ALBANY — The state’s chief fiscal watchdog is urging lawmakers to reject portions of Gov. Kathy Hochul’s $227 billion state budget, arguing the plan impairs the ability of auditors to scrutinize billions of dollars in spending while offering a “misleading picture” of state debt. In a detailed analysis of Hochul’s budget blueprint, Comptroller Thomas DiNapoli said the spending plan would exempt some $12.8 billion in state spending from competitive bidding.as well as oversight requirements he called “essential for maintaining the integrity of the procurement process.”

DiNapoli went on to say the budget proposal “also advances unfavorable debt proposals that reinforce concerns about the affordability of debt levels and the transparency and accountability of current debt practice.”

DiNapoli’s report was released in the same week that Sandra L. Beattie was relieved of her duties as acting state budget director. She is to be replaced by Robert Megna, who has previously headed the Division of the Budget.

How the shuffle of key staff might impact the governor’s negotiations with leaders of the Legislature remains to be seen.

The state Office of the Inspector General, when asked about Beatty’s departure, confirmed Friday it has accepted a referral to open an investigation from the governor’s office. The inspector general’s office did not provide specifics and said it would not provide details of the probe until it is completed.

Under the Hochul plan, the competitive bidding processes that would be exempted from scrutiny by DiNapoli’s office include $6 billion in spending for COVID-19 services, $2 billion for what was called “unanticipated emergencies” and $4.2 billion appropriation to the state’s Office for People with Developmental Disabilities, according to the comptroller’s report.

Last year, DiNapoli won the support of good government advocates who pressed Hochul to restore the ability of the comptroller’s office to have oversight over certain contracts.

Hochul, in approving that measure in December, acknowledged the comptroller’s office “plays an important and pivotal role in ensuring that there is integrity in our procurement system and works to ensure that contract decisions are based on which contractor will provide the best and most cost-effective product or service.”

Less than two months later, she released the budget proposal that seeks to reduce the ability of DiNapoli’s office to review contracts before they are finalized. She and DiNapoli are both Democrats.

Rachael Fauss, a senior policy advisor for Reinvent Albany, a government watchdog group, said DiNapoli is raising appropriate concerns at a time when lawmakers are poised to formulate their response to the governor’s budget presentation.

“A big red flag coming from DiNapoli is that the state budget is eroding his oversight powers, and that’s the exact opposite of what we fought very hard to restore last year,” Fauss told CNHI. Hochul’s press team had no immediate comment on DiNapoli’s report.

Fauss said the Hochul effort to sideline the comptroller’s auditors from conducting pre-audits of contracts before they are finalized “is counter to the spirit of the new law that was passed.”

The comptroller’s report emphasized the independent audits are aimed at preventing waste, fraud and abuse. “Removing OSC oversight and competitive bidding requirements reduces transparency and removes critical checks on State procurements,” the report said.

Ken Girardin, who monitors state government programs for the Empire Center for Public Policy, said DiNapoli correctly focused on how economic uncertainties could impact the state’s fiscal health in the months ahead.

“We’re not just trying to walk through the dark now,” he said. “We’re trying to walk through the dark after being spun around five times.”

A significant recession would reduce personal income tax receipts, DiNapoli pointed out.

“There are significant headwinds that will present challenges to ongoing growth.” DiNapoli wrote. “Among them is inflation remaining well above historical levels.”

Meanwhile, DiNapoli added, the Federal Reserve Board’s moves to raise interest rates in response to inflation “may dampen national and local economic prospects, which if not carefully managed, risks causing a recession.”