Overview Fiscal 2011 Executive Budget
January 25, 2010

The following provides The Business Council’s overview of the Fiscal 2011 Executive Budget.  Note that additional details on the Governor’s proposed budget, as well as the text and support memos for specific budget bills, are available on the Division of Budget’s web site. 

BUDGET OVERVIEW

Staff contact: ken.pokalsky@bcnys.org

The Executive Budget, at $134 billion, proposes to close a $7.4 billion gap between projected spending and revenues, including a $500 million deficit carried forward from the current Fiscal Year. 

Major spending actions include:

  • $5.2 billion in total spending reductions and controls
    • $1 billion (or 5 percent) in “real” reductions in school aid
    • $1 billion “cut” (trend-line reduction) in health care expenditures (through the elimination of trend factors, graduate medical education reform, personal care program reform, and increased audit recovery)
      • Actual health expenditures increase by $1 billion
      • Total Medicaid spending increases by $899 million or 18%
      • State funded Medicaid spending increases by $1.1 billion or 8.3%
    • $1 billion in cuts from state agencies (including $500 million across the board agency cuts; $250 million in anticipated salary givebacks or deferrals)
      • The Division of Budget is projecting a two year 5,700 (4%) reduction in the state workforce

Other features:

  • Spending increases 0.9% on a state funds budget basis (state tax and fee supported spending, except capital)
  • The proposed budget includes about $4 billion in non-recurring federal funds.
  • The proposed budget includes $2.65 billion in new state borrowing

Future Deficits: The revenue and spending actions in the proposed Executive Budget reduce but do not eliminate out-year deficits.  Projected deficits include

  • FY 2012 = $6.3 billion
  • FY 2013 = $10.5 billion
  • FY 2014 = $12.2 billion

TAX/REVENUE PROPOSALS 

Staff contact: ken.pokalsky@bcnys.org

Tax Policy measures

  • Extends New York State and City bank taxes to tax years beginning before January 1, 2011; extends New York’s Gramm-Leach-Bliley transition rules through the same date. (S.6610/A.9710, Part Y)  This extension is related to the Department of Tax and Finance’s efforts to draft legislation to integrate Articles 9-A and 32 of the tax code.  Note that this integration language was not included in the FY 2011 Executive Budget proposal, but is intended to be introduced as a non-budget bill later this session. 
  • Increases the allowable rate for city and village-imposed gross receipts taxes on energy and telecommunications utilities from 1 percent to 3 percent.  (S.6606/A.9706, Part HH)
  • Requires the Department of Taxation and Finance to develop recommendations on reforming state and local taxation of telecommunications services  (S.6610/A.9710, Part M)
  • Creates a real property tax circuit breaker for residential taxpayers with incomes under $200,000 (or $300,000 in New York City, Long Island, and Westchester, Rockland, Dutchess, Orange and Putnam counties); would provide a personal income tax credit for eligible taxpayers based on “excess” real property tax payments.  (S.6610/A.9710, Part Q)

Revenue Measures

  • $450 million to $1 billion – Imposes a new tax on soda “syrups,” “bottled soft drinks,” and soft drink powders.  (S.6610/A.9710, Part C)
  • $240 million in new and increased health care assessment. (See details in Health Care / Health Insurance section below.)
  • $210 million – Imposes a $1 per pack increase in the state’s cigarette tax (S.6610/A.9710, Part B)
  • $93 million – Establishes new license fees for grocery stores authorized to sell wine, as part of broader legislation to allow for sale of wine in grocery stores and provides increased operational flexibility to existing liquor stores.  (S.6610/A.9710, Part T)
  • $35 to $83 million – Requires financial institutions and other entities that are subject to the IRC mandate to file federal “information returns” regarding payment transactions to file duplicate returns with New York State covering such payments settled with New York payees.  (S.6610/A.9710, Part H)
  • $30 million – Subjects certain asset sales by nonresident shareholders of subchapter S corporations to New York State taxable income.  (S.6610/A.9710, Part F)
  • Allows for up to $16 million from PSC Section 18-a assessments to pay for NYSERDA research and planning programs, and the “climate change program” at the Department of Environmental Conservation.  (S.6609/A.9709, Part CC)
  • $8 to $12 million – Allows the Department of Taxation and Finance to employ statistical sampling in sales tax audits; exempts businesses with gross receipts under $1 million for each of the previous three years.  (S.6610/A.9710, Part I)
  • $ 2 million – Imposes a cap on the aggregate amount of biofuel production and qualified emerging technology company tax credits that can be claimed by members of Partnerships, LLCs and subchapter S corporations.  (S.6610/A.9710, Part D)
  • $1 million – a 3% tax on the value of natural gas extracted from the “Marcellus shale” formation (S.6610/A.9710, Part A)
  • $500,000 – Allows Department of Health public service education programs to be financed through Public Service Commission assessments on the cable television industry.  (S.6609/A.9709, Part V)

