What's happening
This bill requires New York State to adopt balanced budgets based on generally accepted accounting principles and creates a governmental accounting review board.
Why it matters
Mandates more transparent budgeting. By requiring state budgets to follow generally accepted accounting principles (GAAP), this bill aims to provide a clearer and more accurate picture of New York’s finances, closing loopholes that previously allowed for “balanced” budgets based on less stringent methods.
Adds independent oversight. The creation of the New York State Governmental Accounting Review Board introduces an expert body to oversee adherence to these accounting standards, review requests for exemptions, and help phase in major changes—potentially reducing political manipulation of budget numbers.
Limits short-term budget fixes. The bill would constrain the state's ability to rely on borrowing or accounting gimmicks to appear balanced, making it harder for lawmakers to push costs into future years and obligating them to address deficits more directly.
Potentially impacts funding for services. By enforcing stricter balance requirements, the state may face more immediate pressure to either cut spending or raise revenues, which could affect funding for public services, especially if compliance with GAAP reveals larger structural deficits than previously reported.
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Who cares
Headline styles
Require Balanced State Budgets
Plain English, a few words. Used as the page title.
Sponsors
History
- Referred to finance
- Referred to finance
Full text
4 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
5017
2017-2018 Regular Sessions
IN SENATE
March 6, 2017
Introduced by Sens. KRUEGER, LATIMER, MONTGOMERY, SERRANO, STAVISKY -read twice and ordered printed, and when printed to be committed to the Committee on Finance
AN ACT to amend the state finance law and the legislative law, in relation to enacting a balanced budget requirement and creating the New York state governmental accounting review board
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The state finance law is amended by adding a new article 3-A to read as follows:
ARTICLE III-A
BUDGETING ACCORDING TO GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES Section 35. Definitions.
36. Development of the executive budget submission and enacted
budget.
37. New York state governmental accounting review board.
§ 35. Definitions. As used in this article, the following words and terms shall have the following meanings unless the context otherwise requires.
1. "Board" means New York state governmental accounting review board pursuant to section thirty-seven of this article.
2. "Revenues" mean all taxes, rents, fees, charges, payments, all proceeds from borrowings and other income and receipts paid or payable to or for the state's treasury.
3. "Generally accepted accounting principles" means the set of accounting principles for financial reporting established by the Financial Accounting Standards Advisory Board and governed by the American Institute of Certified Public Accountants for federal reporting entities.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD05557-01-7
S. 5017 2
4. "Executive budget submission" means the document submitted by the governor to the legislature pursuant to section two of article seven of the state constitution.
5. "Enacted budget" means the document passed by both houses of the legislature pursuant to section four of article seven of the state constitution.
§ 36. Development of the executive budget submission and enacted budget. 1. For fiscal years beginning on and after April first, two thousand eighteen, the executive budget submission and the enacted budget covering all expenditures other than capital items shall be prepared and balanced so the results thereof would not show a deficit when reported in accordance with generally accepted accounting principles.
2. The governor, the legislature and the New York state governmental accounting review board shall confer concerning the requirement to balance the budget, as well as the projected effect on the budgets by any change in generally accepted accounting principles or change in the application of generally accepted accounting principles to the state. The governor and/or the legislature may petition the board to exempt either the executive budget submission or the enacted budget from the provisions of this section.
§ 37. New York state governmental accounting review board. 1. There is hereby created the New York state governmental accounting review board. The board shall be a governmental agency and instrumentality as is set forth in this article.
2. The board shall have the following functions:
a. to confer with the governor and the legislature concerning the requirement to balance the budget as provided in section thirty-six of this article, the projected effect on the budgets by any change in generally accepted accounting principles, and change in the application of generally accepted accounting principles to the state budget;
b. to hear petitions from the governor or legislature with relation to modifying or exempting the executive budget submission or the enacted budget from the balanced budget requirement of section thirty-six of this article or from the requirements of any new or existing governmental accounting standards, board statements, interpretations, technical bulletins, and concept statements; and
c. to determine whether immediate compliance with the provisions of section thirty-six of this article will have a material effect on state budgets over a time period insufficient to accommodate the effect without a substantial adverse impact on the delivery of essential services, and, upon such determination, to authorize and approve a method of phasing the requirements of this section into such budgets over such reasonably expeditious time period as the board deems appropriate.
3. The board shall be comprised of five members, one of whom will serve as chair; who are nominated by the governor and appointed with advice and consent of the senate. All of the appointed members shall be residents of the state. Such appointed members shall serve a term of five years. All appointed members shall have academic or business experience in governmental accounting standards and generally accepted accounting principles. The board shall act by a majority quorum vote of the entire board. The board shall maintain a record of its proceedings in such form as it may determine, but such record shall indicate attendance and all votes cast by each member.
4. Notwithstanding any inconsistent provisions of law, no officer or employee of the state, or political subdivision of the state, any governmental entity operating any public school or college or other
S. 5017 3
public agency or instrumentality or unit of government which exercises governmental powers under the laws of the state, shall forfeit his office or employment by reason of his acceptance or appointment as a member, representative, officer, employee or agent of the board nor shall service as such member, officer, employee or agent of the board be deemed incompatible or in conflict with such office or employment.
