Overview Fiscal 2012 Executive Budget

In proposing his Executive Budget for the 2011-12 state fiscal year, Governor Cuomo did pretty much what he said he was going to do during his campaign and transition – close the state's budget gap with spending reductions and reductions in the size of state government, rather than with new or higher taxes.

The Business Council has come out in strong support of the Governor's spending plan.

The following provides an overview of the Fiscal 2012 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. 


 “Governor Cuomo is proposing a budget that finally addresses the need to reduce government spending and put New York on the road to recovery,” said Heather Briccetti, Acting President & CEO of The Business Council. “This budget proposal ends the business as usual in Albany that has led to a loss of jobs and population in our state. It puts forward a long-term, sustainable approach to move New York in the right direction, and ends the tax increases, gimmicks and short-term fixes that simply mask the underlying problem of government's overspending,” said Briccetti.

The Executive Budget proposal addresses a $10 billion gap between projected revenue and projected spending with significant spending reductions for state government operations; the consolidation and elimination of state agencies and the closing of state facilities; and reductions in spending on major state programs including Medicaid and school aid.

The result is $132.9 billion in overall spending, a reduction of $3.7 billion or 2.7 percent from the current year.

Even with these proposed actions, the state still faces a projected gap of $2.3 billion in Fiscal 2013, and a combined gap of $9.1 billion over the next three fiscal years. The Governor compares this to a combined gap of $53 billion over the same three years without his proposed spending controls and government reform.

Overall, the Executive Budget proposal includes an $8.9 billion reduction in projected all funds spending levels for the new budget year.

Projected Medicaid spending will be cut by $2.9 billion, while actual state spending on Medicaid in Fiscal 2012 will be reduced by $982 million compared to the current fiscal year, a reduction of 1.8 percent. The Governor is proposing a long term Medicaid spending growth target tied to increases in the medical component of the consumer price index. The loss of short-term federal Medicaid “stimulus” funds means that state tax-funded Medicaid spending will actually increase by $3.6 billion. A “Medicaid Redesign Team” appointed by Governor Cuomo is charged with recommending specific proposals for restructuring the state's Medicaid program.

Actual state school aid would be reduced by $1.5 billion, or 7.3 percent, compared to the current year budget. Going forward, the Governor proposes tying increases in school aid to increases in state personal income.

The budget also proposes a 10 percent reduction in General Fund spending on “state operations,” a savings of $1.4 billion that will come from a combination of consolidations, contract adjustments and, if necessary, layoffs. The budget consolidates eleven existing agencies into four, and the Governor's “Spending and Efficiencies Commission” is charged with recommending another 20 percent reduction in the number of state agencies, authorities and commissions.

The plan includes $455 million in new revenue measures – a relatively modest increase compared to the past two budgets which saw a combined $10 billion in tax hikes. The largest component, $200 million, is expected from improved tax administration and increased compliance and enforcement, rather than an increase in rates or extension in taxes. It also includes $150 million in new state lottery-related revenues. The only significant business tax proposal is the repeal of insurance tax exemptions for large cooperative insurance companies, a move that would affect a limited number of carriers, and is expected to raise $22 million per year in new revenues.

The budget plan is based in part on increased tax revenues generated by a recovering economy. It includes projections of 4.8 percent growth in state personal income, 1.3 percent growth in private sector employment, and a slight drop in the unemployment rate.   

As a result of increased economic activity, the budget is projecting total state tax revenues to increase by $4 billion or 6.6 percent in the new budget year.

The budget projects personal income tax revenues to increase by $2.7 billion or 8.4 percent during the new budget year, and total state tax revenues to increase by $4.0 billion or 6.6 percent. Business tax receipts overall are projected to grow by $705 million or 9.2 percent, with the greatest growth coming from corporate franchise and bank taxpayers.

The budget also includes a permanent extension of the state's ability to impose an unemployment insurance interest assessment surcharge on employers. These assessments will finance repayment of federal loans to the state's UI system; the state expects to begin making interest payments on these federal loans by October 2011.

Even with increases in tax revenues driven by increased economic growth, the state will still experience a $1.7 billion reduction in total state income, with growth-related increases in tax revenues offset by the loss of $5.8 billion in federal stimulus funds.

The Budget also includes a number of major non-fiscal initiatives.

