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SUMMARY OF THE GOVERNOR'S PROPOSED
2006-2007 BUDGET

Prepared by the staff of The Business Council
January 20, 2006

Overview and Issue areas:

Overview

This week, Governor George E. Pataki proposed his 12th and final Executive Budget.

The $110.7 billion Executive Budget closes a modest $700 million budget gap. It increases the State's total reserves to $4 billion and uses the projected $2 billion 2005-06 surplus to reduce out-year gaps. It also reduces the projected 2007-08 out-year gap to $1.9 billion, or less than 4 percent of the General Fund.

Under the 2006-07 Executive Budget, General Fund spending would total $49.6 billion, an increase of $2.4 billion. State funds would grow by $4.6 billion and total $75 billion. All Funds spending would total $110.7 billion, an increase of $4.4 billion. After adjusting for a one-time increase in State spending resulting from last year's takeover of local Medicaid costs and new proposed enhancements to STAR (property tax relief that is technically treated as budgetary spending) - the annual percentage increase of each spending category is 2.4 percent for the General Fund, 4.8 percent for State Funds and 2.9 percent for All Funds. Unadjusted annual percentage increases would total 5.1 percent for the General Fund, 6.6 percent for State Funds and 4.1 percent for All Funds.

The Governor's press release and Executive Budget documents are available at www.budget.ny.gov

Taxation

Article 9-A - Corporation Franchise Tax

Expenses capital assets placed in service in New York on or after 1/1/8.

Reduces the alternative minimum taxable income tax rate from 2.5% to 1.67% on 1/1/6, to 0.83% on 1/1/7, and to zero on 1/1/8.

Reduces the alternative business capital tax rate from 1.78 mills to 1.187 mills on 1/1/6, to 0.593 mills on 1/1/7, and to zero on 1/1/8 and the specific alternative business capital tax rate for cooperative housing corporations from two-fifths of a mill to four-fifteenths of a mill on 1/1/6, to two-fifteenths of a mill on 1/1/7, and to zero on 1/1/8.

Reduces the tax rate (on entire net income) from 7.5% to 6.75%.

Repeals the additional tax on subsidiary capital.

Eliminates the subchapter S corporation differential tax.

Extends for three years the additional brackets applicable to the alternative fixed dollar minimum tax.

Eliminates the exclusion for certain dividends received by a parent company from a Real Estate Investment Trust (REIT) or a Regulated Investment Company (RIC).

Extends for two years the transitional provisions related to the Federal Gramm-Leach-Bliley Act.

Requires that the Metropolitan Commuter Transportation District (MCTD) surcharge be computed as if the proposed changes in the 2007 Fiscal Year Executive Budget did not occur.

Provides businesses principally engaged in research and development in new clean energy technologies or renewable fuels all benefits of the Empire Zones program, whether or not these qualifying businesses are physically within existing zone boundaries.

Makes permanent the Empire State Film tax credit and increases the maximum annual credit to $30 million.

Provides tax credits for the purchase of alternative fuel vehicles and for the production of alternative fuels.

Article 32 – Bank Tax

Expenses capital assets placed in service in New York on or after 1/1/8.

Reduces the alternative entire net income base tax rate from 3% to 2% on 1/1/6, to 1% on 1/1/7, and to zero on 1/1/8.

Reduces the alternative taxable assets base tax rate in: (1) subparagraph i from one-tenth of a mill to one-fifteenth of a mill on 1/1/6, to one-thirtieth of a mill on 1/1/7, and to zero on 1/1/8, (2) subparagraph ii from one-twenty-fifth of a mill to two-seventy-fifths of a mill on 1/1/6, to one-seventy-fifth of a mill on 1/1/7, and to zero on 1/1/8, (3) subparagraph iii from one-fiftieth of a mill to one-seventy-fifth of a mill on 1/1/6, to one-hundred-fiftieth of a mill on 1/1/7, and to zero on 1/1/8.

Reduces the tax rate (on the entire net income tax base) from 7.5% to 6.75%.

Removes the expiration dates from the 1985 and 1987 amendments to the Bank Tax.

Extends for two years the transitional provisions related to the Federal Gramm-Leach-Bliley Act.

Repeals the 60 percent exclusion for dividends received by a parent from a REIT or a RIC.

Requires that the Metropolitan Commuter Transportation District (MCTD) surcharge be computed as if the proposed changes in the 2007 Fiscal Year Executive Budget did not occur.

Article 33 – Insurance Tax

Reduces the minimum and maximum limitations on tax liability of life insurance companies from 1.5% of taxable premiums to 1.25% and from 2% of taxable premiums to 1.75%, respectively.

