2009-10 Enacted Budget Gap-closing Plan – Federal Aid

Federal Aid Initiatives

Overall, the state budget included a combined total of $12.6 billion in extraordinary federal aid in 2008-09 ($1.7 billion) and 2009-10 ($10.9 billion). As directed by the Obama administration and Congress, New York had to spend this aid as soon as possible in order to help stimulate the economy and preserve critical services. It could not be used to fund the state’s Rainy Day reserve.

This stimulus funding consists of two main components: “pass-through” funding, which is directed to specific spending purposes outlined in federal legislation, and flexible state FMAP funding.

The flexible state FMAP relief totals $5.0 billion over the next two years ($1.3 billion in 2008-09 and $3.7 billion in 2009-10). FMAP aid represents increased federal Medicaid reimbursements, which reduce the state’s share of General Fund Medicaid costs, providing general fiscal relief.

This $5.0 billion in relief provided through increased FMAP reimbursements was used in the following manner: $1.3 billion to reject certain proposed tax and fee increases; $1.2 billion to address revenue deterioration; $1.0 billion to restore proposed health care reductions, $750 million to address increased Medicaid caseload in a difficult economy, $328 million to restore New York City’s Aid and Incentives for Municipalities payment; $282 million to address a shortfall in the HCRA account; $126 million to restore proposed reductions to human services programs serving our most vulnerable citizens; and $38 million to restore proposed reductions to mental health programs.

New York will also receive $7.6 billion ($440 million in 2008-09 and $7.2 billion in 2009-10) over the next two years in federal “pass-through” money. While the allowable uses of this funding are specifically prescribed in federal legislation, these funds are appropriated in the budget, pass through the All Funds financial plan, and count as spending. State FMAP relief, by contrast, can be used for flexible purposes and has no impact by itself on All Funds spending levels, since each dollar in increased federal reimbursement is matched with one dollar in decreased state General Fund costs.

This $7.6 billion in pass-through funding includes the county share of FMAP relief ($440 million in 2008-09, $1.4 billion in 2009-10); funding mandated to be used for education restorations ($1.2 billion in 2009-10); Title I and IDEA funding that is sent directly to school districts ($850 million in the 2009-10 fiscal year); state and local highway grants ($459 million in 2009-10); the clean water and drinking water revolving funds ($287 million); weatherization programs ($263 million); and others.

The only portion of this “pass-through” funding that represented fiscal relief is the $1.2 billion in aid that the federal government mandated must be used for education restorations and other government services. Overall, when combined with the $5.0 billion in flexible FMAP relief included in the stimulus bill, the state used $6.2 billion in federal aid to help address its record $20.1 billion budget gap.

Each year, the budget includes a $1 billion contingency appropriation to allow the state to accept federal funds that unexpectedly become available during the course of the fiscal year after the state budget has been enacted These contingency appropriations do not contain any cash, but are enacted annually to ensure that the state would not have to refuse federal funds that may materialize following enactment of the budget.

This year, because of the unprecedented fiscal accountability requirements that accompany the receipt of ARRA funding, every effort was made in the budget to provide detailed lined-out ARRA appropriations for each program authorized in the federal Act. The $1 billion contingency appropriation annually included in the budget was also amended to reference ARRA funding in order to be absolutely certain there would be no issues with accepting these funds in the unlikely event that unanticipated ARRA funding were to become available. Furthermore, because New York must compete with other states for limited funding for certain initiatives, this appropriation could allow the state to accept funding that becomes available through competitive grants.