FY 2015 Executive Budget Summary
Governor Cuomo's FY 2015 Executive Budget continues the recent 2% spending cap for the new fiscal year and begins implementing a $2 billion tax cut package. Under this proposal, state operating funds spending (excluding capital) would increase to $92.0 billion, an increase of 1.7% or $1.5 billion. This plan would produce a $500 million surplus for the new fiscal year. “All funds” cash disbursements (which includes capital spending) are projected to grow by 0.9% or $1.3 billion, to $142 billion.
The following provides an issue-by-issue overview of major business-related initiatives included in the Executive Budget. We welcome questions and comments from Business Council members on these proposals and on other aspects of the Executive Budget.
- Make “design-build” contract authorization permanent; extend its authorized use to local governments on non-Wicks Law projects.
- Includes $250,000 to conduct a disparity study on state contracting with disabled-veteran owned small business owners, which will serve as the basis for a set aside goal of 5% state contracts.
- Extend local governments' ability to “piggyback” off of other government-entity let contracts for an additional six years.
- Local governments would be authorized to access the State's data center and other IT services; this includes end user computing and collaboration tools that are used by state agencies.
- Make the design-build method for infrastructure projects at the State level permanent and extend it to all counties, cities, towns and villages with a population exceeding 50,000, projects subject to Wicks law would be excluded from this type of contract.
- Allow state agencies and local governments to purchase electricity and fuel through the Office of General Services.
- Develop interoperable public safety communications for all of the state's emergency responders and will set standards for regional communications consortia to follow; this initiative is slated to receive $75 million in state funds which includes $10 million in grants to counties.
- Adopts “Global NY,” a program to promote foreign investment in New York and to promote exports by in-state businesses, including a new international marketing campaign.
- Provides an additional $150 million in capital funding and $70 million in Excelsior Job tax credits to be disbursed through the ten regional economic development councils (extending current state support levels.)
- Provides $680 million in additional capital commitments under the “Buffalo Billion” program.
- Funding initiatives include: $180 million for equipment at Nano Utica; $110 million for NYSUNY and CUNY 2020 grants; $105 million to support the NY Genome Center and University of Buffalo; $50 million to continue the NY “Open for Business” marketing campaign; $46 million for ongoing ESDC programs including the Economic Development Fund and M/WBE programs; $31 million for NYSTAR program grants; $30 million for Onondaga Lake regional redevelopment; $24 million for community redevelopment related to closure of an additional four corrections facilities; $12 million to support a Clarkson University/Trudeau Institute partnership; $5 million for competitive funding for tourism marketing plans; and $3.75 million to support the “Innovation Hot Spot” and state incubator programs.
- Reforms several business tax credit programs, including the investment tax credit, brownfield remediation tax credit, and others. See Taxation section below for details.
The budget provides an increase of $807 million in education aid for the 2014-15 school year, $608 of which is provided as formula-based school aid. The following are the major education initiatives in the executive budget proposal:
- Another round of funding for P-TECH partnerships ($5 million)
Smart Schools Initiative
- Proposes a $2 billion general obligation bond act, to be on the ballot in November; use of funds is restricted to certain technology upgrades and construction of pre-K classrooms and after-school program space as needed
Statewide universal full day Pre-K
- Commitment for $1.5 billion over 5 years for “high quality” universal pre-k; charter schools would be eligible for pre-K funding.
After school programs
- $720 million over five years for statewide after-school programs.
Teacher Excellence Fund
- $20 million for awards to “highly effective” teachers; eligible districts would submit an application to request funding; funding focused on schools with the greatest academic need; difficult-to-staff subject or certification areas and/or grade levels; and those at critical points in their career.
School district reorganization and real property tax rates
- When two or more districts propose reorganization that would result in impacted school tax rates in the areas served by the districts, the boards of education or trustees of the districts may opt to have the impact deferred for a one-year period and/or phased in over a period of up to 10 years.
- A panel of legislators and education experts will be appointed to assess the Common Core implementation, and propose a package of corrective action;
- Eliminate standardized testing for students in K – 2.