5. The members of the board shall serve without salary or per diem allowance but shall be entitled to reimbursement for actual and necessary expenses incurred in the performance of official duties under this act, provided however that such members and representatives are not, at the time such expenses are incurred, public employees otherwise entitled to such reimbursement.
6. All agencies, authorities, and institutions of the state shall cooperate with and provide such assistance to the board as the board may request.
7. The chair, in consultation with the board, may hire or appoint an executive director for the board if deemed necessary.
§ 2. Section 22 of the state finance law is amended by adding a new subdivision 17 to read as follows:
17. Notwithstanding any provision of law to the contrary, budgets submitted pursuant to this section shall include:
(a) a description of all of the expenditures estimated to be made before the close of the current fiscal year and all of the expenditures proposed to be made during the ensuing fiscal year, both in accordance with generally accepted accounting principles as defined in article three-A of this chapter; and
(b) a description of all the revenues estimated to accrue before the close of the current fiscal year and during the ensuing fiscal year, inclusive of any revenues which are expected to result from the proposed legislation which the governor deems necessary to provide receipts sufficient to meet proposed disbursements, all in accordance with generally accepted accounting principles as defined in article three-A of this chapter.
§ 3. Paragraph (a) of subdivision 2 of section 54 of the legislative law, as added by chapter 1 of the laws of 2007, is amended to read as follows:
(a) The legislature shall enact a budget for the upcoming fiscal year that it determines is balanced [in the general fund].
§ 4. Subdivision 2 of section 54 of the legislative law is amended by adding a new paragraph (d) to read as follows:
(d) Notwithstanding any provision of law to the contrary, budgets submitted pursuant to this section shall include:
(i) all of the expenditures estimated to be made before the close of the current fiscal year and all of the expenditures proposed to be made during the ensuing fiscal year, both in accordance with generally accepted accounting principles as defined in article three-A of the state finance law; and
(ii) a description of all of the revenues estimated to accrue before the close of the current fiscal year and during the ensuing fiscal year, inclusive of any revenues which are expected to result from the proposed legislation which the legislature deems necessary to provide receipts sufficient to meet proposed disbursements, all in accordance with generally accepted accounting principles as defined in article three-A of the state finance law.
§ 5. Separability clause. If any part or provision of this section or the application thereof to any person is adjudged by a court of compe-
S. 5017 4
tent jurisdiction to be unconstitutional or otherwise invalid, such judgment shall not affect or impair any other part or provision or the application thereof to any other person, but shall be confined to such part or provision.
§ 6. This act shall take effect immediately, provided that if this act shall take effect after April 1, 2018, it shall be deemed to have been in effect on and after April 1, 2018.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the state finance law and the legislative law, in relation to enacting a balanced budget requirement and creating the New York state governmental accounting review board
Purpose or general idea of bill
To require the state to prepare its budget in accordance with generally accepted accounting principles.
Summary of specific provisions
Section 1 amends the state finance law by adding a new article 3-A.
Section 35 provides the definitions for the terms used in the article.
Section 36 requires that the executive budget submission and the enacted legislative budget must be balanced in accordance with generally accented accounting principles. It also provides for an appeal process when the executive and/or the legislature request relief from accounting standards.
Section 37 establishes a new governmental accounting review board.
Section 37 subdivision 1 establishes the administration of the board.
Subdivision 2 established the functions of the board.
Subdivision 3 & 4 established the compositions of the board and qualifications of the members.
Subdivision 5 establishes the compensation of the beard members.
Subdivision 6 states that other state agencies must cooperate with the board and provide assistance as needed.
Subdivision 7 states that the chair of the board may hire an executive director.
Section 2 amends state finance law by adding a section that requires that all expenditures and revenues submitted by executive in his/her budget submission must be estimated and balanced in accordance with generally accepted accounting principles.
Section 3 amends the legislative law requiring the legislature to pass a balanced budget.
Section 4 amends the legislative law by adding a section that that all expenditures and revenues submitted by the legislature in the enacted budget must be estimated and balanced in accordance with generally accepted accounting principles.
Section 5 provides for a separability clause.
Section 6 states that the bill takes effect on April 1, 2018.
Justification
New York State has long maintained the impression of having a very flexible budget process by operating on a cash basis. Under this system, bills are recorded as paid when funds are spent, not when a liability is incurred. This non-accrual basis is what allows lawmakers to roll expenses from the current year to the next and claim the current budget is balanced. It also allows lawmakers to use the next fiscal year's revenues to pay the current year's expenses. The result is less a matter of financial planning than of timing- related gimmickry.
The State's cash accounting practices have allowed lawmakers to repeatedly defer payments to creditors so long as cash can be found somewhere. However, as New York's recent string of fiscal crises is making evident, the threat of the State running out of cash is very real. The same holds true for the threat of default. But under the Constitution, default is not an option for New York.
To address the reality of New York's fiscal position, more comprehensive and accrual-based accounting standards are needed. While the standards outlined by the Generally Accepted Accounting Principles (GAAP) would restrict the flexibility afforded by cash budgeting, the tradeoff is a different kind of flexibility. It would be a flexibility that affords lawmakers a clearer picture of the State's financial situation and the time to make adjustments to it.
Fiscal implications
None.
Effective date
This act shall take effect immediately , provided that if this act shall take effect after April 1, 2018, it shall be deemed to have been in effect April 1, 2018.
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