Deficit Reduction Plan
- Presentation on Governor Paterson's Deficit Reduction Plan
- Paterson's Recommended Local Assistance Spending Cuts
- Governor Paterson DRP Legislation
- Contract Procurement
- Economic Development
- Environment Conservation
- Financial Services
- Health Care & Health Insurance
- Homeland Security
- Legal Reform
- rejected a five-year Wick's Law exemption for all school districts.
- included provisions to impose civil penalties on an employer, contractor or agent who willfully permits a person to operate a crane without a certificate of competence issued by the Commissioner of Labor. The first violation is up to $5,000 and the second or subsequent violation is up to $10,000. Persons operating a crane without a certificate of competence issued by the Commissioner of Labor would be subject to a first violation of up to $1,000 and a second violation of up to $2,000. (S.57B/A.157B – Part DD)
- Exempting school district construction projects from the Wicks Law;
- Increasing the Wicks construction project threshold for New York City;
- Removing the mandatory apprenticeship requirements from the project labor agreement provisions enacted as part of the 2008-09 state budget;
- Creating a new Office of Procurement Services within the Executive Department.
- expands criteria for decertifying Empire Zone companies (with a projected savings of $60 to $100 million in reduced in tax credits)
- narrows eligibility for new Empire Zone credits; reduces value of credits for newly certified companies.
- Click here for our detailed summary of Empire Zone changes.
Empire Zone Bill Text
- contains $25 million in new, non-designated economic development capital ($25 million); $50 million for the IBM Wafer Packaging Center and $25 million for Albany Nanotech.
- increases the aggregate amount of credits available under the film production credit to $350 million for 2009; requires taxpayers with credits greater than $1 million to take credits over two or more years.
- repeals the "qualified emerging technology company" (QETC) capital tax credit, effective 1/1/09 (see S.57-B/A.157-B, Part C-1, p.85)
- rejected other Executive Budget proposals to modify eligibility for the “qualified emerging technology company” (QETC)employment credit; to create a new 10% research expenditure credit, and create a $50 million “New York Growth, Achievement and Investment Strategy”.
- rejected the sales tax data matching program that would have imposed a new and costly mandate to require banks and other financial institutions to report annually the gross amount of activity on all accounts for registered sales tax vendors. This proposal was particularly troubling for small businesses by putting them at risk for unwarranted audits resulting in massive legal fees.
- rejected the repeal of private label (bad debt) provisions.
- rejected a premium tax increase on life insurers.
- rejected an increase in fines and penalties for violations of the insurance law.
- rejected the Sec. 332 insurance assessment to insurers headquartered out of state. This would have caused retaliatory taxes from other states.
- rejected codifying provisions unrelated to the Insurance Department.
- raised Sec. 332 insurance assessments (taxes) on health, life and property/casualty insurers. ($455 million) (S.55C/A.155C)
- doubles the auto insurance surcharge fee from $5 to $10. ($48.4 million tax increase)(S.56B/A.156B – Part T)
- imposes a $100 tax preparer fee of all persons who prepare 10 or more returns and includes additional penalties. This provision applies to certified public accountants, attorneys and commercial tax return preparers. ($4 million tax increase) (S.59B/A.159B – Part VV)
- $240 million increase in the Covered Lives Assessment ($120 million for 2008-09 and $120 million for 2009-10 as part of the DRP; the Covered Lives Assessment increases from $920 million to $1.160 billion.) (S. 249-A/A.162-A; pg. 10)
- an estimated $230 million increase in the health insurers' portion of the State Insurance Department Section 332 assessment. The overall increase was approximately $400 million through the DRP and enacted budget. (S. 250-A/A. 163-A; pg. 40; S. 55-C/A.155-C pgs. 299-306)
- an estimated $126 million increase in the HCRA hospital patient services assessment – essentially a sales tax on health care services performed in hospitals – from 8.95 percent to 9.63 percent on private payors. (S. 58-B/A. 158-B, Part B pg. 34-35)
- $107 million increase through extending the premium tax on commercial insurers to for-profit HMOs. (S. 57-B/A. 157-B, Part B1 pg. 83
- $5 million increase through extending the Covered Lives Assessment to health insurers licensed outside of New York. (S. 58-B/A. 158-B, Part C pg. 93)
- the creation of a Third Party Administrator claims processing fee, which would have assessed a $1 tax on health, pharmaceutical, dental and vision claims valued at more than $20 processed by entities that administer self-funded health insurance plans.
- expansion of the HCRA patient services assessment to radiological and surgical services in physicians' offices.