ECONOMIC DEVELOPMENT

Staff contact: ken.pokalsky@bcnys.org

Restructures the New York Job Development Authority; eliminates the Department of Economic Development and Urban Development Corporation, and transfers their functions into the JDA.  (S.6609/A.9709, Part L)

Creates a new “Excelsior Jobs Program” to in part replace the expiring (sun-setting Empire Zone program (see S.6610/A.9710, Part W)

  • Criteria for participation includes:
    • Businesses in targeted industries, including: manufacturing; biotechnology, pharmaceutical, "high-green" and "clean-technology" research and development; internet publishing; software development; financial service back office operations and other high growth industries identified by ESDC.
    • Net increase of 50 jobs in-state over a two year period
  • Incentives include:
    • A job creation tax credit of between $2,500 and $10,000 per job, to be determined by ESDC
    • A 2 percent investment tax credit
    • An additional research and development tax credit, equal to 10 percent of the federal R&D credit earned for R&D investments in New York State
  • Eligibility would be for up to five years after certification.  Participants would be subject annual reporting and verification, and clawback of incentives if their program eligibility is revoked.
  • Credits would be refundable, with unuseable credits treated as a refundable overpayment of taxes for the tax year in which they were earned.
  • Participants in Excelsior must voluntary decertify from the Empire Zones program.
  • Only $50 million in Excelsior credits would be awarded in Fiscal 2011 and in each of the next four fiscal years.

Provides $31.2 million in new appropriations for the “Economic Development Fund.” (S.6605/A.9705, p.225)

Creates a $25 million small business revolving loan program; the state would make low interest loans available to “community based financial institutions” which would make loans of up to $125,000 to businesses with one hundred or fewer in-state employers.  Program is dependent upon legislative appropriations and a $25 million transfer from the New York Power Authority to the state.  (S.6609/A.9709, Part N)

Creates a $25 million “New Technology Seed Fund”; the state would make funds available to venture capital firms that would make loans to new/emerging businesses.  Fund resources are subject to legislative appropriation.  (S.6609/A.9709, Part O)

Allows up to $420 million in credits to be awarded under the pre-existing film production tax credits program for FY 2011 and each of the next four fiscal years, for a total increased commitment of $2.1 billion; modifies some eligibility criteria for the production credit. (S.6610, A.9710, Part V)

Directs $46 million in “excess funds” from the NY/NJ Port Authority for use by the New York City Empowerment Zone, the proposed New Technology Seed Fund, and the Governor’s Island Corporation. (S.6609, A.9709, Part Q)

Clarifies that Qualified Empire Zone Enterprises that are decertified under last year’s “reforms” would lose tax credits for tax years beginning on or after January 1, 2008.  (S.6610/A.9710, Part X)

Eliminates the ability of IDAs to grant exemptions from the portion of the mortgage recording tax dedicated to the support of the MTA (S.6609/A.9709, Part D)

FINANCIAL SERVICES

Staff contact: walter.pacholczak@bcnys.org

Amends the General Municipal Law and the Banking Law to permit local governments to make deposits in credit unions, savings banks and savings and loan associations. Conforming changes permit such institutions to accept such deposits. (S.6606/A.9706, Part HH)

Enhances the collection of taxes by requiring payment settlement entities, third party settlement organizations, electronic payment facilitators, or others deemed to be acting on behalf of payment settlement entities to annually report by payee the gross amount of settled payment card and third party network transactions. (S.6610/A.9710, Part H)

Extends the provisions of the New York State and New York City bank taxes dealing with the taxation of commercial banks, and the Federal Gramm-Leach-Bliley Act (GLBA) transitional provisions, for one additional year. (S.6610/A.9710, Part Y)

Funding for the Department of Insurance is reduced by $32 million, reflecting savings achieved through a $30 million reduction in health insurance subsidy payments made under the Timothy’s Law program and $2 million from net State operations changes.

