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SUMMARY OF THE LEGISLATURE'S 2006 BUDGET

Following is a brief summary of the budget actions taken by the legislature:

Bill numbers:

S. 6450-C/A.9550-C Public Protection and General Government
S. 6456-C/A.9556-B Public Protection and General Govt. Article VII
S. 6451-A/A.9551-B Legislature and Judiciary
S. 6452/A.9552 State Debt Service
S. 6453-C/A.9553-C Education, Labor and Family Assistance
S. 6458-C/A.9558-B Education, Labor and Fam. Asst. Article VII
S. 6454-C/A.9554-C Health and Mental Health
S. 6457-A/A.9557-A Health and Mental Health Article VII
S. 6455-C/A.9555-C Transportation, Environment and Economic Dev.
S. 6459-C/A.9559-B Transport., Env., Econ.Dev. Article VII
S. 6460-C/A.9560-B Revenue bill

Tax

The legislative leaders agreed on a revenue Budget bill Tuesday and scheduled it for passage on Friday, March 31. After passage, the revenue bill -- S.6460C/A.9560B -- faces an uncertain future. It is generally, but not universally, believed that -- in addition to signing or vetoing the entire bill -- the Governor may veto individual Parts of the 27-Part Article 7 bill. More uncertain is lining out within a Part. There is the precedent of 2005 when the Governor lined out language within the SBC-RPS (System Benefit Charge-Renewable Portfolio Standard) Part of economic development Article 7 bill.

In the area of much needed broad-based business tax relief, the Senate Majority and Assembly Majority negotiated Budget, rejected Governor Pataki's Executive Budget broad-based business tax reduction proposals to:

  • Reduce the general business income (Article 9-A) tax rate from 7.5% to 6.75%;
  • Reduce the bank income (Article 32) tax rate from 7.5% to 6.75%;
  • Eliminate the general business income (Article 9-A) alternative tax on business capital;
  • Eliminate the bank income (Article 32) alternative tax on (gross) assets;
  • Eliminate the bank income (Article 32) alternative minimum tax on income;
  • Eliminate the general business income (Article 9-A) alternative tax on minimum taxable income (the "AMT");
  • Eliminate the additional general business income tax (Article 9-A) imposed on subsidiary capital;
  • Expense (deduct) the full cost of depreciable property in the year that the property is placed in service;
  • Phase out and eliminate the estate tax by conforming State exemptions to Federal levels; and
  • Decrease the maximum and minimum limitations on the business tax applicable to life insurance companies.

The two-way agreement rejected also the Senate Majority proposal to repeal the general business income tax (Article 9-A) on manufacturers.

Outside of the area of broad-based business tax relief the agreement changed tax law as follows:

  • Real property tax relief checks (around 1/3 the STAR value) sent to taxpayers this Fall -- $805 M in FY'7 and $960 in FY'8;
  • Enhancement of STAR for seniors -- $72 M in FY'7 and $72 M in FY'8;
  • Enhancement of the school tax credit for agriculture -- $0 in FY'7 and $10 M in FY'8;
  • Personal Income Tax marriage penalty relief -- $15 M in FY'7 and $41 M in FY'8;
  • Enhancement of the Sales Tax vendor collection credit for quarterly and annual filers -- $24 M in FY'7 and $54 M in FY'8;
  • Permanent repeal of the subchapter S corporation differential tax -- $40 M in FY'7 and $40 in FY'8;
  • Permanent extension and enhancement of the motion picture tax credit -- $35 M in FY'7 and $35 M in FY'8;
  • Expansion of the film tax credit to production of commercials -- $0 in FY'7 and $7 M in FY'8;
  • Enhancement of Empire Zone tax credits for investments exceeding $750 M -- $0 in FY'7 and $50 M in FY'8;
  • Creation of a volunteer fireman Personal Income Tax credit -- $6 M in FY'7 and $25 M in FY'8;
  • Enhancement of the credit for investors in low income housing -- $0 in FY'7 and $4 M in FY'8;
  • Creation of a 15 cent/gallon subsidy for biofuel production plants -- $0 in FY'7 and $5 M in FY'8;
  • Enhancement of the brownfields tax credit -- $0 in FY'7 and $11 M in FY'8;
  • Personal Income Tax deduction for National Guard members on active duty ordered by the Federal government -- $1 M in FY'7 and $1 M in FY'8;
  • Personal Income Tax credit for conservation easements -- $0 in FY'7 and $1 M in FY'8;
  • Permanent extension of the Sales Tax exemption for amusement parks -- $1 M in FY'7 and $1 M in FY'8; and
  • Creation of a Personal Income Tax child tax credit at 1/3 times the Federal child tax credit -- $0 in FY'7 and $370 M in FY'8.

