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New York's $2 Billion Shortfall Won't Freeze Tech Spending

November 26, 2008 By

Several months into the economic recession precipitated by the collapse of the sub-prime mortgage market, New York is facing a $2 billion budget shortfall. Moreover, that amount, Gov. David Paterson said, "is really only about 15 percent of what we are going to have to cut between now and April because our 2009-2010 deficit is $12.5 billion."

The day before Paterson made that announcement at a public meeting with New York's legislative leaders, Citigroup laid off 52,000 workers and the heads of the company announced they were considering giving back their scheduled year-end bonuses.

Additionally, six heads of Goldman Sachs have declined their bonuses. Their bonuses would have exceeded $300 million, Paterson said.

That would have a significant impact on the state budget, Paterson said, because those bonuses were worth $150 million in tax revenue for the state. Furthermore, Wall Street bonuses account for 30 percent of the state's fourth quarter "enrichment," the governor said.

That could have a major impact on technology spending in the state.

On November 4th, Paterson issued a directive to the heads of all state agencies outlining cost-control measures. "In light of the current market crisis and the potential risk to the state's finances, it is critical that we prioritize our new capital spending to focus on health and safety projects that address our state's most important infrastructure needs. To this end, I am instituting a more rigorous review process for all new capital projects."

Any new construction or rehabilitation effort will require prior approval from the Division of the Budget and the Office of State Operations. "Only essential projects will be approved," Paterson wrote.

The directive defined an essential project as one whose failure to be completed "will (1) present an immediate, demonstrable threat to public health or safety; (2) directly violate a court order or federal, state, or local law; or (3) result in a substantial reduction in federal aid."

These steps are defined in the budget bulletin B-1184, Agency Contracts, Non-Personal Service and Capital Spending Controls for 2008-09. The bulletin establishes guidelines that create stricter pre-approval processes and a higher level of scrutiny to control costs.

A New York state Web page provides links to the plans to cut spending at several agencies, but  the Office for Technology is not one of those listed. Nevertheless, "all new contracts, contract extensions, or contract modifications, including but not limited to commodities, construction, consultants, equipment, grants, land purchases, leases, printing, and services must receive the joint prior approval of the Division of the Budget (DOB) and the Office of State Operations before an agency engages in any aspect of the contractual process, including requests for proposals, notices of funding availability, and actual awards for funding," Paterson wrote in his letter of 3 November 2008.

Additionally, "all requests for furniture, vehicles, computers, printing, advertising, cell phones, food (outside of institutional settings), and office supplies must receive the joint prior approval of the Division of the Budget and the Office of State Operations," the governor wrote.

"These initiatives will build upon other agency cost-control measures, which I have previously ordered, including a statewide hard hiring freeze, a ten percent across-the-board spending reduction, and my request that all agencies submit no-growth budget requests for the 2009-10 fiscal year," Paterson wrote.

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