- increasing the premium tax on commercial insurers from 1.75 percent to 2 percent.
- shifting the financing of the cost of assisting small businesses to implement the Timothy's Law mental health insurance mandate from the General Fund to assessments on the insurance industry.
- eliminate trend factors, or the inflationary increase to Medicaid reimbursement rates paid to hospitals, for the latter part of 2008 and all of 2009, generating $68.8 million in savings.
- re-institute a gross receipts tax - .35 percent - on hospital in-patient revenue, generating $124.3 million.
- establish a Transition Reform Fund - $75 million – to help hospitals adjust to the new “rebasing” methodology, $50 million in state HEAL-NY and federal F-SHRP matching funds, as well as other funds to help hospitals and community health centers adapt to the primary care and reimbursement reforms.
- eliminate trend factors, or the inflationary increase to Medicaid reimbursement rates paid to nursing homes, for the latter part of 2008 and all of 2009, generating $101.2 million in savings.
- as part of the new Long Term Care Reform Act, establish reimbursement reform via a new regional pricing system in lieu of the current provider-specific cost-based system. The methodology goes into effect April 2010.
- re-institute a gross receipts tax - .35 percent - on personal care, certified home health agencies and long-term health care programs' revenue, generating $14.2 million.
- eliminate trend factors, for the latter part of 2008 and all of 2009.
- limit the quantity, frequency and duration of certain drugs, saving $7.5 million.
- require “step therapy” for certain drugs, saving $0.5 million.
- authorizes the Department of Health to negotiate discounts directly with drug manufacturers for drugs already on the state's Preferred Drug List as well as expand the rebate program to include additional drugs, generating savings of $167 million over two years.
- $1.2 million to incent electronic prescribing.
- a prohibition on payments or gifts from pharmaceutical and medical device manufacturers to physicians and other prescribers in excess of $50 per year;
- a requirement to disclose financial relationships of presenters of continuing medical education with drug manufacturers.
- requiring prior approval for selected high cost radiological procedures, generating savings of $2.3 million.
- increasing the Retail Tobacco Fee on a graduated scale, and will range from the current $100 annual fee to $5,000, based on the level of a tobacco retailer's total sales.
- a state electronic health records loan program was established for providers to access through the Dormitory Authority.
- $45 a ton if emissions are less than 1,000 tons a year;
- $50 a ton if emissions are more than 1,000 tons a year but less than 2,000 tons a year;
- $55 a ton if emissions are more than 2,000 tons a year but less than 5,000 tons a year;
- $65 a ton if emissions are 5,000 or more tons a year.
- 7.85% on income from $300,000 to $500,000 for married joint returns (bracket is $250,000 to $500,000 for resident head of households, and $200,000 to $500,000 for single filers).
- 8.97% on income over $500,000.
- These new brackets apply to 2009, 2010 and 2011 tax years.
- Limits itemized deductions for taxpayers with AGI over $1 million to 50 percent of such deductions (excluding charitable donations).
- the mandatory first estimated tax installment payment under Articles 9, 9-A, 32 and 33 is increased to 40 percent ($333 million) (see S.57-B/A.157-B, Part G-1, p.98).
- certain“overcapitalized" captive insurance companies to file combined returns with their affiliates ($31 million). (see S.57-B/A.157-B, Part E-1, p.91).
- an increase in the “Covered Lives Assessment” on health care insurance ($120 million for 2008-09 and $120 million for 2009-10 as part of the DRP;) (Senate Bill 249-A / Assembly Bill 162-A; pg. 10).
- $400 million increase in the Insurance Department Section 332 assessment. The assessment, which is the primary funding source for the Insurance Department's budget, is placed on all insurers doing business in New York. (The overall increase was a $400 million through the DRP and enacted budget. see S.250-A / A.163-A; pg. 40 and S.55-C / A.155-C pgs. 299-306).
- An increase in the HCRA hospital patient services assessment – essentially a sales tax on health care services performed in hospitals – from 8.95 percent to 9.63 percent on private payors. ($126 million) (see Senate Bill 58-B / Assembly Bill 158-B, Part B pg. 34-35).