The agreement also did not include an extension of the suspension of the $110 clothing Sales Tax exemption; therefore, the Sales Tax exemption for clothing priced under $110 automatically (by Law) returns on April 1, 2006. (Extension of the suspension would have been a $587 M tax increase in FY'7 and a $605 M tax increase in FY'8.)

Health insurance

The legislature agreed on a proposal to create an independent Health Insurance Mandate Commission. The legislature allocated $300,000 for this initiative, the details which will be decided post-budget. The Business Council has long-advocated the need to create a commission to look at the dozens of mandate bills introduced by the legislature.

Health / Medicaid

The legislature rejected the bulk of the changes to Medicaid that were in Governor Pataki's proposed budget, including:

  • Eliminating the trend factor for hospitals
  • Changes to the preferred drug and clinical review program
  • Lower Medicaid reimbursement for pharmacies
  • higher co-payments for Family Health Plus

The legislature agreed to the following changes to Medicaid:

  • Increase the rate of payment for emergency room visits
  • Increase the rate of payment for emergency room physicians
  • Increase rates for personal and home care workers
  • Funding for a nursing home pay for performance program
  • Funding for a nursing home quality incentive program
  • Funding for home care recruitment and retention
  • Creates an early intervention demonstration program
  • Authorizes a Chemung County demonstration program
  • Require hospitals to provide greater pricing discounts for patients who lack health insurance
  • Agreed to create a Medicaid Fraud initiative subject to further negotiations after the budget

Education

The legislature increased formula aid to education by $1.1 billion which represents a 6.7% increase overall formula aid increase including a $375 million increase for Sound Basic Education aid to be allocated in the same manner as in 2005-06. Virtually all the Governor's changes were rejected. In addition to the $1.1 billion here are just some of the items where funding was restored and/or increased.

  • Established a new aid category called Supplemental Extraordinary Needs Aid (ENA) of $136.1 million to provide additional operating aid for low wealth districts and districts with high need students.
  • Provided an additional $76.6 million in Tax limitation aidfor districts with high residential tax burdens and for districts that provide a high amount of local per pupil funds.
  • Teacher Resource and Computer Centers were allocated $31 million.
  • Restored the Teacher Mentor Intern program to $6 million.
  • Funded a Math and Science High School Initiative at $1.5 million.
  • Funded an Engineers of the Future program at $5 million.
  • Funded a Summer Institute for Math and Science at $5 million.

Some of the Executive Proposals that the legislature rejected:

  • Changing the school voting process to only allowing one vote.
  • Wicks Law Exemptions.
  • Raising limit on the number of charter schools that can be established.

Also included was a capital construction program of $2.6 billion of which 1.8 would be for NYC.

Higher Education

  • The legislature accepted the Governor's Math and Science teaching scholarship proposal with some slight modifications
  • The legislature agreed to the Empire Innovation Program and included language to direct the allocation of these funds.
  • The Tuition Assistance Program was restored -- $83.65 million \
  • Bundy Aid (Aid to Independent Colleges and University was increased by $2.9 million.
  • A 10% funding increase was provided to the Educational Opportunity Program (EOP),

Higher Education Opportunity Program (HEOP), College Discovery and the Liberty Partnerships Program

  • The proposed to increase tuition at SUNY by $500 and CUNY by $300 was rejected and additional operating aid support was provided -$93.985 million.
  • Community College Base Aid was increased above the executive proposal by $75 per full time equivalent student at SUNY and CUNY -$12.795 million
  • Contract courses at both SUNY and CUNY were increased by $1 million each.

