Monday Morning Memo – Jan 20

Governor Andrew M. Cuomo will present his Executive Budget tomorrow. New York is facing a $6 billion deficit—the largest of Cuomo’s tenure—and everyone involved with state government is eagerly, and in many cases anxiously, awaiting the proposed fixes.

Budget observers expect to see Cuomo’s budget to include some fiscal sleight of hand including:

However, experts, including the Citizens Budget Commission and the Empire Center for Public Policy, all agree that these budget gimmicks are responsible for New York’s fiscal woes in the first place, especially such an enormous deficit during a strong national economy. A $4 billion deficit in Medicaid spend—and even more dire projections in the out years—with dwindling reserves—at a time when the economy is expanding and revenues are on target—have fiscal watchdogs sounding alarms. Expect more scrutiny of the fiscal plan over the next few months.

Nonetheless, the state’s top fiscal decision makers—beginning with Budget Director Robert Mujica—seem less concerned. Mujica says this year’s deficit is simply business as usual. That may be tough to explain to constituency groups when their budget allocations are cut tomorrow.

Weighing in last week, Comptroller Tom DiNapoli released audits of various aspects of the Medicaid program, identifying $790 million in potential savings. The audits reviewed improper fee-for-service payments, Medicare Part D clawback payments, managed care premium payments for those with third-party health insurance, and the failure to collect rebates for prescription drugs under Health and Recovery Plans. Also on Medicaid, Cuomo pulled back from his State of the State Address proposal to make municipalities pay more of the Medicaid burden, saying such a proposal was not forthcoming, and “[he had] not yet proposed how [he believes the State] should resolve it.”

Another area that the Governor could be looking at is Foundation Aid. The Citizens Budget Commission says that taking a more focused approach to the formula could save the State $800 million this fiscal year alone. However, advocates across the state, including the Alliance for Quality Education and key legislators, are calling on Cuomo to increase Foundation Aid by $1.66 billion. While it’s certainly an area of the budget that needs to be revisited, any changes present political risks for the Governor.

While prognosticators across the State have offered ample speculation over the past couple of weeks, it is just that: speculation. The Governor’s State of the State Address and the discussion to date have been light on detail. We ultimately will not know the full picture until the Budget Bills are live tomorrow night. Please let us know what you are watching for and if we can be of any assistance on analysis.

In Washington D.C., House Democrats formally shifted the Impeachment Trial of President Donald Trump to the Senate, by delivering the Articles of Impeachment. In a ceremonial procession, seven designated Democrats, known as impeachment managers, silently marched the two articles across the Capitol — a short promenade through the old House chamber, beneath the soaring Rotunda, past the legendary Ohio Clock and on to the Senate. On Friday, Trump announced he had retained Kenneth Starr (whose investigation into the Monica Lewinsky scandal led to the eventual impeachment of Bill Clinton) and Alan Dershowitz (a former Harvard law professor and prominent defense attorney), to lead his defense in the Senate Trial. Those choices are not without controversy. The selection of Dershowitz was widely criticized for his ties  to Jeffrey Epstein, and many have questioned the choice of Starr who was ousted as President of Baylor University in 2016 amidst allegations he turned a blind eye to sexual assaults on campus.

Staff for the House impeachment managers worked through the weekend, reviewing trial materials and their legal brief. The House brief, which was submitted ahead of a 5 PM deadline last Saturday (read it here), will be countered by the White House with a brief that is due today at noon. Managers returned to Washington last night to meet and are in the Capitol today with counsel to prepare for their opening arguments. There are dozens of staffers across the Intelligence, Judiciary and Oversight Committees, in addition to House General Counsel’s office, working on the trial, according to Democratic aides. The Senate trial will officially kick off tomorrow at 1 P.M. Once the trial begins, there are clear rules for each of the key players. U.S. Chief Justice John Roberts presides. Senators do not do the talking; they can only submit written questions. Impeachment managers from the House will represent the Democrats’ argument (read the full background on the ground rules here). The President’s defense is expected to include White House counsel and potentially outside attorneys. The White House declined to participate in the earlier House proceedings, which it considered a “sham.”