Eliminates the deduction for certain dividends received by a parent company from a REIT of a RIC.

Limits the amount of annuity premiums included in computing the maximum limitation on tax due for those life insurance companies whose annuity premiums exceed 95 percent of total premiums from all of their annuity premiums to only those annuity premiums in excess of 95 percent of total premiums.

Article 26 – Estate Tax

Increases the unified credit by conforming to the amount of the Federal credit in 2007, 2008, and 2009 and repeals the tax for decedents dying after 12/31/9.

Articles 28 & 29 – Sales and Use Tax

Imposes tax on clothing priced under $110, revokes the authority for counties to exempt clothing priced under $110, and creates a $250 per item clothing exemption for two seven-day periods.

For those vendors filing on a quarterly or longer basis, the maximum vendor credit is increased, on a phased basis, from $150 to $250 and the 3.5% credit on State Sales and Use Tax (SUT) collected is increased to 5% on all Sales and Use Tax collected.

Exempts certain Energy Star appliances and home weatherization products from State SUT for two seven-day periods annually and authorizes localities to do the same.

Removes the expiration on the exemption for admissions to amusement parks.

Exempts alternative fuels.

Article 20 – Cigarette and Tobacco Products Tax

Increases the excise tax to $2.50 per pack and reduces New York City's excise tax to $0.50 per pack on 1/1/6.

Postpones until 3/1/7 implementation of the law requiring collection of tax from wholesalers who sell cigarettes to Native Americans for resale on New York reservations for purchase by non-Native Americans.

Article 22 – Personal Income Tax

Reduces the top tax rate from 6.85% to 6.75%.

Raises the top income bracket thresholds and raises the income thresholds applicable to the rate recapture by 20 percent.

Eliminates the marriage penalty by increasing the standard deduction and the income thresholds applicable to the rate recapture for married taxpayers.

Creates a refundable credit at 50 percent of the costs of upgrading or renovating a residential home heating system.

Establishes a maximum $3,000 refundable credit set at 25 percent of energy costs for farmers and small businesses whose energy costs exceed five and ten percent, respectively, of total costs.

Creates credits for the purchase of fuel efficient alternative fuel vehicles and the production of alternative fuels.

Expenses capital assets placed in service in New York on or after 1/1/8.

Re-imposes through 12/31/9 the increased limited liability company fees.

Clarifies the treatment of nonresident stock options associated with New York employment.

Creates a credit for farmers for real property tax on land related to conservation easements.

Creates an earned income credit for low-income, non-custodial parents who pay child support.

Article 12-A – Motor Fuel Tax

Creates an exemption for alternative fuels.

Article 13-A – Petroleum Business Tax

Creates an exemption for alternative fuels.

Article 21 – Highway Use Tax

Creates an exemption for alternative fuels.

Contract Procurement

Eliminates the sunset date for the "Procurement Stewardship Act," in effect, enacting a permanent extension of the PSA.

The threshold for Comptroller pre-audit of state contracts is raised from $15,000 to $50,000 for state agencies other than the Office of General Services, and to $100,000 for contracts made by the OGS. The budget does not proposed to change the 90 day time period of OSC review of contracts.

The threshold for discretionary purchases (non-competitive bids) has been increased from $50,000 to $100,000 for the Office of General Services, and from $15,000 to $50,000 for state agencies.

The discretionary purchase thresholds for purchases from small businesses and from minority/women owned businesses is increased from $50,000 to $100,000.

The discretionary purchase thresholds for municipalities is increased from $20,000 to $50,000 for public works contracts; and from $10,000 to $20,000 for other contracts.

Explicit language is added to prohibit the “artificial splitting” of contracts for the purpose of avoiding competitive bid requirements.

Fire companies; volunteer ambulance services; consortiums of private or government owned hospitals, medical schools and other health related facilities; institutions for instruction of the deaf and blind; non-profit agencies for severely disabled; hospitals and residential care facilities; non-profit mental hygiene facilities; the interstate environmental commission; and “other association or entity as specified instate law” would become eligible to purchase off of OGS centralized contracts.

The budget would create an advisory council on the creation of a “vendor responsibility database.” The council would include the OGS commissioner, the State Comptroller, Attorney General, budget director, and several other state agency commissioners; representatives of local government and the contracting community; and representatives of the Senate, Assembly and court system. It is charged with making recommendations on the creation of a central database for vendor responsibility information, and develop a strategic plan for its implementation. Its recommendations are due January 1, 2007.

The Division of Minority and Women's Business Development is directed to study current M/WBE participation in state public works contracts, and state contracts for commodities and services, and submit recommendations to the Governor and legislature by January 1, 2007.

