In case you weren’t aware, we’re in a financial crisis.
As the stock market continues to fluctuate and unemployment continues to skyrocket, everyone is looking to cut costs, perhaps no one more so than the governor of the state of New York.
In his executive budget proposal, Gov. David Paterson has called for some drastic changes in order to close a $1.7 billion current-year shortfall and a $13.7 billion deficit in 2009-10. The proposal calls for flat spending, a comprehensive deficit reduction plan, increased taxes and funding cuts for numerous sectors.
Read on for a roundup of what’s in the budget as it stands now.
What’s in
The executive budget proposal calls for the following additions:
The first increases to the welfare allocations since 1990 are a key part of Paterson’s proposal. The basic monthly grant has remained at $291 for a family of three ($3,492 per year) for 18 years; Paterson’s proposal would raise it to $387, or $4,644 annually.
“Since 1990, the world has changed dramatically, but the basic welfare grant has stayed the same,” Paterson said in a press release. “Though our resources are limited, this is a much-needed investment to help assist vulnerable New Yorkers who are suffering as a result of the current economic crisis, far too many of whom are children.”
Since 1990, inflation has increased by nearly 65 percent.
Other additions, which Paterson calls part of a “safety net” for those in need, include increased funding to food banks, increased access to insurance coverage, expanded access to health care coverage, increased indigent care funding for teaching hospitals and community clinics, increased access to food stamp benefits and expanded eligibility for the Home Energy Assistance Program.
A new program will provide at least $350 million per year in student loans. The budget proposal calls for the establishment of the New York Higher Education Loan Program, a partnership between the state, private lenders and higher education institutions. The lender would originate the loan, which the State of New York Mortgage Agency would purchase with funds raised by issuing bonds. SONYMA would then issue $350 million in tax-free bonds to finance new fixed-rate loans of up to $10,000 per borrower. Maximum awards would total $20,000 for undergraduates at a two-year school, $50,000 for undergraduates at a four-year school and $70,000 for combined undergraduate and graduate studies at an interest rate of approximately 8 percent.
Also in higher education: Paterson is calling for an increase in SUNY and CUNY tuition for undergraduates. The hikes come on top of an existing 14 percent increase for both undergrads and grad students as well as a 21 percent increase for non-residents at SUNY schools, all effective in spring 2009. The proposal calls for an additional increase of 7 percent for graduate tuition effective in the fall of 2009 for SUNY. Tuition for graduate students at CUNY schools, meanwhile, would increase by 20 percent.
The tuition hikes would allow schools to retain a percentage of the fiscal benefit, a break from a 30-year tradition of using the money to offset General Fund spending. That money would be reinvested in the schools, including the Tuition Assistance Program.
The proposal calls for the creation of a new tier of pension benefits (Tier V) for state and local employees, removing pension enhancements added to Tier IV, upping the minimum retirement age from 55 to 62, requiring employees to contribute to their pension fund after their 10th year of service and restoring the minimum years of service required to draw a pension from five to 10. The new tier also excludes overtime compensation when calculating benefits.
The Empire Zone program, originally designed to promote the growth of business, is not accomplishing its purpose effectively, Paterson says, and is in need of reform. The executive budget proposal would require all current program participants to demonstrate that they are producing at least $20 in actual investments and wages for every $1 that the state invests in order to remain in the program.
After these reforms, Paterson estimates the total cost of the program would be $338 million, down from the original estimate of $610 million without reforms. The savings would be used to create a new grant program and to fund research and development tax credits.
In the interest of eliminating duplicative services in state government, the executive proposal calls for the creation of a new Council on Shared State Operations to centralize back-office operations to decrease costs and improve services.
What’s out
The proposal calls for the following cuts in both this fiscal year and the next:
School aid will be reduced by $698 million, or 3.3 percent, from 2008-09 levels. Paterson said school aid would still total $20.7 billion, or 42 percent more than in 2003-04. The cuts would come from foundation aid and universal pre-kindergarten, which, in many cases, would not actually be cut, but would be maintained at 2008-09 levels. Building aid, transportation aid and certain other formulas will change based on existing statutory provisions.
