Cuomo's Lesson for House Republicans

New York's Governor exposes the fraud of 'baseline budgeting.

Move over, Chris Christie. New York Democratic Governor Andrew Cuomo is bidding to join the New Jersey Republican as the national spokesman for fiscal sanity, and he's doing so in a politically clever way that House Republicans could learn from.

The budget that Mr. Cuomo unveiled this week closes a gaping deficit with major budget reductions, calling for spending cuts in state hiring, education, health care, aid to universities and payments to cities. The plan would balance the Empire State's $135 billion budget without a dime of new taxes or borrowing. Remarkably, if his budget passed, the state would spend $3.5 billion less than it did last year.

And remember, we're talking about politically liberal New York, not New Hampshire. If you're surprised by this, you should see long-time Democratic Assembly Speaker Sheldon Silver, who looks as though he stuck his finger in the electric socket.

These cuts are impressive on their own, but Mr. Cuomo's real conceptual breakthrough is to expose the rigged-game of "baseline budgeting." This is a gambit by which spending increases automatically each year even before a Governor submits his budget. The "baseline" grows each year due to spending formulas that legislatures build into the law even before they take a single vote.

Mr. Cuomo put it this way in a New York Post op-ed on Tuesday: "When a governor takes office, in many ways the die has already been cast. Unbelievably, this year these rates and formulas in total call for a 13 percent increase in Medicaid and a 13 percent increase in education funding next year."

This means that if Mr. Cuomo proposes a spending increase for Medicaid that is less than 13%, he will be attacked for "cutting" spending. Yet overall Medicaid spending would still increase. As Mr. Cuomo notes, "this process frames the dialogue around the budget and biases the political discourse." That is precisely the goal of government unions and the politicians who follow their orders because it allows them to increase spending even as they cry fiscal havoc.

Mr. Cuomo points out that under the automatic baseline formulas, the New York state budget deficit this year is estimated to be $10 billion. Yet if the state operated like families do, with a new budget for each year starting from a base of what the state spent the year before, the deficit would be closer to $2 billion. Closing a deficit of that size suddenly becomes a lot easier, making it much harder to justify the tax increases that Mr. Silver and his cronies are famous for.

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Associated Press

New York Gov. Andrew Cuomo

The Governor is proposing a reform that would deflate these baselines with more reasonable and affordable spending projections. For example, his budget would base a spending increase for Medicaid on the rate of medical inflation, which is less than half the 13% increase previously assumed in the budget. He would hold education funding to the rate of personal income growth, about half the growth built into the baseline for school budgets. By fixing this fraudulent convention, Mr. Cuomo's budget reduces spending for years to come without having to fight political battles every year.

There's a vital lesson here for House Republicans because the same baseline games have long prevailed in Washington. The Democrats who wrote the budget rules also built in formulas that increase spending each year before Congress even takes a vote. Those same Democrats are now lying in wait for Republicans to propose their budget, and they will describe even increases in spending as brutal "cuts." The media will dutifully play along.

Republicans ought to follow Mr. Cuomo's savvy lead and blow the whistle on this rigged process early and often. Alas, we fear too many Republicans want to brag about their "cuts" to impress the tea party even if they come from an inflated baseline. This is a recipe for letting Democrats frame the budget debate in ways that will make it harder for Republicans to achieve their budget goals, even as the GOP suffers political damage in the process. They would be smarter to take Mr. Cuomo's cue.

This is not to say Mr. Cuomo's budget is perfect. The Governor reduces education aid by 7.3% and tells schools to get their costs under control, thin bloated payrolls, and do more with less. He would also allow New York City and other cities to lay off thousands of "nonteaching teachers." But he doesn't propose to let cities lay off teachers based on merit, as opposed to seniority—which means that many of the youngest and best teachers will lose their jobs. Mr. Cuomo seems to think this would be too difficult to pass given his other priorities, but such a reform will never pass if it isn't part of his first budget when his political capital is at its peak.

Mr. Cuomo nonetheless deserves credit for breaking Democratic type and following through on his campaign promise to shape up Albany. His fight has only begun, but he's off to a shrewd and useful start.