Of particular interest is the creation of a new Department of Financial Regulation, which would consolidate the current Insurance Department, Banking Department and Consumer Protection Board. The proposal also extends “Martin Act” enforcement authority to the new DFR, which would be in addition to existing enforcement authority of the Attorney General, and gives the DFR new civil penalty authority. The Business Council does not support expansion of the Martin Act.

It also include several economic development initiatives supported by The Business Council. These include:

The Governor is also proposing the creation of ten Regional Economic Development Councils that will develop region-specific economic development plans and compete for up to $200 million in competitive state grants to help implement regional growth initiatives.

While not technically part of the Budget, Governor Cuomo has also proposed a cap on local real property taxes that limits the annual increase in rates to 2 percent or the rate of inflation, whichever is lower. This measure has already passed the State Senate.

Final legislative action on the state budget is due by April 1, the start of the state's new fiscal year.


Provides SUNY & CUNY with enhanced discretion in the areas of procurement, participation in public-private partnerships and the leasing and transferring of state lands. Some of these areas of enhanced discretion include:

Amends the Public Health Law to authorize the Department of Health to distribute funds available under the Health Care Efficiency and Affordability Law for New Yorkers program through grants to general hospitals and nursing homes without a competitive bid or RFP process, to facilitate closures, mergers and restructuring. (S.2809/A.24009, Part A, Section 25-a).

Eliminates certain non-instructional shared services from reimbursement of state aid. Inclusion on this list does not preclude a BOCES from providing this service to a school district; it merely stipulates that if this service is being provided it is not eligible for state aid under the shared services reimbursement state aid category. This proposal addresses concerns raised by businesses about BOCES providing services beyond their intended mission and about unfair competitive advantages BOCES enjoyed by being able to bill the state for the services, masking the true cost of the service being provided. Some of the proposed list of services no longer eligible for reimbursement include:


Modifies the Excelsior Jobs program (S.2811/A.4011, Part G) by:

Creates a permanent replacement for Power for Jobs and related NYPA energy costs savings programs; with 910 MW in blended NYPA hydro and purchased power; contracts up to 7 years duration; expanded eligibility criteria; and set-asides for upstate facilities, economic development projects and small business/not-for-profits.

Authorizes $200 million in competitive grants to newly created regional economic development councils, including $130 million in capital funding from reprioritizing existing economic development funds; and $70 million in tax credits from the enhanced Excelsior Jobs Program. Regional councils are to be established by Executive Order.

Clarifies that taxpayers remain eligible for Empire Zone tax credits past the program's 6/30/10 expiration date unless they are decertified by ESDC. (S.2811/A.4011, Part C). 7,500 businesses remain eligible for Empire Zone tax credits.

Extends the investment tax credit for certain financial services activities (without changes) under the corporate franchise, bank, insurance and personal income tax until October 1, 2015. (S.2811/A.4011, Part E).

Makes permanent the Urban Development Authority's ability to make economic development loans; this supports other proposed changes to convert state grants programs to loan programs. (S.2810/A4010 Part G).

Extends the state's “Linked Deposit Program” for four years; increases the business-specific cap on aggregate loans from $1 million to $2 million. The program has unused loan capacity of $192 million. (S.2810/A4010, Part H).

Repeals the so-called “state cost recovery” assessment on IDAs as of April 1, 2011; increases the cap on total state recoveries on public benefit corporations from $55 to $60 million per year. (S.2810/A4010,  Part J).

Authorizes Department of Agriculture and Markets to create a competitive grants program for agriculture business-related research and marketing efforts. Funded at $1.2 million (replacing $3.2 million in existing programs). (S.2810/A4010,  Part T).

Provides $100 million in targeted economic development funding for communities impacted by prison closings and consolidations.

Merges the Foundation for Science, Technology and Innovation (NYSTAR) and the existing high technology and research and development programs to the Empire State Development Corporation. (S.2812/A.4012, Part D).


Creates a permanent replacement for Power for Jobs and related NYPA energy costs savings programs; with 910 MW in blended NYPA hydro and purchased power; contracts up to 7 years duration; expanded eligibility criteria; and set-asides for upstate facilities, economic development projects and small business/not for profits. (Article VII budget bill, not yet introduced.)

Among proposed changes to the Excelsior Jobs program is authority for the Public Service Commission to allow gas and electric utilities to offer reduced energy rates to Excelsior participants. (S.2811/A.4011, Part G). Excelsior program change details can be found here.