Some of the items that were rejected include:

  • The proposal to privatize SUNY hospitals
  • The proposal to alter tuition policy at SUNY and CUNY
  • The proposal to create the Partnership to Accelerate Completion Time

Environment

n the spending side of the budget (see S.6455-C/A.9555-C), the legislature:

  • Adopted DEC's general operations budget at $454 million, an increase of $23 million or about 5.6% ($1 million less than proposed in the Executive Budget).
  • Approved $142.3 million for superfund/brownfield programs, including $120 million for hazardous waste remediation, $15 million for expenses related to the brownfield act, including state funded cleanups, technical assistance grants, and brownfield program administration; $7.3 million for costs related to brownfield and VCP oversight.
  • Approved $800,000 for Empire State Development Corporation to implement the small business pollution prevention/compliance assistance program adopted in 2005.
  • Approved $500,000 for “community impact research grants.”

On the policy/program side of the budget, the legislature (see various provisions of S.6459-C/A.9559-B):

  • Rejected the Governor's proposed increase in the Title V air permit fee cap to $67 per ton (Note that the Administration will continue to push for an increase next week.)
  • Rejected all proposed changes to hazardous waste-related fees, including the Governor's proposal to re-set the hazardous wastewater fee threshold at 15TPY, as well as the Governor's and Senate's proposed reductions in per ton special assessments.
  • Rejected the Governor's proposed increases in SDPES P/C/I permit fees; and dam-related fees.
  • No agreement was reached on the Governor's proposal to expand the state's authority to regulate freshwater wetlands under 12.4 acres in size, and to increase wetlands permit fees
  • Increased the Environmental Protection Fund to $200 million per year; with additional revenues coming from an increased diversion of income from the existing state Real Property Transfer Tax. Open space remains the largest spending category at $119 million; other broad categories include: $58 million for parks, rec and historic preservation; and $21 million for municipal solid waste management.

Contract Procurement (See S.6456-C/A.9556-B, Part D) – The legislature agreed to modest changes to the state's procurement laws as part of their ongoing budget negotiations. Specifically, they agreed to:

  • Extended the Procurement Stewardship Act (State Finance Law Section 163) through June 30, 2007, largely unchanged.
  • Increased the thresholds for Office of State Comptroller pre-audit of contracts from $15,000 to $85,000 for contracts let by the Office of General Services, and from $15,000 to $50,000 for contracts let by other state agencies. No change in pre-audit thresholds for municipal contracts.
  • Increased the discretionary purchase (i.e. non-competitive bid) thresholds for commodities and services from $15,000 to $85,000 for the Office of General Services, and from $15,000 to $50,000 for other state agencies. The discretionary purchase threshold for purchases from small businesses and minority/women owned businesses was increased from $50,000 to $100,000.
  • Repealed Section 163.6-a of the State Finance Law, which restricted vendors that prepared and furnished specifications to a state agency regarding a technology procurement proposal from bidding on such contract.
  • Increased the threshold for publishing bids in the Procurement Opportunity Newsletter from $15,000 to $30,000.
  • Note: These changes only apply to contracts for which bid solicitations have been issued prior to the effective date of this act.

Lobbying Act – The legislature made two technical amendments to last year's Lobby Act reform package (see S.6456-C/A.9556-C).

  • They clarified that the $5000 expense threshold for registering as a lobbyist applies on an annual, rather than biennial, basis.
  • They clarified the duration of the “restricted contact period” related to contract procurement activities.

