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GOVERNOR PATERSON,
SENATE MAJORITY LEADER SMITH AND ASSEMBLY SPEAKER SILVER ANNOUNCE
BUDGET AGREEMENT TO CLOSE LARGEST BUDGET GAP IN STATE HISTORY Budget Enacts Significant Reforms while Reducing Projected Multi-year Deficits by More than 80 Percent
ALBANY, NY - Governor David A. Paterson, Majority
Leader Malcolm A. Smith and Speaker Sheldon Silver today announced a
budget agreement to close the largest budget gap in State history,
institute long-overdue reforms that will improve the efficiency and
effectiveness of State government, and stabilize New York’s long-term
finances by dramatically reducing future projected deficits. The
agreement is subject to final enactment by the Legislature.
“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.”
“Facing the worst fiscal crisis since the
Great Depression, with economic conditions worsening by the day and no
sector of the State immune to the pain of a struggling economy, we made
the tough choices these difficult times demand,” Majority Leader Smith
said. “We held firm to a core set of priorities – maintain strong
education funding, protect healthcare from the harshest cuts while
achieving long-needed reform to increase investments in primary and
preventative care, and create new jobs wherever and whenever possible.
And coupled with the Senate’s commitment to enacting property tax
relief this session through a middle class circuit breaker, we will
also address skyrocketing property taxes. For New Yorkers across the
State, we have created a budget that confronts the dire economic
problems responsibly and positions us to achieve the long-term economic
growth we need to get our State back on track.”
“Faced with the largest deficit in New
York’s history, our plan makes $6 billion in spending cuts – including
historic reforms to Medicaid that will save $1.6 billion this year and
billions more in future years – while leveraging $5 billion in federal
stimulus dollars and a temporary increase in income taxes on high
earners to balance the budget on time and prevent deep cuts to schools,
healthcare, seniors, child welfare and the environment,” said Assembly
Speaker Sheldon Silver. “In addition, this budget advances two long
held Assembly priorities: reform of the Rockefeller drug laws to
emphasize treatment and prevention over incarceration and an expansion
of New York’s nickel deposit law to bottled water – a move that will
clean up New York’s environment and raise an additional $115 million
for green initiatives throughout the State.”
The Enacted Budget agreement closes a
two-year $17.7 billion 2009-10 budget gap and reduces the State’s
multi-year deficit by an estimated 80 percent from approximately $60
billion to approximately $11 billion. These estimates are preliminary.
The Division of the Budget will release an Enacted Budget Financial
Plan within 30 days of budget enactment.
Along with the recurring impact of the
Deficit Reduction Plan, today’s Enacted Budget agreement reflects $6.5
billion of the spending reductions in the Executive Budget – the
largest amount in State history. Additionally, it includes $5.2 billion
in revenue actions, the largest of which is a temporary $4 billion
personal income tax surcharge on higher-income New Yorkers.
Based on preliminary estimates, General
Fund spending is expected to increase no more than 1 percent and total
approximately $54 billion. All Funds spending is expected total
approximately $131.8 billion, an increase of $10.5 billion or 8.7
percent. The vast majority of that increase ($7.2 billion) represents
American Reinvestment and Recovery Act (ARRA) aid that must, according
to federal guidelines, be spent in the current fiscal year. The
remainder reflects negotiated State funds spending restorations ($2.0
billion) and previously committed capital and debt service spending
($1.3 billion).
Over the past year, the State has
experienced a precipitous decline in revenues. In the last two months
alone, since the passage of the 2008-09 Deficit Reduction Plan, the
State’s budget deficit has increased by $4.7 billion from $13 billion
to $17.7 billion, primarily due to lower than anticipated projected tax
collections, as well as increased pressures on entitlement spending.
This decline is roughly similar to the amount that will be collected
from the temporary Personal Income Tax surcharge on high-income New
York taxpayers.
The Enacted Budget also utilizes $6.2
billion of federal economic recovery funding that Congress allocated to
help states stabilize their finances and stimulate the economy. This
funding is required to be spent during the coming fiscal year and may
not be used to fund rainy day reserves or retire debt. Federal economic
recovery aid will be targeted to address the State’s deficit, restore
proposed spending reductions in health care, education, human services,
local aid to New York City, and mental hygiene, as well as to eliminate
selected revenue proposals.
Selected Enacted Budget Highlights:
Education
In 2009-10, General Support for Public
Schools is projected to total approximately $21.9 billion, an increase
of $405 million – reflecting the elimination of a proposed $1.1 billion
Deficit Reduction Assessment through the use of American Reinvestment
and Recovery Act aid. When enhanced funding for the Title I ($454
million) and IDEA ($398 million) programs is included which are
provided to school districts pursuant to a federal formula, which was
provided through federal economic recovery legislation, School Aid is
expected to increase by $1.2 billion compared to 2008-09.
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.
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