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Three Men In A Room Reach Budget Deal

by: robert.harding

Sun Mar 29, 2009 at 20:38:40 PM EDT

Governor David Paterson announced tonight that a deal has been reached with Senate Majority Leader Malcolm Smith and Assembly Speaker Sheldon Silver. The deal includes several spending cuts, a tax hike on the wealthiest New Yorkers and reforms to Medicaid that are being touted as necessary changes to the system.

"Over the last year, New York faced a historic fiscal crisis that tested our resolve. But by working together cooperatively with our partners in the Legislature, we made the tough choices necessary to address that challenge through shared sacrifice and responsible budgeting," said Governor Paterson. "The agreement we are announcing today closes the largest deficit in State history, stabilizes our finances, and institutes critical reforms that will help eliminate waste and inefficiency in our government. We have produced a budget that provides a solid foundation to move forward and address the challenges ahead. We have accomplished this with a budget that holds government accountable to the people of New York, and protects those who can not protect themselves."

There are several items in the budget that were cut, but then restored thanks to funding from the federal stimulus package. Some of these items include funding for public schools, which would have been slashed $1.1 billion under the Deficit Reduction Plan. But in the budget, there will actually be a $405 million increase in aid - a modest increase, but better than the original cut that was proposed.

There will be $2.3 billion in cuts to health care in New York, which is a lower figure than the proposed $3.5 billion in cuts that Governor Paterson was aiming for in his Executive Budget. Among items in the health care portion of the budget are reforms to the Medicaid hospital reimbursement system.

Here are some of the other highlights (you can also read the full list below the fold):

- The budget will expand the bottle bill, albeit slightly. So far, all that is being expanded is bottled water. Based on the summary given, that doesn't seem to include drinks like Gatorade, which do not have deposits on them. Even with the inclusion of bottled water, the state is expected to gain $115 million with that move.

In addition, the state will retain 80 percent of unclaimed deposits. In the past, bottlers kept 100 percent of unclaimed deposits.

- One of the more talked about changes this year is the STAR rebate program. The budget will eliminate the STAR rebate program along with the enhanced New York City STAR tax credit, which is a $1.5 billion savings to the state.

However, the STAR exemption program and the New York City STAR credit will remain in tact and still provide $3.3 billion in property tax assistance to New York's taxpayers.

- It's not Fair Share Tax Reform, but it's a lot better than nothing. Overall, the budget will produce $5.3 billion in revenues from taxes and fees. Among those taxes and fees are two new tax levels that will produce $4 billion in revenue. This is how it breaks down:

- From 2009 to 2011, married couples filing jointly will pay the following rates:
      - Income over $300,000: 7.85 percent
      - Income over $500,000: 8.97 percent

Again, you can read the full summary below the fold.

The budget is far from perfect. A lot of what was cut in Governor Paterson's proposal was still slashed, but it was also saved by the economic stimulus package funding the state received. Still, there are plenty of individuals and groups in this state that will be in quite a bind, including schools. So while having an on-time budget is a feel-good story, the impact of this budget still will leave plenty of New Yorkers hurting.

Foundation Aid will be maintained at $14.9 billion, the same amount as 2008-09 levels in both the 2009-10 and 2010-11 school years. Additionally, although the full phase-in of Foundation Aid will be delayed, the commitment to Foundation Aid has been maintained with phase in now taking place over seven years and full implementation occurring in 2013-14.

The Enacted Budget also eliminates an Executive Budget proposal to make school districts responsible for a 15 percent share of preschool special education costs. Rescinding this proposal will provide a fiscal benefit of $185 million to school districts in 2009-10.

Health Care
The Enacted Budget includes a record Health Care savings package totaling $2.3 billion in 2009-10. The 2009-10 Executive Budget recommended $3.5 billion of health care savings, which included a $404 million tax on non-diet soft drinks that Governor Paterson and Legislative Leaders previously agreed to eliminate. The Budget also permanently reforms New York's Medicaid hospital reimbursement system to lower costs while improving patient outcomes. These savings will be invested in primary and preventive care to create a higher quality and more sustainable system.

Local Government Aid
The scheduled Aid and Incentives for Municipalities (AIM) payment for New York City will be fully restored by redirecting total $328 million of the State's allocation of federal economic recovery funding.