Economic Development

Unless noted, these are provisions of S.6459-C/A.9559-B

  • Extended the Power for Jobs program and the “energy cost savings benefit program” through the end of 2007; allows all PfJ participants to elect to begin receiving benefits through the savings reimbursement option, rather than a contract continuation; PfJ participants with contract extensions are eligible for a rebate of any excess costs (PfJ rates compared to rates available through their local utility) incurred after January 1, 2006 under their PfJ contracts (Part U).
  • Extended the Empire Zone program category for “regionally significant projects” to “clean energy R & D enterprises,” defined as power generating facilities using pulverized coal, fluidized bed, or integrated gasification technology, and capable of capturing carbon or being retrofitted for carbon capture technology. (Part HH)
  • Agreed to immediately designate six new Empire Zones. (Part II)
  • Appointed interim members for the State Foundation for Science, Technology and Innovation (which is to replace the NYSTAR board under 2005 legislation). Required the NYSFSTI to produce an annual report to assess the effectiveness, costs, and benefits of all state science/technology/innovation funding programs. (Part CC)
  • Funded the Economic Development Fund at $32 million each (see S.6455-C/A.9555-B); allow regional partnerships to apply for EDF and Jobs Now program funding (Part FF).
  • New funding of $1.4 million each for the states five Centers of Excellence. (see S.6455-C/A.9555-B) Creates a new Center for Excellence in the area of life sciences to be located within New York City. (Part FF)
  • Increased the level of funding available for the Excelsior Linked Deposit Program from $350 million to $410 million.  (Part Q)
  • Extended UDC's general loan powers through 7/1/07.
  • Restored $2.3 million for local Empire Zone administrators  (see S.6455-C/A.9555-B)

Small Business

The Legislature rejected:

  • Repeal of New York's extra estate tax
  • STAR for Small Business

The Legislature agreed to:

  • Vendor Sales Tax Credit: $24 million this year: $54 million next year
  • Elimination of the S-Corp rate differential: $40 million this year; $40 million next year
  • A farmer school property tax credit: $10 million next year
  • Tax credit for emerging Bio-fuels companies: $5 million next year
  • Legislature also noted that it stands firm on the collection of taxes on Native American sales

Consumer Products and Services

Legislature agreed to:

  • Sales tax exemption on clothes under $110: $587 million this year; $605 million next year
  • Extend the Motor Fuel Marketing Practices Act (MFMPA) for one year; deny the proposed payment of certain Consumer Protection Board investigative costs by the A.G.

Construction

The Legislature agreed to:

  • Setting the letting level for highway and bridge construction and maintenance at $1.85 billion

The legislature rejected:

  • Proposal regarding design-build contracts

Occupational Safety and Heath

The Legislature rejected:

  • Proposal to increase the Asbestos Handling License Renewal Fee from $300 to $500

Transportation

  • Added a requirement to the state finance law that the Executive Budget proposal will contain a comprehensive financial report and plan for the dedicated bridge and highway trust fund to be submitted to the Controller. This report will include detailed information specific to the dedicated bridge and highway trust fund for the prior fiscal year, the completed quarters of the current fiscal year and a projection of the next five fiscal years.
  • Rejected the Governor's proposal regarding Transportation Development Partnerships (public-private partnerships).
  • Rejected the Governor's proposal regarding design-built contracts.
  • Accepted a provision requiring New York State to revoke the New York commercial driver's license of a commercial driver convicted in another state of operating a motor vehicle under the influence of alcohol or drugs.
  • Rejects the proposal to increase the fee for non-driver identification card photographs
  • Agreed to the Governor's CHIP's funding levels.
  • Agreed to setting the letting level for highway and bridge construction and maintenance at $1.85 billion.
  • Agreed to provide a $5.3 million appropriation for airport and aviation facility projects.

Labor

  • Accepted the proposal to transfer the Radiological Health Unit from the Dept. of Labor to the Dept. of Health.
  • Rejects a proposal to increase the Asbestos Handling License Renewal fee from $300 to $500.
  • Rejected a proposal to make public employer's financial ability to pay the primary factor that a public arbitration panel uses in arriving at a determination in disputes.