New York State Science, Technology, Engineering and Mathematics Incentive Program
- A new financial assistance program for undergraduates matriculated in an approved undergraduate program leading to a career in STEM at a state public university; requires a commitment to work in a STEM field within New York State for 5 years; program funding of $8 million.
- College-specific funding programs include: $15 million for SUNY College of Emergency Preparedness, Homeland Security and Cybersecurity; $180 million for Nano Utica; $105 million for a NY Genomic Medicine Network (partnership between the New York Genome Center and the University at Buffalo's Center for Computational Research): $5 million for Cornell University College of Veterinary Medicine; $10 million for Clarkson-Trudeau Partnership (partnership to foster biotechnology R&D); $10 million for School of Pharmacy at Binghamton University.
- Provides $110 million for another round of NYSUNY2020 and NYCUNY2020 grants ($110 million)
Enhanced Youth Works Tax Credit
- Employers will be eligible for an additional $1,000 credit for every at-risk youth employed full-time for an additional year ($500 for part-time status), and the annual credit allocation will increase from $6 million to $10 million. Additionally, the Tax Law will be conformed to a recent Labor Law change that reduces, from 20 to 10, the number of hours which full-time students must work in order to be eligible for the employer to claim the credit.
- Reduce corporate and LLC contributions to an aggregate total of $1,000 per year.
- Reduce contribution receipt limits for candidates for all offices.
- Limit party transfers and direct campaign expenditures to candidates
- Institute a voluntary matching funds system at a $6 to $1 rate, funded by a voluntary taxpayer check-off, from the abandoned property fund, private contributions from individuals and organizations, and transfers from the general fund.
- Expand the definition of electioneering activities and require greater disclosure of independent expenditures.
- Create an independent enforcement board within the State Board of Elections, the Chief Enforcement Counsel of which will be appointed by the Governor.
- Create new crime of corrupting the government and increase penalties for corruption, bribery and official misconduct.
- Increase required disclosure of outside business relationships, including client names and duties performed.
Long Island Office of the Department of Public Service
- $5.5 million in funding for a new Long Island Office of DPS, with authority to review utility rates and operations including storm preparedness.
18-a Elimination for Industrial Customers (TED S.6357/A8557 Part S)
- Reduce the Public Service Law § 18-a(6) Temporary State Energy and Utility Service Conservation Assessment (Temporary Assessment) by a total of $200 million per year by immediately eliminating the assessment on industrial utility customers and accelerate the phase out for all other customers. First year assessment elimination for electric customers with a monthly peak demand of 1000 kW and gas customers of one hundred thousand dekatherms or more, and all customers of municipal electric and gas utilities and water works corporations.
Reduction of Department of Public Service Administrative Burden (TED S.6357/A8557 Part R)
- Streamline the process for overseeing telephone corporations, reviewing violations of the shared meter law, and confirming cable franchises. The streamlining initiatives are intended to remove administrative burdens of the DPS without having a reduction in oversight.
- Amends the Agriculture and Markets Law to require that all retail gasoline outlets near I-87, I-90, I-84, I-88, I-86/State Route 17, I-81, I-390 and I-190 and evacuation routes be prewired for using a generator which is capable of providing adequate electricity for operations; authorize NYSERDA to provide grants for prewiring and access to a pool of generators administered by NYSERDA (TED S.6357/A8557 Part M).
- Makes permanent the current pesticide registration fees and the specific timeframes for the registration of pesticides (existing law sunsets 7/1/14; requires the reporting of all sales of each pesticide by county for the entire calendar year (TED S.6357/A8557 Part H).
- Extends the Brownfield Cleanup Program for ten year, fairly consistent with the Business Council's requested amendments; tax credits remain as of right; remedial and the tangible property credits are bifurcated; a no-credit fast track is created, and would expand the program to include additional sites; to be eligible for the tangible property credits, a property must be vacant for at least 15 years or vacant and tax delinquent for 10 or more years, the value of the property must be less than the cleanup costs, and be an economic development project; sites will be removed from the program if in since June 2008 and cleanups are not complete by 12/31/15 or if in the program from June 2008 through July 1, 2014 with no complete cleanup by December 31, 2017. Exempt hazardous waste generated at certain sites from fees and special assessments. Brownfield Cleanup Program (REV S 6359 / A 8559 Part Q).