The Office of General Services' authority for centralized services related to electricity purchases from NYPA is expanded to apply to the purchase of electric power, electric generating capacity, renewable energy and/or renewable energy credits from either the Power Authority or “other power suppliers.” In addition to state agencies, participants in these centralizes services would be expanded to include political subdivisions of the state, public authorities, and pubilc benefit corporations.

Education

The Governor proposes an overall net school year education aid increase of $634 million which would bring state aid to education up to almost $17 billion for the 2006-07 school year. This increase is comprised of two components - a $259 million increase in regular school aid and $375 million increase in Sound Basic Education (SBE) Aid which would be placed in reserve to be allocated pursuant to the development of sound basic education plans.

Most other aid categories remain essentially the same, though some school districts would see aid decreases in some categories. Decreases are generally due to decreases in expense-based aids and proposed reforms in Private Excess Cost Aid. (Private Excess Cost Aid is for special education students placed in private school settings and certain state-operated schools.)

The Governor also proposes the following program enhancements and new programs:

Proposes to increase the cap on charter schools from 100 to 250 and to clarify that charter school conversions authorized by the New York City Schools Chancellor do not count towards the cap. Also proposes other changes to make it easier for more charter schools to be established.

Proposes a $5 million increase (to a total of $25 million) in the Teacher of Tomorrow program to retain and attract teachers to areas where teacher shortages exist. The $5 million increase is to provide recruitment incentives and tuition reimbursement for math and science teachers entering the profession through alternative certification pathways.

Proposes a new $5 million program called Engineers of the Future to enable 500 middle and high schools to offer pre-engineering programs to increase the number of students pursuing engineering careers.

Proposes a new $5 million Summer Institutes for Math and Science program for middle school students. The summer institutes would be held at community colleges. It would also support university-based programs to renew and update the competency of math/science teachers.

Proposes the creation of a Science and Technology Task Force to develop a comprehensive statewide plan to strengthen science and technology education through public/private partnerships.

Proposes an increase of $9.5 million in funding for the expansion of the Science and Technology Entry Program/Collegiate Science and Technology Program (STEP/CSTEP) to increase the number of historical under-represented and disadvantaged students successfully pursuing math, science and technology-related study at the high school and college level.

Proposes that additional Flex Aid be provided prospectively to schools districts that show significant improvement on statewide achievement tests. Also proposes that school districts that adopt a spending cap in 2006-07 would be eligible for a 2 percent Flex Aid bonus in the 2007-08 school year.

Proposes a new $500,000 program to provide 25 academic achievement Pathfinder Awards and 25 Trailblazer awards to schools across the State to recognize outstanding educational performance and exceptional operational efficiency.

Proposes reforming the school voting process by:

Proposes enhancements and a new $530 million STAR Plus program to recognize and encourage school spending restraint. Would index the STAR exemption for senior citizens to inflation and make it retroactive.

Would give homeowners a $400 STAR Plus rebate in districts that adopt a spending cap and would also provide more school aid to those districts.

Proposes a $500 refundable income tax credit to families with an income of less than $90,000 in school districts with under-performing schools. It can be used to for tutoring, after-school programs and other eligible education expenses.

Higher Education

Proposes to increase the number of math and science teachers by establishing the New York State Math and Science Teaching initiative for students attending New York State public and private colleges and universities who make a five year commitment to teach math and science in a New York State middle or high school. Under this program 500 new annual scholarships would be provided every year for up to the amount of tuition charged at the State University of New York or actual tuition, whichever is less.

Proposes changes in the Tuition Assistance Program (TAP) that are projected to result in a $189.9 million reduction in the cost of the program. The award amounts for which TAP recipients are eligible remain the same. However, other changes, related to requiring institutions to pre-finance TAP awards to students they admit who do not have a high school diploma and full-time study definitions, are projected to lower overall TAP expenditures.

Proposes maintaining funding for Unrestricted Aid to Independent Colleges and Universities (Bundy Aid) at $42 million.

Proposes maintaining the Higher Education Opportunity Program (HEOP) at $22 million.

Proposes maintaining the Liberty Partnership Program at $10.9 million.

SUNY and CUNY

Proposes an Empire Innovation Program for $6 million to be established at SUNY campuses to attract 200 new research faculty over three years beginning in 2006-07 and to retain existing faculty. This funding is to help SUNY compete for research grants, generate additional revenue and contribute to the economic growth of the surrounding regions and the State. Proposes an $85.3 million revenue raising authorization for SUNY Trustees to enable them to raise tuition through various options including but not limited to adopting a tuition policy that adjusts tuition annually based on inflation and allows campuses to charge differential tuition.