- An increase in the Public Service Commission's 18-A assessment on energy utilities ($600 million); (see S.59-B/A.159-B, Part NN, p.54)
- Last year's increased filing fees for LLCs are extended to general partnerships with income over $1 million. (see S.57-B/A.159-B, Part H-1, p.54)
- eliminates sales tax exemptions for “corporate” aircraft and other vehicles; (see S.57-B/A.157-B, Part N-1, p.110)
- modifies definition of vendor for internet sales tax purposes to include certain affiliates. ($9 million). (see S.57-B/A.157-B, Part P-1, p.118)
- increases the state tax on non-cigarette tobacco products to 46 percent of wholesale prices (up from 37 percent). (see S.57-B/A.157-B, Part I-1, p.101)
- increases the rate of prepaid sales taxes on cigarettes from 7 to 8 percent (see S.57-B/A.157-B, Part M-1, p.110)
- increases state excise tax on beer, wine and sparkling wine. (see S.57-B/A.157-B, Part P-1, p.118)
- requires vendors that maintain sales tax records in electronic form to submit records to DT&F in electronic form; increases penalties for non-filing of records. (see S.57-B/A.157-B, subpart A, p.147)
- Requires issuance of a certification renewal to all current Empire Zone program participant that are not subject to new decertification criteria (so-called “shirtchangers,” defined as the transfer of employees or property between taxpayers with similar ownership; and companies that do not meet a 1:1 ratio of in-zone wages, benefits and investments versus zone credits claimed. Going forward, it requires a projected 10:1 ratio for manufacturers, and 20:1 ratio for non-manufactures seeking certification. For additional details, see our Empire Zone summary here.
- Increases the aggregate amount of credits available under the film production credit by $350 million for 2009; requires taxpayers with credits greater than $1 million to take credits over two or more years. (see S.57-B/A.157-B, Part Y-1, p.197)
- Repeals the "qualified emerging technology company" (QETC) capital tax credit, effective 1/1/09 (see S.57-B/A.157-B, Part C-1, p.85)
- a new offense of “filing false or fraudulent returns;” adopted a new Section 1801 of the Tax Law entitled “Tax Fraud Acts & Penalties,” which in part consolidates enforcement provisions from elsewhere in the Tax Law. (see S.57-B/A.157-B, subpart I, p.165)
- an expedited hearing process in cases involving the cancellation, revocation, or suspension of a license, permit, registration, or other credential issued by Tax Department.
- expanded the “bottle bill” to include bottled water, and recapture by the state of 75 percent of unclaimed deposits (See S.59-B/A.159-B, Part SS, p.65)
- $3,680,600,000 from the American Recovery and Reinvestment Act.
- The Department of Transportation all funds appropriation is $10,756,686,700. (S.55C/A.155C)
- $363 million for the Consolidated Local Highway Improvement Program. (S.55C/A.155C)
- $39.7 million for the Marchiselli Program. (S.55C/A.155C)
- $82 million in capital funding for the Metropolitan Transportation Authority. (S.55C/A.155C)
Governor Paterson's Proposed Deficit Reduction Plan
Final SFY 2009-10 New York State Budget Analysis
The final budget agreement:
The Legislature rejected various proposals made in the Governor's Public Protection & General Government (PPGG) Article VII bill related to procurement practices including:
Also rejected were Executive Budget proposals in the Education, Labor & Family Assistance Article VII bill which would have provided various procurement relief procedures for SUNY and CUNY along with related entities.
Economic Development - Ken Pokalsky
The most significant economic development initiatives in the final budget are described below.
Please contact Ken Pokalsky to discuss or for additional information.
Empire Zones – The final budget included significant changes to the Empire Zone program; it:
Agency Restructuring - The Executive Budget proposal to merge NYSTAR into Empire State Development Corporation, and “integrate activities' between ESDC and the Department of Economic Development were rejected by the Legislature.
The state's major economic development agencies (DED, UDC, NYSTAR) did have their state operations and local assistance appropriations reduced by a total of $39.4 million (-26.6%) compared to the SFY 2009 budget.
Other Program/Funding Changes
The final budget also:
The final budget agreement:
The SFY 2009-10 enacted budget, including the SFY 2008-09 Deficit Reduction Plan, will include $2.3 billion in Medicaid and other health-care “savings” and reimbursement and other reform initiatives. It relies on spending reductions, redirection of resources and taxes on health insurance and hospital in-patient and home care revenue. The Governor had sought $3.5 billion in savings and revenue.
Approximately $700 million in taxes on health insurance were enacted in the budget, including the taxes that were passed as part of the Deficit Reduction Plan (DRP) on February 3. Taxes on New Yorkers voluntarily purchase private health coverage will increase from $3.5 billion to $4.2 billion, reflecting as much as 10 percent of the cost of coverage in some areas of New York.