The Executive Budget recommends an increase of 70 in Department of Insurance staffing, including new examiner trainees and new staff to support enhanced oversight of the health care insurance industry.

HEALTH CARE/HEALTH INSURANCE/MEDICAID 

Staff contact: margaret.moree@bcnys.org

Reinstates the Insurance Department’s authority to approve commercial health insurance premium rate adjustments before they take effect, starting with premiums effective after October 1, 2010. Increases the medical loss ratio on community-rated policies to at least 85%.  (S.6608/A.9708, Part D)

Increases the assessment on hospital inpatient services from 0.35 % to 0.75%; extends Health Care Reform Act surcharges to surgical and radiological procedures performed in private ambulatory centers, physicians’ offices and urgent care settings; expands Child Health Plus benefits to include medically-necessary orthodontia; establishes co-payments for the Family Health Plus Buy-In program.  (S.6608/A.9708, Part B)

Prohibits pharmaceutical companies from providing to physicians and other prescribers inappropriate gifts and payments; requires information provided to prescribers by pharmaceutical companies about their products to be accurate and not misleading.  (S.6608/A.9708, Part B)

Institutes a two-year cap on the aggregate increase in nursing home reimbursement rates processed as a result of rate appeals. Increases the nursing home assessments by one percent, from 6 to 7%, and stipulates that the increase is not reimbursable under Medicaid.  Increases the cash assessment on personal care providers, certified home health care agencies, long term home health care programs and licensed home care services agencies from 0.35% to 0.7%.  Transitions the responsibility for rate setting for Managed Long Term Care services from the Insurance Department to the Department of Health. (S.6608/A.9708, Part C)

Reduce Timothy’s Law Subsidy for businesses with 50 or fewer employees, by $30 million in 2010-11.  This reduction is in addition to a $20 million reduction that was enacted as part of the 2009-10 Deficit Reduction Program.  (S.6605/A.9705, p. 215) 

Precludes insurers from denying payment of an Early Intervention services claim based upon location of where services are provided; duration of the insured's condition; if the provider of services is not a participating provider in the insurer's network; or the absence of a primary care referral. (S. 6608/A. 9708, Part A)

LEGAL REFORM

Staff contact: walter.pacholczak@bcnys.org

The Executive Budget includes modest legal reforms for the Metropolitan Transportation Authority and municipalities.  They include:

  • Eliminates the ability of Metropolitan Transportation Authority (MTA) employees from receiving double the amount of workers’ compensation benefits when injuries occur on leased New York City property.  (S.6609/A.9709, Part F)
  • Eliminates the ability to sue the MTA when injuries result from reckless or deliberate conduct. (S.6609/A.9709, Part I)
  • Sets the interest rate paid on judgments by local governments, the State and certain public corporations, at market rates. This section would facilitate local and state government cost savings efforts by setting the interest paid on judgments by local governments, the State and certain public corporations at the weekly average one year constant maturity treasury yield, capped at 9 percent. (S.6607/A.9707, Part DD)

TRANSPORTATION

Staff contact: walter.pacholczak@bcnys.org

$8.8 billion in All Funds appropriations for the Department of Transportation, including $97.6 million from the General Fund; $4.3 billion in capital projects funds; and $4.4 billion from other fund sources for the Department of Transportation.   This is an overall decrease of $3.46 billion, primarily due to non-recurrence of American Recovery and Reinvestment Act funds and 2005 Bond Act funds. 

The Executive Budget recommends a net decrease of 91 in DOT staff, an increase of 54 positions associated with the DOT takeover of maintenance and operation of Interstate 84; 15 new positions to replace consultant contracts for information technology and a decrease of 60 positions associated with the Department’s workforce reduction plan and lower staffing for non-health and safety functions.