Funding for AIM program outside of New York City is preserved at 2008-09 payment levels for 2009-10 and 2010-11. The State will still provide municipalities with $755 million in AIM support.

The Enacted Budget eliminates an Executive Budget proposal to reduce State payments in lieu of taxes and maintain other taxes on State-owned lands at 2008-09 levels.

The Governor and Legislative Leaders agreed to continue to review a package of mandate relief proposals for local governments.

Higher Education
The Enacted Budget restores $35 million in modifications to the Tuition Assistance Program, $49 million in reductions to community colleges and $31 million in reductions to university-wide programs for SUNY and CUNY. The Enacted Budget also establishes the New York Higher Education Loan Program (NYHELPs) proposed by Governor Paterson in the Executive Budget. This initiative would provide, on an annual basis, a minimum of $350 million in loans to 45,000 resident students enrolled in a degree-granting program at a college or university in New York State.

Human Services/Mental Hygiene
The 2009-10 Enacted Budget restores $254 million of human services programs and $36 million of mental hygiene programs. These include: homeless prevention programs, refugee resettlement programs, Community Optional Preventive programs, reductions in the New York City adult shelter reimbursement and the personal needs allowance for Safety Net recipients, and many others. In addition, the Enacted Budget includes the first increase to the welfare grant since 1990 to help assist those in poverty during a time of unprecedented economic turmoil. Implementation of the public assistance grant increase will be will be accelerated, with recipients expected to receive a 10 percent increase in July, 2009, with the total 30 percent increase to be implemented by July, 2011. The cost of the grant increase will be paid by the State for three years using TANF funding.

Transportation
The Enacted Budget restores $20 million of transit aid. It also restores a $96.5 million reduction in capital aid to local governments for highway and bridge projects under the CHIPS program for municipalities outside New York City and another $15.3 million for New York City.

Government Reforms
The Enacted Budget implements several significant reforms that will reduce the cost of State government moving forward. These include Empire Zone Reform, to rein in long-documented abuses in the Empire Zone program by raising standards to ensure taxpayers' investments create jobs; Rockefeller Drug Laws to provide judges the discretion to divert non-violent drug-addicted individuals to treatment alternatives that are shown to be far more successful than prison; and closing three underutilized prisons and nine juvenile justice facilities to save taxpayers money.

Environment
The Enacted Budget will expand the five-cent nickel deposit on carbonated beverages to now include bottled water. The state will retain 80 percent of unclaimed deposits on all beverages, a change from the 100 percent of which are currently kept by bottlers. The Enacted Budget also will increase Environmental Protection Fund appropriations by $17 million from $205 million to $222 million, and restores a proposed $45 million transfer from the Environmental Protection Fund. The enacted budget restores the Real Estate Transfer Tax as the primary funding source for the Environmental Protection Fund providing almost $200 million in support in 2009-10.

STAR Rebate
The Enacted Budget eliminates the STAR rebate program as well as the corresponding enhanced NYC STAR tax credit, producing savings of $1.5 billion in 2009-10. Even after this action, the STAR exemption program and NYC STAR credit will continue to provide $3.3 billion in property tax relief. Additionally, the Executive Budget proposal to decrease the "floor" reduction - the maximum reduction in STAR benefits that can occur as a result of changes in assessed value or market value -from 18 percent to 11 percent is not included in the Enacted Budget.

Taxes
The Enacted Budget includes taxes and fee actions that will produce $5.3 billion in revenues in 2009-10. The largest increase is a temporary Personal Income Tax Surcharge for higher-income taxpayers. This will temporarily increase the marginal State personal income tax rate for higher-income filers for a three-year period from tax year 2009 to tax year 2011. For married couples filing jointly, the marginal rate will increase from 6.85 percent to 7.85 percent for filers with incomes above $300,000 and 8.97 percent for filers with incomes above $500,000. This surcharge is expected to produce $4.0 billion in revenue in the 2009-10 fiscal year, which is an amount that is approximately equivalent to the $4.7 billion increase in the deficit that has occurred since the passage of the 2008-09 Deficit Reduction Plan on February 3.