NEW YORK (Reuters) - New York's Democratic and Republican candidates for governor have proposed braking the state's runaway spending with a legal cap, but a new report found most such measures do not work unless married with other limits.
"When spending caps are effective in curbing state spending they typically work in tandem with other limits on government, including local property tax caps, local spending limitations, strict balanced budget requirements and state-revenue caps," according to the report by the Citizens Budget Commission, a nonpartisan fiscal monitor.
With the recession shrinking state and local revenues, many governments will have to cope with multibillion-dollar deficits over the next several years.
Intensifying the pressure on states to rein in spending is the balanced budget requirement that all but one state has. This in turn increases the odds of more layoffs and service cuts because tax increases likely would prove unpopular, financial analysts said.
New York Democratic Governor David Paterson, whose term ends in January, has proposed one of the strictest budget caps: limiting how much spending can rise to the three-year national inflation rate, according to the report.
Paterson has estimated that his cap would have saved nearly $17 billion in the fiscal 2008 year if it had been enacted in 2003.
"Gubernatorial candidate Andrew Cuomo's campaign policy book proposes a spending cap nearly identical to Governor Paterson's, adding more detail on the treatment of surplus revenue," the report said. For example, Cuomo, who is the state's attorney general, would place one-third of any revenue above the cap into a rainy day fund.
A Cuomo campaign spokesman was not available to comment; nor was a spokesman for the Republican and Tea Party-backed candidate, Carl Paladino, who is a Buffalo real estate developer.
In the last 25 years, New York state's spending has risen an average of 5.4 percent each year, when the growth of its operating budget is measured. The operating budget excludes federal funds and capital spending.
Yet during the same period, the national inflation rate has only climbed an average of 2.9 percent while New Yorkers' personal income has risen 4.8 percent a year.
In some cases, the report said, spending caps have backfired. Colorado, for example, was overhauled in 2005 because the previous limit did not let lawmakers restore services cut during the recession.