Authorizes the CHIPS and Marchiselli capital aid programs to counties, cities, towns and villages for State Fiscal Year 2010-11 at $363.1 million and $39.7 million respectively. (S.6609/A.9709, Part A)

Establishes a waiver process so that transit systems and State agencies and authorities that operate diesel vehicles, and those that operate diesel vehicles on their behalf, do not have to install pollution devices on older vehicles if those vehicles will be retired within 3 years. (S.6609/A.9709, Part C)

CONTRACT PROCUREMENT

Staff contact: margaret.moree@bcnys.org

Repeals the fee that contractors were to collect on sales from centralized contracts administered by OGS, with an immediate effective date. (S.6600/A.9700, Part P, p.313)

Provides increased procurement flexibility for local governments and the State through increasing competitive bidding thresholds, authorizing reverse auctions, allowing local governments to award contracts based on “best value”; allowing local governments to piggyback on certain federal GSA contracts.  (S.6600/A.9700, Part FF)   

As part of school district only mandate and fiscal relief, proposes to repeal the Wicks Law, which requires multiple bidding requirements on public work construction projects, while preserving subcontractor protections enacted in 2008.  (S.6609/A.9709, Part CC)

The New York State Public Higher Education Empowerment & Innovation Act (S.6607/A.9707, Part E) provides enhanced discretion for SUNY and CUNY in the areas of tuition, account management, asset maximization, administration, public-private partnerships, procurement and capital construction.  The proposed language does require that lease agreements and construction and financing by the Dormitory Authority of facilities for the benefit of SUNY by not-for-profit entities associated with SUNY, be subject to MWBE provisions, prevailing wage rates, and project labor agreements; broadens the authority of the SUNY Construction Fund to implement capital projects subject to procurement guidelines which must substantially conform to those applicable to existing public authorities. 

Eliminates several procurement related advisory committees:  The Advisory Council on Procurement Lobbying; the Statewide Wireless Network Advisory Council; and the MWBE Advisory Board (S.6614/A.9714). 

The proposed budget does not include language to extend the Procurement Lobbying Law, which expires on March 10, 2010.

WORKERS’ COMPENSATION

Staff contact: margaret.moree@bcnys.org

The Governor’s State Budget Proposal included two provisions specifically related to workers’ compensation:

Requires workers’ compensation insurance carriers to remit to the Workers’ Compensation Board any New York State Assessment Surcharge funds, as defined by the New York State Compensation Insurance Rating Board, collected from policyholders attributable to State Fiscal Year 2008-09 in excess of amounts billed to the insurance carriers by the Workers’ Compensation Board during State Fiscal Year 2008-09.  The Division of Budget estimates the amount to be remitted at approximately $24 million to be ultimately swept into the General Fund.  (S.6606/A.9706, Part Q)

Includes several proposals related to self-insured employers and trusts, and the recovery of funds from defaulted trusts.  These include:

  • Extends the authority of the Workers’ Compensation Board to borrow from the Uninsured Employers Fund for up to $75 million for purposes of making payments to claimants of defaulted trusts and to offset assessments on remaining self-insured trusts.
  • Clarifies the Workers’ Comp Board’s authority to enforce judgments of former members of an insolvent self-insured trust and to commence collection actions against them. 
  • Permits the Board, self-insurers or group self-insurers to purchase “loss portfolio transfer” policies from a carrier authorized to provide workers’ compensation coverage.  (S.6606/A.9706, Part R)

ENVIRONMENT

Staff contact: marcus.ferguson@bcnys.org

  • Overall Department of Environmental Conservation budget of $1.16 billion, a reduction of $173 million or 12.9 percent.
  • Environmental Protection Fund appropriation of $143 million, a reduction of $73 million from FY 2010; moratorium on new funding for Adirondack and open space purchases.  (S.6609/A.9709, Part FF)
  • Eliminate sunset on statewide waste tire disposal fee.  (S.6609/A.9709, Part DD)

ENERGY/TELECOMMUNICATIONS

Staff contact: ken.pokalsky@bcnys.org

  • Increases the allowable rate for city and village-imposed gross receipts taxes on energy and telecommunications utilities from 1 percent to 3 percent.  (S.6606/A.9706, Part HH)
  • Imposes a 3 percent tax on the value of natural gas extracted from the “Marcellus shale” formation (S.6610/A9710, Part A).
  • Allows for up to $16 million from PSC Section 18-a assessments to pay for NYSERDA research and planning programs, and the “climate change program” at the Department of Environmental Conservation.  (S.6609/A.9709, Part CC)
  • Requires the Department of Taxation and Finance to develop recommendations on reforming state and local taxation of telecommunications services. (S.6610/A9710, Part M)
  • Authorizes the Department of Health to finance public education expenses through PSC-imposed assessments on cable television companies. (S.6609/A.9709, Part V)