Extends motor fuel, petroleum business, fuel use and state and local sales tax exemptions for E85, compressed natural gas, hydrogen and biodiesel (B20) until 9/1/12. (S.2811/A.4011, Part L).

Extends for one year the authority to fund NYSERDA's research, development and planning programs, and the Department of Environmental Conservation's climate change programs through assessments under Section 18-a of the Public Service Law; funded by an assessment of 1 cent per 1000 cu ft of gas, and 0.010 cent/kwh of electric power. (S.2810/A.4010, Part Q).


The Executive Budget contains no significant environmental regulatory initiatives. Key funding provisions include:


Establishes the Department of Financial Regulation (DFR) by consolidating the Insurance and Banking Departments and the Consumer Protection Board. (S.2812/A.4102).

Provisions include:


Some areas of reform that might be of interest to Business Council members include:


A number of modifications are proposed to the Early Intervention program which serves pre-school children with certain developmental delays. These modifications do not actually reform the program structure, as many have urged, but represent a cost-shift to those with coverage in the commercial insurance market, including:

Unlinks the funding for the Empire State Stem Cell Fund authorized by the Health Care Reform Act from any potential conversions proceeds to allow for spending from current HCRA resources. (S.2809/A.4009, Part A, Section 16).

Extends the Health Care Reform Act through March 31, 2014, including extension of the authorization for the collection of the Covered Lives Assessment through the same timeframe. The Covered Lives Assessment currently generates about $1.16 billion, which is collected from health plans on the basis of individual and family policies issued. (S.2809/A.4009, Part C, sections 5, 5-a, 5-b, and 6).

Suspends implementation of a new nursing home reimbursement method, extends the reimbursement cap, and extends authorization to collect nursing home assessment revenue. (S.2809/A.4009, Part B).

Appropriation authority is provided for a number of programs and activities related to implementation of the Federal Health Care Reform Act, including a dry appropriation of $70 million for health exchanges. (S.2800/A.4000, page 270-1).


The Governor recommends a budget of $9.2 billion in All Funds for the Labor Department. This is a decrease of $1.6 billion in All Funds or -14.9 percent from the 2010-11 budget, reflecting the nonrecurrence of one-time Federal American Recovery and Reinvestment Act (ARRA) appropriations. The budget recommends $3.3 billion in new appropriations and $158.8 million in reappropriation authority to allow the department to fully disburse ARRA-related Workforce Investment Act and unemployment insurance program funding. In addition, federal grant funding received by DOL will support the department's unemployment insurance computer systems modernization efforts and appropriations totaling $6.8 million are recommended for this project.

The staff level at the department is estimated at 3,949 by March 31, 2011. For the 2011-2012 fiscal year, an increase in overall staff of 28 is recommended bringing the new total headcount to 3,977.

The Executive Budget recommends $21.3 million in All Funds for the Human Rights Division. This is a decrease of $1.5 million or 6.4 percent from the 2010-11 budget.

The staff level at the division is estimated at 195 by March 31, 2011. For the 2011-2012 fiscal year, the Governor has recommended no change in headcount for the division. This recommendation does not reflect layoffs that may be necessary in the absence of negotiated workforce savings.


Tax Credits

Enhances and extends the Excelsior Jobs program tax credits (for details, see Economic Development section above).

Clarifies that taxpayers remain eligible for Empire Zone tax credits past the program's 6/30/10 expiration date unless they are decertified by ESDC. (see S.2811/A.4011, Part C). 7,500 businesses remain eligible for Empire Zone tax credits.

Extends the investment tax credit for eligible financial services activities (without changes) under the corporate franchise, bank, insurance and personal income tax until October 1, 2015. (see S.2811/A.4011, Part E).

Extends motor fuel, petroleum business, fuel use and state and local sales tax exemptions for E85, compressed natural gas, hydrogen and biodiesel (B20) until 9/1/12 (See S.2811/A.4011, Part L).

Tax Compliance and Enforcement. Includes a number of amendments to implement the “Tax Modernization Project,” (See S.2810/A.4010, Part Z), including:

The state projects $200 million per year in increased state revenues resulting from these measures.

Makes permanent tax shelter disclosure and penalty provisions adopted in 2005 (currently scheduled to expire 7/1/11). (S.2811/A.4011, Part B).

