Gov. Cuomo Launches Assault on Dysfunctional Budget Process Including Medicaid and Education Funding Mechanisms

Gov. Andrew Cuomo seems to get it. His budget proposal for the upcoming fiscal years shows that he understands the nature of the beast. The state's financial health has been destroyed because of structural deficits brought on because the state legislature and political leaders have been unwilling to tackle the sources of the deficits - cost adjustments that require increases far above the rate of inflation or other standard metrics.

I have no doubt that opponents will claim that Cuomo is slashing critical budget items and that women and minorities will be hardest hit, but here are some facts.

Cuomo is talking about resetting the formula used to fund Medicaid and state education, which are the key drivers in pushing the state budget into deficit on an annual basis. Reforming those areas would help bring the state's finances into balance without resorting to one-shots and other financial trickery.

Cuomo will propose legislation that would change the system involving what are known as Article 7 bills, which accompany the budget when it is submitted to the Legislature.

He revealed Monday that most of the state's widely forecast $10 billion budget deficit was the result of automatic "sham" spending increases that have no bearing on the state's fiscal reality.

Unlike the budget itself, which has a legal life of just one year, Article 7 bills become "permanent law" upon adoption and remain in effect until changed or repealed.

Cuomo's budget director, Robert Megna, said the Article 7 changes would substitute the widely used Medical Consumer Price Index formula for the nearly impenetrable and complex set of some 200 measurements used for decades to project cost hikes in the $50 billion-plus Medicaid program.

The current formula, if followed, would have increased Medicaid by almost 14 percent, while the new system would limit growth to about 4 percent annually, Megna said.

The opposition will try to claim that the governor is slashing their budgets, but the reality is that he's merely reducing the rate of increase. That's a huge difference, and it's one that everyone needs to recognize. The state isn't cutting these budgets, but trying to slow the rate of increase. For those who are reliant on those programs, they're going to complain that their services are being slashed, but this proposal brings a rationality to the programs and will help slow the already sky-high cost of health care and education throughout the state.

Former Gov. Paterson tried to deal with the same issues when he came to office, and he even initially proposed a 1.1% increase to the budget budget, up until the moment he frittered away his advantage and caved in to give a 4.9% increase in the state budget, funded largely through tax and fee increases. When the revenues from those tax and fee hikes failed to materialize, the deficit was further exacerbated.

Cuomo has to do much better than that, and his head-on assault of the Medicaid funding mechanism is a good start. That's sure to get the usual suspects up in arms, including some politicians who would rather treat that separate from the budget process, but that's a wholly ignorant stance. The Medicaid financing structure is critical to the state budgeting process, and reforming the financing structure is going to help bring the state's finances into order and address longstanding structural deficits.