Governor Paterson today announced that he is creating a Program to Eliminate the Gap (PEG) to help make state government more cost-effective, accountable, and transparent. This initiative will serve as a new, permanent tool that Governor Paterson can use to call for and monitor agency spending reductions at any time throughout the fiscal year, in order to ensure budget balance and address out-year deficits. The program will also be open to view by the public who will be able to access agency information via the Internet. Governor Paterson also provided an update on the status of agencies’ 3.35 percent spending reductions plans, which were due May 16.

“New York needs a government that demands results and holds itself accountable,” said Governor Paterson. “This new program is the first of many steps we must take to get New York’s fiscal house in order and prepare for the difficult economic times ahead.”

Last week, the vast majority of executive state agencies submitted financial management plans, reflecting the 3.35 percent reduction in projected spending Governor Paterson ordered during budget development. Three executive agencies (Division of Human Rights, Hudson River Valley Greenway, Greenway Heritage Conservancy) were granted short extensions due to changes in leadership, but their proposals are expected to be received in the coming days.

The Division of the Budget (DOB) is currently in the process of reviewing these plans to ensure that they will produce sufficient savings. Following approval by DOB, summaries of these savings initiatives will be made public online and monitored through the PEG process. This online report will be available as soon as possible, but no later than June 30.

Governor Paterson said: “I want to thank agency commissioners for their hard work in developing these savings plans. I look forward to working with them to make our government more effective and efficient.”

The PEG Program Governor Paterson is creating today has three main components:

A process to achieve agency spending reductions and improved state government efficiency throughout the fiscal year;
An online report that provides summaries of approved savings plans and quarterly updates on agencies’ progress in achieving spending reduction targets; and
An Oversight Board that monitors agency compliance and takes corrective actions where necessary.

Through PEG, Governor Paterson can issue spending reduction targets for individual state agencies whenever he deems it necessary to address either current year deficits that emerge during the course of the fiscal year or looming, forecasted budget gaps. The 2009-10 budget gap is currently projected to total $5.0 billion.

After Governor Paterson has called for a PEG, commissioners will then have one month to develop plans to achieve their targets. Once these plans are approved by the Governor and the DOB, summaries will be posted on DOB’s website. Progress implementation updates will be added to the site quarterly for each agency, increasing the transparency and accountability of the PEG process.

The 3.35 percent reductions in this fiscal year will serve as a pilot for the online component of the program. It is expected to be in place by no later than June 30, with the first quarterly update expected in October.

An Oversight Board consisting of Secretary to the Governor Charles J. O’Byrne, Director of the Budget Laura Anglin, and Director of State Operations Paul Francis has been created to monitor agency savings plans. If required reductions are not achieved, the Oversight Board may take corrective actions such as a instituting a hard hiring freeze at non-compliant agencies or withholding budgeted funding.

PEG is modeled after a New York City initiative of the same name, which was established in consultation with Governor Hugh Carey during that city’s 1970s-era fiscal crisis, and has a more than thirty-year track record of success in cutting government costs. Mayor Michael Bloomberg and his predecessors have continued using the PEG program throughout their administrations.

Governor Paterson’s Budget Working Group, which was formed to identify ways to control state government spending, recommended the creation of the PEG program. The Budget Working Group is expected to recommend further proposals for budget savings and reforms by the end of the Legislative session.

“We need to change the culture of state government. We must constantly look for ways to make the way we deliver essential services more effective and efficient,” said Governor Paterson.

As PEG continues to develop, the Division of the Budget will explore implementing further monitoring, tracking, and performance measures. This will ensure that the program will serve as a permanent tool to improve the efficiency of state agency operations, ensure budget balance, and change the culture of state government through increased accountability.