The agreement included the following:
Lawmakers rejected the following revenue actions:
Hospital and Community-based Services
The multi-year hospital reimbursement reform begun in 2008 to redirect resources and improve access to primary and preventive care will continue under the enacted budget. In-patient Medicaid reimbursement rates will be reduced to bring rates closer to actual costs as part of the “rebasing” process. Implementation of a new in-patient reimbursement rate methodology that better defines inpatient rates to reflect patient severity, and reallocation of graduate medical education funds to teaching and non-teaching hospitals that treat a large number of Medicaid and uninsured patients are also part of the enacted budget.
The enacted budget will also:
The enacted budget includes $224.6 million in 2009-10 nursing home savings. Among other actions, the enacted budget will:
The enacted budget includes a $68.1 million in home care savings. Among other actions, the enacted budget will:
The enacted budget includes $27.7 million in pharmacy savings FY2009-10. Among other actions, the enacted budget will:
Other Health Budget Actions
Expands the Bottle Bill to Cover Additional Beverage Containers and to Provide for the Return of the Unclaimed Deposits on Beverage Containers to the State General Fund (S.59B/A.159B, Part SS)
Amends the Environmental Conservation Law for the purpose of expanding the state returnable container act (“Bottle Bill”) to include bottled water; requiring that 80% of the unclaimed deposits be collected by the Department of Taxation and Finance for deposit into the state's general fund.
Increases the current handling fee paid to a vendor, operator of a redemption center, or distributor to three and one half cents for every beverage container accepted.
All redeemable beverage containers must have a New York State-specific universal product code (UPC) to prevent redemption of beverage containers in other states.
This measure is estimated to generate an additional $115 million in revenue annually for the state.
Increases Fees to Ensure compliance with Title V of the Federal Clean Air Act (S.59B/A.159B, Part BBB)
Authorizes an increase in the maximum Title V facility per ton operating permit fee on regulated contaminates from $45 to a maximum of $65 depending on the level of emissions.
The fee is determined as follows:
This measure increases the current annual cap from 6,000 tons per contaminant to 7,000 tons. This is estimated to raise an additional $2.5 million annually.
Increase Certain State Pollution Discharge Elimination System Program Fees (S.59B/A.159B, Part JJ)
Amends the Environmental Conservation Law (ECL) to increase certain State Pollutant Discharge Elimination System (SPDES) program fees. The fee increases will raise revenues to be used to inspect and monitor regulated facilities. This will generate additional revenue of $5 million to be deposited into the Environmental Regulatory Account.
Increase the Utility Assessment Cap (S.59B/A.159B, Part NN)
Increases the cap imposed by Section 18-a of the Public Service Law (PSL) from 1/3 of one percent to two percent of a public utility's gross intrastate utility revenues and raise the minimum gross revenue assessment threshold from $25,000 to $500,000 and the minimum assessment amount from $10 to $200.
Telecommunications providers are exempted from the law. This is estimated to estimated to generate $500 million in new revenues annually.
The Legislature rejected the Governor's proposal contained within the PPGG which would have created a new not-for-profit corporation to carry out the functions of the state's Office of Cyber Security & Critical Infrastructure. Accepted was the Executive Budget proposal to increase the annual fee assessed to nuclear electricity generating facilities to $1 million for the purpose of offsetting a greater share of local emergency preparedness costs (Part R of the PPGG Article VII).
The Legislature accepted the Governor's proposal to establish an enterprise account to allow SEMO to generate revenue from the NY Alert system, which can be found in the Division of Military & Naval Affairs appropriations budget.
Negotiations to roll back a 23-year-old ceiling on legal fees from medical malpractice awards was not adopted in the final budget agreement.
Also rejected were provisions that would have prevented double recoveries presently available to municipal employees with respect to lost earnings, and a floating interest rate on judgments in lieu of current 9% fixed rate on claims against the State and municipalities.
Revenue - Ken Pokalsky
The final budget agreement includes about $6 billion in new revenue measures, including a projected $4 billion from increased upper-end personal income tax rates and brackets. This is a 50 percent increase from the Executive Budget proposal, which included $4.2 billion combined in taxes, fees and assessments.
Key revenue measures adopted:
Personal Income Tax - The budget adopted two new PIT backets and rates (see S.57-B/A.157-B, Part Z-1, p.198):
Business Taxes -The final budget did not include any increases in broad-based state business taxes. Business tax changes in the final budget include:
Fees and Assessments – Major non-tax fees and assessments include:
Sales Taxes – Most of the sales tax provisions proposed in the Executive Budget were rejected. Sales tax changes adopted this year include:
Tax Credits - The final budget adopted several changes to economic incentive tax credits.
Tax Compliance - The budget adopts several new compliance, enforcement and penalty provisions, including:
Other Revenue Measures — The final budget:
The final budget agreement includes: