2011-2012 Final Budget Agreement
The legislature largely adopted the spending plan proposed by Governor Cuomo, and closed a projected budget gap of $9 billion with no new taxes or state borrowing. Instead, the legislature followed the Governor's proposal for spending cuts and restructured government. In addition, the budget includes several significant economic development measures.
Key details of the final Fiscal 2011-12 state budget include:
The final budget provides SUNY & CUNY with enhanced discretion in the areas of procurement and the leasing and transferring of state lands.
Both SUNY and CUNY are authorized to: (1) purchase goods; (2) execute contracts for construction and construction-related services; and (3) execute printing contracts without prior approval of the Comptroller and Attorney General.
Similar authority is provided to the SUNY Hospitals to: (1) purchase goods and; (2) enter into joint and group purchasing arrangements for goods without prior approval of the Comptroller and Attorney General.
Language related to public-private partnerships for SUNY and CUNY was rejected. (S. 2808-D/A. 4008-D, Part D)
Language was rejected which would have limited BOCES ability to claim shared services aid for an array of non-instructional services including telecommunications, copying, and employee benefit management.
Modifies the Excelsior Jobs program by extending the program by five years, extending the eligibility period for all Excelsior tax credits from 5 to 10 years, modifying the real property, jobs and investment tax credits, and making additional changes: (1) the cap on total available Excelsior tax credits is reduced by $50 million/year in 2016 through 2020, to reflect that first year Excelsior recipients will not be eligible for 10 year benefits; and (2) Excelsior is expanded to include businesses subject to Section 185 of the Tax Law, applicable to agricultural cooperatives. (S.2811-C/A.4011-C, Part G).
Governor's “Recharge NY” program bill is adopted as part of the budget. It 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. It also includes a 5 year energy efficiency program to be offered through NYPA or NYSERDA directed at upstate residential ratepayers. (S.2810-C/A.4010-C, part CC).
Legislature approved $130.5 million appropriation for capital funds to be distributed through regional councils, saying that the funds will be available during Fiscal years 2012 and 2013, and will be distributed “based in part” on a competitive selection process among the regional councils, but will be awarded at the discretion of the Urban Development Corporation. (S.2804-D/A.4004-D, page 595).
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-C/A.4011-C, Part E).
The Urban Development Authority's ability to make economic development loans was extended by one year, to 7/1/12. (S.2810-C/A4010-C, 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-C/A4010-C, Part H).
Repeals the so-called “state cost recovery” assessment on IDAs as of April 1, 2009; increases the cap on total state recoveries on public benefit corporations from $55 to $60 million per year. (S.2810-C/A4010-C, Part J).
A new tax credit program, including investment, job creation, job training, real property and sale tax credits and/or abatement is created to assist communities impacted by prison closings and consolidations. Credits are available to businesses that locate near a closed prison or youth detention facility and create at least 5 new, full-time jobs. New businesses are eligible for credits for a five year period. (S.2811-C/A.4011-C, part V).
Merges the Foundation for Science, Technology and Innovation (NYSTAR) and the existing high technology and research and development programs to the Department of Economic Development. (S.2812-C/A.4012-C, Part D).
Requires the Urban Development Corporation to develop and submit to the Division of Budget, legislature and state comptroller comprehensive financial plans for the corporation and all subsidiaries; modifies UDC's fund structure; and places restrictions on UDC interfund transfers (S.2810-C/A.4010-C, Part DD).
Creates the Empire State New Markets Corporation within UDC to perform community development projects and receive allocations of federal “new markets tax credits.” (S.2810-C/A.4010-C, Part EE).
Creates “Recharge NY,” 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. Initially introduced as a stand alone program bill, Recharge NY was adopted as part of the final budget. The bill was adopted as proposed by the Governor, except that it includes a five year energy efficiency program to be implemented by NYPA and/or NYSERDA targeting former upstate recipients of “rural and domestic” NYPA power. (S.2810-C/A.4010-C, part CC).
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-C/A.4011-C, 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-C/A.4010-C, Part Q).
The final budget contains no significant environmental regulatory initiatives. Key funding provisions include:
- Overall Department of Environmental Conservation budget of $954 million, a reduction of 5 percent from the 2010-11 Budget. (S.2800-E/A.4000-E).
- Environmental Protection Fund (EPF) appropriation of $134 million, the same level as 2010-11. (S.2800-E/A.4000-E).
- Environmental Facilities Corporation (EFC) budget of $12.3 million. (S.2800-E/A.4000-E).
- The Legislature rejected the Governor's proposal to make permanent pesticide registration fees and the current time frames for review of pesticide product registration applications but extends each for three years until July 1, 2014. (S.2810-C/A.4010-C, Part S).
- Extends the New York State Diesel Emissions Reduction Act compliance deadline for two years until December 31, 2012. (S.2810-C/A.401C, Part BB).
Creates new sections of Financial Services Law and establishes the Department of Financial Services (DFS) by consolidating the Departments of Insurance and Banking. (S.2812-C/A.4012-C – Chapter 18-A of the Consolidated Laws). The Department is funded by two appropriations $329,430,823 (A.2800-E/A.4000-E) and $225,566,000 (S.2803-E/A. 4003-E) totaling $554,996,823. Details include:
- Establishes a Superintendent of the Department of Financial Services appointed by the Governor.
- Grants the Superintendent appointment authority for a Deputy of Insurance and Deputy of Banking.
- Establishes an insurance division and a banking division.
- Grants the Governor authority to create a working group to examine ways to improve the efficiency and effectiveness of banking and insurance regulation. June 30, 2011.
- Establishes within the Department of State a nine member Charter Advisory Board to retain state chartered banking institutions and encourage conversion of federally chartered banking institutions.
- Assessments for direct and indirect costs of the Department. Persons regulated under either the insurance or banking law shall be assessed solely under each law.
- Assessment provisions shall not be applicable to a bank holding company, as defined in article three-A of the banking law.
- Establishes administrative and procedural provisions including powers of the superintendent; regulatory authority; hearings; judicial review of orders, regulations and decisions; and injunctive powers.
- Establishes a Financial Frauds and Consumer Protection Unit within the Department of Financial Services. Grants the Superintendent investigatory powers and authorizes immunity and civil penalties not to exceed $5,000 per offense. Civil penalties pursuant to this section shall be applied first to reduce assessments.
- Establishes a Consumer Protection Division within the Department of State. The Consumer Protection Account shall consist of certain penalties received by the Department of State and transfers by the Legislature.
- Transfers certain authority with respect to consumer protection from the executive law to the Department of State.
- Amends section 109 of the Insurance law and increases penalties up to $1,000 for each offense.
- Amends section 2101 of the Insurance law and increases penalties up to $500 for each transaction.
- Amends section 2117 of the Insurance law by adding penalties for each violation.
- Amends Section 2 of chapter 385 of the laws of 2008 relating to an exemption to certain provisions of law relating to risk-based capital for property/casualty insurance companies. (S.2809-D/A.4009-D – Part H).
Provisions Opposed by The Business Council Not Included in the final bill
- Granting the department new Martin Act powers, which had primarily rested with the New York State Attorney General.
- Expanding the Martin Act by granting the department the power to levy civil penalties in the amount of $5,000 per violation. Currently, the Attorney General does not have the power to impose civil penalties for violations of the Martin Act.
- Including in the definition of financial fraud any deceptive act or practice of false advertising as those terms are interpreted under article twenty-two-A of the General Business Law.
- Granting the department authority to impose and collect civil penalties on behalf of any person suffering economic harm.
- Granting the department authority over certain penal law violations including larceny; forgery and related offenses; false written statements; insurance fraud; bribery; frauds on creditors; residential mortgage fraud; other frauds; bribery involving public servants; perjury; enterprise corruption; and money laundering.
- Granting the department regulatory authority over derivatives including traditional securities, assets or market indices.
- Damages and restitution awards.
Dissolves the Governor's Office of Regulatory Reform, which was created under Executive Order 20 in 1995; and most recently extended under Executive Order 2 of 2011. (A. 4010-C/S. 2810-C, Part O).
Requires that all reappropriations (state and local) with the exception of reappropriations for capital projects and federal purposes, lapse five years after the close of the fiscal year in which they were appropriated. (A. 4007-C/S. 2807-C, Part M).
Repeals the Community Projects Fund, the vehicle through which most member items, some capital projects and grants for not-for-profits were channeled. (A. 4007-C/S. 2807-C, Part 0).
The only modification to the Early Intervention program, which serves pre-school children with certain developmental delays, was an across-the-board 5% reduction in EI rates. Proposals to shift costs to commercial carriers without program design changes were rejected. (S. 2809-D/A. 4009-D, Part A).
Delinks 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-D/A.4009-D, 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. (S.2809-D/A.4009-D, Part C).
Part H (Medicaid Redesign Components of the Health Article VII)
The final budget largely accepts the recommendations made by the Medicaid Redesign Team. This includes the:
- across-the-board reduction in payments to providers;
- elimination of provider trend factor increases for the next several years;
- the provision of authority to the Commissioner of Health to implement other savings if the Medicaid spending reduction targets are not realized;
- the carve-in of pharmaceutical benefits for Medicaid managed care recipients;
- authority to issue contracts and grants without a competitive bid process, including for the Early Innovator grant of $27 million awarded by HHS. In those instances where no bid contracts are authorized, the Department must post details on their website.
A number of the recommendations were revised, rejected, clarified, or newly added including:
- Rejection of the expansion of the HCRA surcharge to outpatient surgical and radiological procedures;
- Rejection of the increased co-pays for Medicaid recipients including those in Child Health Plus and Family Health Plus;
- Rejection of the spousal refusal language for Medicaid eligibility;
- Modification of the home care worker wage parity (aka “living wage) provisions to limit their application to NYC, Long Island and Westchester;
- Rejection of the Public Health Services Corp;
- Rejection of expanded list of professionals authorized to administer vaccinations;
- Rejection of increases in the long term care tax credits;
- Modification of language to permit Commissioner of Health to establish the amount of payments and dispensing fees for drugs; clarifies that the Commissioner shall not change the amounts of or method for such payments or dispensing fees unless 50 days notices of such change is provided to the Assembly and Senate finance and health committee chairs;
- Rejection of prior authorization for the non-preferred drug if it had been determined that the use of the prescribed drug that is not on the preferred drug list is not warranted;
- Addition of a new requirement that managed care providers providing prescription drug coverage must permit participants to fill any mail order covered prescription at his or her option at any mail order pharmacy or retail pharmacy in the network if the price is comparable;
- Rejection of language related to the settlement of pending rate appeals;
- The repeal of a section of the social services law which established regional long term care assessment centers;
- Rejection the recommendation related to the New York City home care managed care program;
- Rejection the proposal to establish a workgroup on establishing a public benefit corporation for the management of public nursing homes;
- Rejection of the medical malpractice cap on non-economic damages;
- Modifications to the New York State Medical Indemnity Fund including advancing the start date of the fund to April 1, 2011; new language on payments from the fund, procedures for suspending enrollment, calculating the amount due for qualifying health care costs; and reducing the appropriation for the first year of the fund from $100 million to $30 million.
- Expansion from the Governor's recommendation to investigate Accountable Care Organizations as a means for innovation and cost efficiency, to language that defines and establishes an ACO demonstration program.
- Addition of language which compels the commissioner to convene a diverse set of stakeholders to develop Medicaid savings allocation plans to ensure, to the extent possible, that such reduction plans have appropriate geographic and service balance.
The Legislature accepted the Governor's 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. This includes $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. For the 2011-2012 fiscal year, an increase in overall staff of 28 will bring the new total headcount to 3,977. (S.2800-E/A.4000-E, p. 411).
The final budget includes $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. (S.2800-E/A.4000-E, p. 390).
Enhances and extends the Excelsior Jobs program tax credits program as proposed in the Executive Budget (S.2811/A.4011, Part G), except that: (1) The cap on total available Excelsior tax credits is reduced by $50 million/year in 2016 through 2020, to reflect that first year Excelsior recipients will not be eligible for 10 year benefits and (2) Excelsior is expanded to include businesses subject to Section 185 of the Tax Law, applicable to agricultural cooperatives.
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).
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
The Governor's proposals to implement the "Tax Modernization Project" were not included as part of the final budget. However, the final budget includes provisions (S.2811-C/A.4011-C, part U) which:
- Authorizes Department of Tax and Finance to establish standards for electronic RPT transactions, including filing of exemption applications, petitions for assessment reviews, payment of taxes and others. Participation is at election of taxpayers; optional for assessors and municipalities; municipalities allowed to adopt local ordinance adopting these e-standards.
- Requires on-line posting of all tentative assessment rolls.
- Allows municipalities to contract with 3rd party vendors to provide online RPT payments.
- Authorizes DT&F to transmit most tax documents via email where agreed-to by online services account holders.
- Expands e-filing requirements for professional tax return preparers.
Extends through July 1, 2015 shelter disclosure and penalty provisions adopted in 2005. (S.2811-C/A.4011-C, Part B).
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-C/A.4011-C, Part I).
Adopts language to extend both state and New York City transitional provisions regarding federal Gramm-Leach-Bliley Act until 12/31/2012; and make permanent the 1985 restructuring of, and subsequent amendments to, the Article 32 Bank Tax.
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-C/A.4011-C, Part K).
Legislative Tax Proposals Not Adopted
- Reinstate the “qualified emerging technology company facilities, operations and training” tax credit, which was set to expire for tax years beginning on or after 1/1/12.
- Provide that any nonrefundable business tax credits earned during 2010, 2011 and 2012 tax years that are subject to the state's three year credit deferral can be claimed in 2013 and/or treated as a refundable overpayment of tax in 2013.
- Accelerate the sunset date of the PSC Section 18-a assessment on electric and gas utilities by two years, to 3/31/12.
- Exclude school districts form the MTA “mobility tax.”
- Exclude the historic property rehabilitation credit from the three-year tax credit deferral imposed in 2010.
- Authorize NYS participation in the “surplus lines insurance multi-state compliance compact,” established under federal law; among other things, establishes a clearinghouse for collection and dissemination of premium taxes.
- Impose a 8.79% tax on personal income taxpayers with taxable income greater than $1 million, and expands the 6.85% tax bracket to taxable income from $40,000 to $1 million, applicable to the 2012 tax year only.
Capital 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 budget will decrease spending for state agency operations by 10 percent. It provides operating support to transit systems totaling $4.2 billion. The MTA will receive $3.8 billion and other transit systems will receive $401 million. Cash support for both MTA and non-MTA programs will increase year-to-year.
The budget supports the adopted two-year DOT transportation capital plan that balances core infrastructure preservation with fiscal necessity and continues prior year funding levels for the core transportation programs supported by the Dedicated Highway and Bridge Trust Fund, including:
- $501 million of Dedicated Funding for State roads and bridge construction (part of a $1.8 billion construction program).
- $363.1 million for the Consolidated Highway Improvement Program (CHIPS).
- $39.7 million for the Marchiselli program for local governments.
- $16.9 million for Amtrak services and additional rail capital investments.
Transportation spending from all sources will total $8.5 billion under this budget.
Transportation related Revenue and Programs
Simplifies the distribution of Motor Vehicle fees. (S.2811-C/A.4011-C, Part M).
Permanently extends Department of Transportation Single Audit Program. (S.2810-C/A.4010-C, Part B).
Permanently extends suspension of drivers' licenses for certain alcohol-related charges. (S.2810-C/A.4010-C, Part C).
Permanently extends suspension/revocation of drivers' licenses for certain drug related offenses. (S.2810-C/A.4010-C, Part D).
Makes permanent provisions relating to the Motor Vehicle Financial Security Act. (S.2810-C/A.4010-C, Part E).
Extends through December 31, 2013 the authorization for the Unemployment Insurance Interest Assessment Surcharge. (S.2808-D/A.4008-D, Part W).
A permanent delinking of workers' compensation and no fault insurance rates from the Medicaid inpatient hospital rates was approved as part of the Health Article VII bill. (S. 2809-D/A. 4009-D, Part H, section 32).
Sets new standards for continuance of group self-insured trusts, including standards by which full funding will be determined; and standards around security deposits on behalf of the members of the group trust. (S.2807-C/A.4007-C, Part G).
Eliminates Workers Comp Board assessments (other than Section 50-5 assessments) on inactive self-insured groups effective January 1, 2011. (S.2807-C/A.4007-C, Part G).
For members of insolvent group trusts, defined as insolvent at the time the group was closed, includes language which provides for specific one-time assessment on members of insolvent group trusts except for those members who: have entered into a settlement agreement or payment plan with the Board under which they have agreed to resolve all liabilities from the membership in the trust; or are members of a group trust that transferred all liabilities via a loss portfolio transfer; or have paid all moneys billed them by the Board at the time such one-time assessment is due. (S. 2807-C/A. 4007-C, Part G).