- Authorize the State to issue an additional $100M in bonds to provide funding for the State Superfund Program. Currently, the State Superfund program is being supported by prior year's bond authorization (PPGG S 6355 / A 8555 Part I).
- Authorize a payment of up to $913,000 from the NYSERDA for West Valley nuclear (TED S.6357/A8557 Part L).
- Authorize the NYSERDA to finance the Department of Environmental Conservation's climate change program, from an assessment on gas and electric corporations. This provision has been in the budget for multiple years (TED S.6357/A8557 Part K).
The Department of Financial Services will have under its purview new proposals to strengthen consumer protections in financial actions.
- Enhance consumer protection through no-fault automobile insurance fraud reform. This proposal gives the Superintendent of DFS the power to prohibit health providers from requesting payment for health services rendered after a determination of fraudulent activity on behalf of the provider and to levy fines of up to $10,000 per fraudulent offense. This provision also gives the Superintendent the authority to examine and audit health providers at any time. No funding allocation was included. (TED S.6357/A8557 Part T).
- Establish new licensing requirements for title insurance agents, closers, and solicitors in New York State. These entities would be required to get licensed to practice in this state. The Superintendent of DFS would be empowered to revoke or suspend any license of any agent who violates the Insurance Law or is untrustworthy or incompetent. The State would collect $80,000 annually in licensing fees. (TED S.6357/A8557 Part V)
The Executive Budget health-related proposals are varied in nature from the funding for the New York Health Benefit Exchange at an additional $54.3 million to $148.3 million in 2014-15, to legislating the composition of out-of-network health benefits and protecting consumers from physician surprise billing and balanced billing as well establishing capital finance programs meant to strengthen New York's health care infrastructure.
Out of Network (S.6357/A.8557 PART U)
- Expands some health insurance plan network adequacy requirements and requires insurers to provide access to out-of-network providers if there is not an in-network provider with appropriate training or experience or within a reasonable geographic area.
- Sets forth levels of reimbursement for plans that offer out-of-network coverage to 70% of UCR (the 80th percentile of FairHealth).
- Requires multiple disclosures of anticipated costs for both insurers and provider. These include requiring insurers to disclose anticipated out-of-network costs for insured and prospective customers and requiring physicians to disclose real and anticipated costs when requested by patients.
- Establishes a dispute resolution process to adjudicate out-of-network claims disputes including balance billing and creates “hold harmless” protections for consumers where required disclosures are not made.
Health Infrastructure Improvement
- Establishes a $1.2 billion capital bonding program over the next seven years for improvements to infrastructure such as primary care facilities, expands health facility restructuring loans for not-for-profit health centers and nursing homes and creates a pilot program authorizing up to five businesses to expand the use of private investment in health care projects. The budget language additionally streamlines the Certificate of Need processes for some providers of health care, authorizes limited services clinics within retail operations and defines the term “urgent care.” (S.6358/A.8558 PART A, Sections 8-22)
- Extends HCRA taxes through 2017 and allows for the use of $65 million of the Covered Lives Assessment for the support of the Statewide Health Information Network (SHIN NY), so long as the assessment raises in excess of $1.045 billion through 1/31/17. (S.6358/A.8558 PART B, Section 17)
- Eliminates “prescriber prevails” provisions in Medicaid fee-for-service and manages care programs. (S.6358/A.8558 PART C, Sections 1-3)
- Authorizes the Commissioner to require further supplemental rebates from name-brand drug manufacturers that provide for Medicaid fee-for-service pharmacy programs. (S.6358/A.8558 PART C, Section 7)
- For higher income State Retirees, the State will eliminate reimbursement of Supplemental Medicare Part B premiums but will continue reimbursement of the regular Medicare Part B premiums of $104.90 per month in 2014.