Other Issues

Conforms excess line premium tax and tax on independently procured insurance with federal “Dodd-Frank” legislation; allows New York to participate in national compact to collect excess lines insurance tax. (S.2811/A.4011, Part I).

Extends both state and New York City transitional provisions regarding federal Gramm-Leach-Bliley Act until 12/31/2012; and makes permanent the 1985 restructuring of, and subsequent amendments to, the Article 32 Bank Tax. (S.2811/A.4011, Part J).

Updates provisions of the state's motor fuel, petroleum business and sales taxes to reflect federal “dyeing” rules, and to restore intended tax treatment of on-road and non-road diesel fuel. (S.2811/A.4011, Part K).


Department of Transportation

The Executive Budget will decrease spending for State agency operations by 10 percent through a redesign effort focused on rightsizing government, increasing efficiencies, as well as by reducing workforce spending.

The Executive Budget continues the two-year $7 billion DOT capital plan adopted in 2010-11 that balances core infrastructure preservation with fiscal necessity.

Program and funding levels remain constrained by a number of key factors including the lack of a new multi-year Federal transportation act, the phase-out of funding from the 2005 Bond Act, and the Trust Fund's continued reliance on General Fund subsidies.

The Executive Budget maintains the State's core Trust Fund investment in the highway and bridge program at 2010-11 levels and also preserves funding for local highway and bridge projects under the Consolidated Highway Improvement Program (CHIPS) program at prior-year levels.

The DOT budget incorporates reductions to improve agency operations that reduce General Fund subsidies to the Trust Fund.

The Executive Budget includes a $16.9 million appropriation to support Amtrak service subsidies and additional rail capital investments.

Mass Transit

The Executive Budget provides operating support to transit systems totaling $4.2 billion. The MTA will receive $3.8 billion, a cash increase of $43 million from 2010-11, and other transit systems will receive $401 million, which reflects a cash increase of $2 million.

The MTA's capital program will be provided $100 million in new State support from the redirection of existing economic development capital funds. The MTA is also projected to receive $194 million in 2005 Transportation Bond Act funds from reappropriations for the Authority's capital program.

Department of Motor Vehicles

The Executive Budget proposes $343 million of appropriations for 2011-12, a decrease of $13 million from prior year levels.

Transportation related Revenue and Programs.

Modernizes certain fuel definitions. (S.2811/A.4011, Part K).

Extends the alternative fuels tax exemptions for one year. (S.2811/A.2811, Part L).

Simplifies the distribution of Motor Vehicle fees. (S.2811/A.4011, Part M).

Provides the annual authorization for the Consolidated Local Street and Highway
Improvement Program (CHIPS) and Marchiselli programs. (S.2810/A.4010).

Permanently extends Department of Transportation Single Audit Program. (S.2810/A.4010).

Permanently extends suspension of drivers' licenses for certain alcohol-related charges. (S.2810/A.4010).

Permanently extends suspension/revocation of drivers' licenses for certain drug related offenses. (S.2810/A.4010).

Makes permanent provisions relating to the Motor Vehicle Financial Security Act. (S.2810/A.4010).

Conforms the Vehicle and Traffic Law to Federal requirements, governing operators of commercial motor vehicles and medical certification requirements. (S.2810/A.4010).


Makes permanent the authorization for the Unemployment Insurance Interest Assessment Surcharge. This language makes permanent both the establishment of a specific interest assessment surcharge fund to receive the assessed surcharges, and provides the authorization to the Department of Labor to collect the surcharge from employers when interest on federal loans must be paid. (S.2808/A.4008, Part W).


Implements the major recommendations of the Task Force on Group Self-Insurance. Eliminates, except under certain limited circumstances, the provisions of workers' compensation coverage for private employers by group self-insured trusts. (S.2807/A.4007, Part G).

Repeals WCL Section 50(30a)(9) relating to the addition of new members to GSITs; permits GSITs to self-insure if certain requirements are met. Subjects entities that filed to pay a judgment under WCL section 26 within ninety days of notice of such failure to a “stop work” order. (S.2807/A.4007, Part G).

Eliminates Workers Comp Board assessments (other than Section 50-5 assessments) on inactive self-insured groups effective January 1, 2011. (S.2807/A.4007, Part G).