The budget cuts the subsidy for SUNY hospitals in Brooklyn, Stonybrook and Syracuse by $25 million.
Local Government Efficiency Grant programs will be scaled back. The programs, administrated by the state department, encourage local consolidation and shared services. Available funds will be reduced by 50 percent.
Cuts to human service programs include a delay in the implementation of the Bridges to Health program and cuts to OASAS prevention funding. The budget delays the phase-on of over 2,600 slots for the Bridges to Health Medicaid waiver program, designed to provide intensive services to children in foster care, until 2011-12; it also reduces funding for the Office of Alcoholism and Substance Abuse Services for school-based prevention services in New York City.
A program to allow management and confidential employees to exchange limited amounts of vacation time for cash payments has been rescinded.
Funding for new legislative programs has been cut by 20 percent.
A proposed $30 million transfer from the General Fund to the Community Programs Fund, also known as member items, will be eliminated.
State funding for arts grants would be cut.
Appropriations for the Environmental Protection Fund would be reduced by $50 million.
The health care industry faces numerous cuts in grants and inflation adjustment money. The proposal also calls for changes to HMO direct pay financing, delays in nursing home rebasing and changes to Healthy NY financing.
In addition, state Medicaid spending would be limited by reforming ineffective hospital, nursing home and home care reimbursement systems to direct spending to more appropriate primary and community-based settings.
The STAR rebate program would go by the wayside under the proposal, eliminating a program that sends a check to homeowners for a rebate on property taxes. The rebate has no relation to homeowners’ property tax bill.
Numerous facilities would be shut down or consolidated to eliminate duplicative services. The New York State Foundation for Science, Technology and Innovation and the Department of Economic Development would be integrated into the Empire State Development Corporation; the State Employment Relations Board would merge with the Public Employment Relations Board; the Northeastern Queens Nature and Historical Preserve Commission and the Hudson River Valley Greenway Communities Council and Conservatory would merge into the Department of State; the New York State Theater Institute would merge with the Empire State Plaza Performing Arts Center Corporation; and the Office of the Welfare Inspector General would merge with the office of the Medicaid Inspector General.
In addition, several underutilized state facilities would be closed or downsized. Up for closure are four prison camps and several annexes, three Office of Children and Family Services evening reporting centers and six OCFS youth facilities. Two OCFS youth facilities would also be downsized, and the Office of Mental Health would eliminate 450 beds from its inpatient psychiatric system.
About 521 state employees’ positions would be eliminated through agency consolidations, facility closures or program elimination.
Even the governor himself isn’t exempt; he announced at an appearance in Syracuse earlier this month that he would take a 10 percent pay cut. He has also proposed eliminating a 3 percent salary increase for all state employees scheduled to begin in April and freezing the salaries of his executive chamber staff.
By the wayside
The governor had originally put forth the following proposals to close the budget gap, but has since said he will not pursue them, eliminating $1.3 billion in proposed tax increases:
The controversial “soda tax” or “fat tax” would have created a tax on sugary sodas and any beverage with less than 70 percent fruit juice. Paterson said the tax would have addressed the obesity epidemic. After significant opposition, Paterson opted to eliminate the tax from his proposal. Other proposed taxes that were cut included surcharges on television and radio services provided by cable, satellite or similar means; on personal services such as beauty, barbering, manicure, pedicure, massage, health salon or gym services; on entertainment-related spending like movie, concert or event tickets; and on the purchase of digital property like prewritten software, digital audio, audio-visual and text files and games. The proposal also would have applied sales tax to the value of a store coupon used for a purchase.
The governor had proposed making significant cuts to local highway, or CHIPS funding. Thanks to the federal stimulus package, Paterson said much of that funding should be restored.
The proposal had advocated a restructuring of the clothing exemption, which would have replaced the exemption for clothing and footwear priced under $110 and replaced it with two one-week exemption periods for clothing and footwear priced under $500. That proposal has been eliminated.
Paterson had wanted to limit the capital improvement exemption under the tax code to new construction, a new addition to existing construction or complete reconstruction. That is no longer part of the budget.
For more information on the governor’s budget proposal, visit ny.gov.