- Extend Monticello VLT rates, certain Pari-Mutuel Tax Rates and Simulcast provisions, and video lottery gaming vendor's capital awards program for one year.
- Increase the regulatory racing surcharge on handles 0.5% to 0.6% to cover the cost of regulation.
- FreshConnect, a competitive grant program to create and expand farmers' markets in underserved communities would receive $350,000.
- Provide $40,000 for hops research aimed at growing the availability of locally grown hops for the growing craft beer industry.
- Make improvements for the State fairgrounds $2.5 million
- Repeal the boxing and wrestling exhibitions tax
Corporate Tax Reform (Part A) - This proposal largely tracks prior draft legislation. The following provides an overview of key provisions of these corporate franchise tax reform provisions, and a separate, more detailed review of the Article 9A reforms will be available soon. Key provisions include:
- The Article 32 Bank Tax is repealed, Article 32 taxpayers are subject to the corporate franchise tax.
- The ENI rate is reduced to 6.5% effective 1/1/16; the capital base cap is increased to $5 million for all non-manufacturing taxpayers; the 1.5% alternative minimum tax is repealed; and a new fixed dollar minimum tax schedule is adopted for sub-C taxpayers, with a maximum payment of $200,000, and for “qualified NY manufacture” taxpayers with a top payment of $4,500.
- Combined reports are required to include: businesses with more than 50% stock ownership and engagement in a unitary business; captive REITs/RICs not combined under Article 33; and certain alien corporations treated as domestic corporations under the IRC. Taxpayers are allowed a seven year non-revocable election to combine based on ownership only.
- The current subsidiary capital exemption is replaced with an exempt investment income/taxable business income regime.
- An economic nexus standard is imposed for the corporate franchise tax and the MTA surcharge; Article 9-A single sales factor apportionment method is adopted for determining the MTA surcharge.
- Pre-reform net operating losses are converted into credits to be applied against ENI-based tax liability, with a 20 year carry forward.
ITC and Manufacturers' Credit (Part R)
- Defines “manufacturer” as a taxpayer or combined group with more than 50% of gross receipts from the sale of goods produced by manufacturing; excludes power generation and distribution, natural gas extraction and distribution, co-generated steam, film/TV/commercial production and fuel blending.
- Defines “qualified New York manufacturer” as a taxpayer or combined group that is a manufacturer with either at least $10 million or 100% of its manufacturing property in NYS; or a taxpayer with 2,500 manufacturing employees and $100 million in manufacturing property in-state.
- Limits the Article 9-A investment tax credit to “qualified NY manufacturers” and to qualified agri- and mining business;” defines qualified agri-business and mining as taxpayer/combined group with at least 50% of gross receipts from such in-state activity; eliminates the ITC for air and water pollution control equipment, security broker/dealers, investment advisory services, and film production; prohibits the ITC for property that had already served as the basis for the ITC or EZ-ITC;
- Creates a new refundable credit under Articles 9A and 22 equal to 20% of real property taxes paid by a qualified NY manufacturer; excludes PILOT payments, any RPTs deducted from ENI or federal AGI calculations, and RPTs used to calculate another tax credit. Recaptures credits if RPTs are subsequently lowered after a legal challenge or other actions.
- Reduces the Article 9-A entire net income tax rate to zero, effective 1/1/14, for a qualified NY manufacturer with a MTCD surcharge apportionment factor of zero (the bill also proposes the adoption of single sales factor apportionment for purposes of the MTCD surcharge.)
Estate Tax Reform
- Increases the Estate Tax exclusion threshold to $5.25 million (and future indexing); phases down the tax rate to 10% by FY 2017; subjects certain gifts to be added back for estate tax purposes (Part X).
- The bill also closes the so-called “resident trust loophole,” to impose state income taxes on distributions from certain non-resident and exempt trusts (Part I).
- Extends the 20% credit for TV commercial production through 12/31/16; it is currently set to expire at the end of 2014 (Part O).
