GOVERNOR PATERSON ISSUES COST CONTROL MEASURES TO STATE AGENCIES

Governor David A. Paterson today issued the following directive to State agency commissioners regarding new cost control measures that will be implemented immediately.

Governor Paterson said: “These unprecedented times require us to take unprecedented steps to reduce spending. That is why I will convene a second special emergency economic session of the Legislature, during which I will work with the Assembly and Senate to enact $2 billion in current-year savings. But there are further actions we must take immediately to continue the process of getting our state’s fiscal house in order. Today, I am putting in place new measures to ensure that we control spending in these uncertain times.”

The cost controls will impact spending on all new contracts and contract extensions, non-personal service costs such as vehicles, furniture and other areas, and capital construction.

A copy of the letter is attached.

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November 3, 2008

Dear Agency Heads and Commissioners,

Our state’s fiscal condition has deteriorated to previously unexpected levels due to a deepening financial crisis on Wall Street.  New York faces a staggering $47.0 billion budget deficit over the next four years – the largest in our history. These sobering figures include a $1.5 billion current-year shortfall and a $12.5 billion deficit for the next fiscal year.

These unprecedented times require us to take unprecedented steps to reduce spending. That is why I will convene a second special emergency economic session of the Legislature, during which I will work with the Assembly and Senate to enact $2.0 billion in current-year savings.

But there are further actions we must take immediately to continue the process of getting our state’s fiscal house in order. Today, I am putting in place new measures to ensure that we control spending in these uncertain times.

Agency Spending Controls

Effective immediately, until further notice, all state agencies must implement the following cost-control measures for spending that does not involve federal reimbursement of at least 75 percent or impact public health and safety:

1. Contracts:  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. 
2. Non-Personal Service:  All liabilities for non-personal service expenses must receive strict scrutiny and all non-critical agency spending should be eliminated. 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.

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.

Capital Spending Controls

As you know, the current financial crisis has restricted the access of many municipal issuers to the bond market, including those with strong credit ratings like New York State.  Demand has slowed and interest rates have climbed to record highs for even the highest quality issuers.

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.

To begin any new construction or rehabilitation initiative, you must have the joint prior approval of the Division of the Budget and the Office of State Operations. Only essential projects will be approved.

For the purposes of this directive, a project is considered essential if failure to complete it 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.

The Division of Budget will be issuing further technical guidance related to this directive within the coming days. 

I know that the current fiscal crisis has been difficult for State agencies. I want to thank you for your cooperation in the last few months during these trying times.

As we move forward and make the additional tough choices that will be necessary to protect our state’s finances, I will continue to depend on your commitment to addressing New York’s fiscal challenges. I look forward to working with you through the difficult months and years ahead.

Sincerely,

David A. Paterson