Earlier this year, New York State Governor David Paterson unveiled his Executive Budget for 2010 – 11 year. Once the Governor and the NYS Legislature agree on a final budget plan, the Legislature passes the budget bills and the new budget in enacted into law. The 2010 – 11 budget year is scheduled to begin April 1, 2010.
Overview
The budget totals $134 billion, and takes aim at closing an expected $7.4 billion gap in the current year’s budget. The proposed budget also considers the expected deficits for future budgets, and seeks to minimize gaps projected for 2011 – 12, 2012 – 13, and 2013 – 14.
Taxes and Fees
The proposed budget includes new tax and fee increases totaling $1 billion. Areas of impact include:
A new excise tax on syrup used in soft drinks and other beverages. This tax is projected to generate an additional $465 million.
- “Improved” audit and compliance/tax enforcement actions, expected to generate $221 million.
- $1 increase tax on individual packs of cigarettes, which will generate $218 million.
- New assessments levied on health care providers, projected to generate $216 million.
- A franchise fee plan to permit grocery stores to sell wine. The fee is expected to bring $92 million in 2010 – 11.
- Extending the hours of operation for video lottery terminals, which will generate $45 million.
The new deployment of speed enforcement camera units - $32.9 million.
Education
Governor Paterson’s plan includes a 5% reduction in school aid, which amounts to $1.1 billion. The 2010 – 11 school aid plan would maintain the levels proposed and freeze the aid packages through 2011 – 12.
Districts would also be subject to a wealth-adjusted Gap Elimination Adjustment (GEA) tax for 2010 – 11, totaling $2.1 billion.
The Executive Budget would also reduce funding for after-school programs, both “advantaged” and “extended day” by nearly $15 million.
Medical/Health Care
Governor Paterson has indicated that without controls in place, Medicaid spending in New York State would increase slightly more than 5% in 2010 – 11, to $53.1 billion. The proposed budget includes a $1.9 billion “gap closing” measure in health care, with the following provisions:
- Almost $1 billion in program and provider reductions.
- $890.2 million in “dedicated taxes and assessments to finance health care investments.”
- Reductions in indigent care reimbursements to hospitals ($67.7 million).
- Increased assessments, totaling $130.2 million, on inpatient services.
Governor Paterson has noted that the budget proposals provide “more rational and cost-effective reimbursement to produce better care at lowers costs.”
State Workers
There have been several initiatives enacted by Governor Paterson’s administration in the past several months to reduce state workfare expenses. These include a program of attrition, where possible, hiring freezes, the elimination of vacant positions when reasonable, and a generous severance bonus. As a result, the state payroll has been reduced by 5,150 workers since March 2008.
The Governor has proposed other actions to reduce payroll and fringe benefits, and the Executive Budget calls for other programs to reduce the state workforce.
Aid and Incentives to Municipalities (AIM)
The Executive Budget includes a measure to reduce funding to AIM. AIM is the single largest program of state aid to local governments, and the Governor’s budget proposes $325 million in savings, primarily by eliminating assistance to the City of New York, and also by reducing payments to other local governments.
Economic Development
The proposed budget also includes provisions to restructure economic development activities within New York by merging the Department of Economic Development (DED) and the Empire State Development Corporation (ESDC). It is proposed that together, these two entities will become known as the Job Development Corporation (JDC). The merging of these units is projected to save the state $4.7 million annually by streamlining costs and eliminating duplicity.
Details of this action are as follows:
Excelsior Jobs Program – This program provides a new package of tax credits for selected firms in targeted industries that create and maintain at least 50 new jobs in New York over the next five years. Eligible firms could receive between $2,500 and $10,000 per new job to cover a portion of the associated payroll cost. In addition, the program includes an Excelsior Investment Tax Credit (ITC) and an Excelsior Research and Development (R & D) Tax Credit.
Small Business Revolving Loan Fund – The Executive Budget includes $25 million to support a capital loan program for small businesses. This proposal was first initiated by the Governor’s Small Business Task Force. The fund will target minorities, women, and other disadvantaged New Yorkers who have difficulty accessing regular credit markets.
New Technology Seed Fund - $25 million has been provided to help University-based entrepreneurs transform research and innovation to marketable products that generate revenue and employment. This fund will help institutions of higher learning expand their research, strengthen their partnerships with the business community and advance their work toward commercialization.
Economic Development - Over $43 million is provided for economic development initiatives, including the Empire State Economic Development Fund; Minority- and Women-Owned Business Development and lending program; the Urban and Community Development Program; the Entrepreneurial Assistance Program; and the retention of professional football in Western New York. Existing resources will be made available to support the Manufacturing Legacy Program, partnership between the State and regional business organizations to re-purpose abandoned industrial facilities. In 2010-11, the operation and development of Centers of Excellence and other high technology research centers will be transferred to the Foundation for Science, Technology and Innovation.
Tourism Promotion Programs - $10.6 million is made available for tourism and promotion efforts, including “I Love NY” tourism advertising, Tourism Matching Grants, and Explore New York. State spending will be augmented by securing additional resources and coordinating regional advertising campaigns with private and non-State entities. This is a combined decrease of $3.5 million from the 2009- 10 budget.
International Trade - $1.2 million increase to attract international investment to New York State and to increase export sales to foreign countries.
Economic Development Capital – Creation of a multi-agency Capital Reduction Program that will ensure sufficient debt capacity for future investments and reduce projected future deficits. Economic Development capital programs will achieve $31 million of projected spending reductions over a five-year period as part of this initiative.
Continuing support of specific projects – The Executive Budget maintains more than $3.8 billion in capital funding from reappropriations for initiatives that are facilitating economic growth in New York.
Operations - $16.7 million is budgeted to support the Job Development Corporation’s operations and administration of State economic development programs.
Synopsis
The proposed Executive Budget is intended to eliminate deficits for current and future years through its combined processes of reduction, consolidation and streamlining. The Budget still leaves consideration and opportunity for the development and growth of small businesses, high-tech industries, and new technologies for New York State businesses.