- Extends and reforms the Brownfield Cleanup Program and its redevelopment tax credit. Tax credit changes include: limits tangible property credit eligibility to vacant or tax delinquent properties and other “priority” sites and limits the availability of the credit to five years after completion of cleanups; terminates sites in program not completed on a timely basis; repeals the environmental insurance credit. Other reform issues discussed under “Environment” above. (Part Q).
- Amends the Excelsior Jobs credit program to provide participants with a credit against their payment of telecommunications excise tax (Part T).
- Conforms Tax Law provisions to recent Labor Law amendments to the Youth Works Tax Credit; provides an additional credit(s) for extended employment of eligible youth (Part U).
- Extends the alternative fuel use credit (for E85, CNG and hydrogen) for two years through 9/1/2016 (Part V).
- Extends the state fee for state-established oil and gas production values, used in local property tax assessments, through 3/1/2018 (Part C).
- Increases the state fee on thoroughbred, harness and OTB betting and simulcast racing from 0.5 to 0.6 percent, with funds to be used for industry regulation (Part D).
- Allows the state to require payment of (or a payment plan for) fixed and final tax liabilities at the time that a state-issued professional or business license is being applied for (Part H).
- Repeals the state tax on agricultural co-operatives (Part S).
- Repeals the stock transfer tax, which under current law is collected and fully rebated to taxpayers with no net revenues to the state (Part CC.)
- Allow self-employed individuals to file MTA mobility tax returns with their personal income tax returns (Part DD).
- Allows for the reclassification of employees transferred into ITS, into appropriate titles while allowing employees in certain IT positions to become eligible for term appointments up to 5 years without examination. No revenue implications for New York (PPGG S 6355 / A 8555 Part F)
- Allows the PSC to forgo application of certain regulatory provisions to telephone corporations if such provisions are not necessary to ensure just and reasonable rates, charges and practices. Such provisions include the requirements to: post rates and schedule with PSC; PSC approval to construct telephone lines; PSC permission for company reorganization; and PSC permission to own and issue telephone company stock PSC streamlining of telecommunications regulation, shared metering and Cable Franchising (TED S.6357/A8557 Part R).
- Reduces the punitive assessment on landlords where a shared metering condition follows a customer complaint or is discovered by a utility. Reduces the additional assessment to 25% of the charges for service measured by the shared meter for 12 months.
- Streamlines the confirmation of cable franchises and renewals by establishing a process that subjects franchises to the PSC's minimum franchising standards, rather than requiring PSC approval.
- Funding for local highway and bridge programs under the Consolidated Highway Improvement Program (CHIPS) and Marchiselli program is maintained at last year's level of $477.8 million.
- DOT interstate commerce vehicle registration fees and the railroad safety fees will now be deposited into the special reserve and obligation account of the dedicated bridge and highway trust fund.
- For the NYS Thruway Authority, continuation of $86 million in funding for the financing of Troop T that patrols the Thruway, offsetting the need for a commercial toll increase.
- Provides $155 million in new state funding under the New York Works Program to fast track highway and bridge projects; $45 million for essential project engineering and $25 million to enhance transit, rail and aviation programs.
- MTA operating support to increase by $85 million to $4.3 billion; Non-MTA transit systems' operating support to increase by $7.9 million to $761 million.
- Appropriate $2.5 million for feasibility study of the Northern Tier Expressway (Route 98) between Watertown and Plattsburgh.
- Market-NY program to provide competitive grants for regional promotion of events and tourism would receive $5 million
- Taste-NY which, in 2012, was funded under the Market-NY program to help market NYS food and food products, would receive $1.1 million.
- Implement the “Open for Fishing and Hunting II” initiative:
- Create NYS Adventure License for things such as lifetime hunting and fishing licenses, and boating certifications as well as for the Empire Pass. Provisions in the Executive budget would also create new 3 and 5 year hunting, fishing and trapping licenses, reduce the cost of 7-day fishing licenses and allow promotional discounts on designated days and six additional free fishing days.
- DEC will undertake 50 projects to make more than 380,000 acres of state-owned lands available for outdoor recreation and rehabilitate the State's fish hatcheries
- Limit liability of landowners who make open their properties for public recreation