JANUARY 1999Governor Pataki proposes tax cuts, little new spending
Mandate relief, debt reform, limits on school taxes are also part of 1999-2000 plan
State spending would rise at less than the rate of inflation, and reforms to state mandates would allow localities to reduce their taxes, under the 1999-2000 Executive Budget Governor Pataki unveiled today.
As the Governor announced earlier this week, his budget includes $350 million in new business tax cuts, along with a $600 million reduction in personal income taxes that will benefit middle-income workers and thousands of small businesses.
The business tax cuts would reduce bank and insurance tax rates from 9 to 7.5 percent; give manufacturers and securities firms greater incentives to invest in New York by reducing the alternative minimum tax; and restructure and reduce taxes on energy utilities. The Business Council Energy and Telecommunications Committee decided Tuesday to support the Governor's energy-tax plan.
The $72.66 billion Executive Budget would increase spending by 1.8 percent, measured by both state-funded and overall expenditures.
It projects a $1.8 billion surplus from the current fiscal year, and sets that aside to pay for future tax cuts.
"In 1995, we had to manage crisis," Governor Pataki said, referring to his first Executive Budget. "In 1999, our challenge is to manage prosperity."
The budget's economic outlook projects moderating growth, with private-sector jobs increasing by some 100,000, or 1.4 percent.
In addition to new tax cuts, the Governor's major proposals include:
- Wide-ranging mandate relief for localities and school districts. The Wicks Law, which requires multiple contractors on public construction costs, would apply to projects costing $2 million, rather than the current $50,000, in most municipalities. Arbitrators ruling on contracts for police and firefighters would be required to give highest priority to the locality's ability to pay for any increase without increased taxation. Other proposed reforms would affect disability retirement proceedings, asbestos removal and joint services.
- Reduction of projected debt by $4.7 billion. Capital projects financed on a pay-as-you-go basis would increase from 22 percent in the coming year, to 37 percent in 2003. Both total debt and annual debt service costs would start falling by 2003. The proposal would direct 75 percent of the state's proceeds from the national tobacco settlement toward reducing debt over the next five years, while reserving most of the rest for health programs.
- Implementing previously enacted tax cuts on schedule. The corporate tax rate will drop from 9 to 8.5 percent in the calendar year 2000 for most companies, and fall later to 7.5 percent. The gross receipts tax on utility bills will drop another .75 percent as of January 1, 2000. The state's added estate tax is repealed as of Feb. 1, 2000.
- Limiting future school tax increases. School districts
with relatively high spending increases over two years would be subject
to a limit on increases in property taxes. And all districts would
be required to disclose more fully how their budget proposals would
- Expansion of the state's business marketing. The budget provides $4.5 million to promote the dramatic improvements in New York's business climate. The Business Council has called for a major increase in those efforts to help attract new businesses.
- Cost-containment actions to reduce the growth of state spending. Medicaid, education, higher education, welfare and other areas would be subject to spending restraint.
- Growth in education costs would be reduced by some $325 million, compared to amounts required by existing law. Still, overall school aid would grow by $154 million, after increases in the two previous years totaling nearly $1.5 billion.
The Governor also proposed appropriations of $12 million for charter schools, and other new education programs including a $200 million Educational Improvement Block Grant and intensive reading remediation for fourth-graders.
Medicaid spending would be reduced by $511 million, compared to projected growth on top of existing funding. The reduction would be partly offset by elimination of $223 million in hospital taxes.
"Governor Pataki's budget is good news for New Yorkers," Business Council President Daniel B. Walsh said. "Cutting taxes means creating jobs. Further tax cuts will mean still more new jobs for working New Yorkers."
The financial plan projects budget gaps of $1 billion in the 2000-01 fiscal year and $2 billion in 2001-02. Those estimates are down sharply from previous projections of future-year gaps.
Click here for the text of Governor Pataki's press release on the Executive Budget.
Click here for the full statement from The Business Council.
January 27, 1999