Proposes similar tuition increase authorizations for CUNY.

Proposes $407.8 million in state funding for SUNY Community Colleges which reflects an increase of $22.5 million which is attributable to a $100 per full-time student base aid increase ($12.4 million); enrollment growth and other annualizations and reconciliations. Similar recommendations and reconciliations are made for CUNY community colleges.

Economic Development
Staff Contact: Ken Pokalsky

Significant business tax reforms (see section on TAXATION).

A new $475 million capital spending program for high tech and other purposes. Includes: $75 million for Albany convention center; $75 million for UAlbany's nanotech center; $75 million each for infrastructure improvements for new stadiums in Bronx and Queens counties; $57 million for WTC visitor/education center; $30 million for renewable vehicles and fuels; another $20 million for support of a cellulosic ethanol refinery.

$94 million to support the JOBSNOW fund; the Empire State Development fund; operations of Centers of Excellence; and support of various other state programs.

Accelerate designation of all nine additional Empire Zones by the end of calendar year 2006.

Expand the Empire Zone program by creating a statewide zone for “clean energy” research, and create five new zones for businesses related to “Centers for Excellence.”

Extend the Power for Jobs and Energy Cost Savings Benefit (i.e., former Fitzpatrick power programs) programs until March 31, 2007, and creates a state commission to recommend future economic development uses of hydropower resources.

Expand the Linked Deposit Program from $350 million to $410 million.

Make permanent the general loan powers of the Urban Development Corporation.

Provide for a three year phase-out of the bond issuance charge on public authorities.

Health

Medicare Part D

Beginning January 1, 2006 due to Federal changes, Medicaid is no longer available to cover the prescription drug costs for individuals eligible for Medicare and Medicaid (dual eligibles) who under the new Federal rules must now enroll in Medicare Part D for their prescription drug benefit.

Due to the start-up problems being experienced with the Federal Medicare Part D program, last week the Governor directed the State's Department of Health to pay all pharmaceutical costs of Medicaid recipients eligible for Part D coverage for the next seven days to ensure that these individuals have access to the prescription drugs they need. The State will seek reimbursement of these costs from both Washington and from the health insurance plans that are receiving federal subsidies to provide drug coverage.

In the current year, $5 million has been allocated to support a range of activities to assist the transition including education and training. In addition, the 2006-07 Executive Budget includes more than $200 million in funding to support:

In connection with the Elderly Pharmaceutical Insurance Coverage Program (EPIC), the Budget requires low-income seniors to participate in Part D as a condition of EPIC enrollment.

Reforming the Long-Term Care System

The Budget advances a proposal to reform the Long Term Care system.

The Governor's Budget advances a five-year plan to restructure nursing home reimbursement, which will provide more than $340 million annually in new savings once fully implemented. The plan updates rates to use 2003 data instead of 1983 data that is currently used-phased in over a five-year period-and eliminates inappropriate and outdated rate enhancements. The Governor's plan also calls for a working group to conduct a comprehensive review of the rate methodologies for hospitals and nursing homes to ensure that State investments are consistent with the efforts underway to eliminate unneeded institutional capacity.

Medicaid Costs

The Budget advances a plan to further enhance and strengthen New York's efforts to combat fraud in the Medicaid program by:

Health Care Reform Act (HCRA): The Budget fully funds HCRA through its current sunset date of June 30, 2007 and including increasing the per pack tax on cigarettes by $1. Proceeds from the conversion of any not-for-profit insurers to for-profit status will be dedicated to HCRA, similar to the Empire Blue Cross conversion. The Budget provides funds for programs such as health care workforce recruitment and retention and Child Health Plus.

Allows Chemung County to establish a demonstration program to improve care coordination and reduce inappropriate utilization.

Eliminates the physician's right of final determination in both the Preferred Drug Program and the Clinical Review Program.

Includes cost as criteria in the drug review process.

Repeals the requirement that the Department of Health post prescription drug retail price lists on its website.

Eliminates the School Health Policy exemption from the Graduate Medical Education surcharge as part of HCRA.

Small Business

Phase out and eliminate the estate tax by conforming State exemptions to Federal levels.

Eliminates the S-Corporation differential tax. This would make permanent a more simplified reporting requirement for S-corporations to calculate their Article 9-A tax due using a fixed dollar minimum tax rate, rather than the greater of the difference between the Article 9-A and Article 22 rates and the fixed dollar minimum rate.

Increase the sales tax vendor credit from a State only base to a State and local base as well as increasing the quarterly cap from $150 to $250 over three years.

Provide small business taxpayers and farmers with a refundable credit for energy costs.

Create a new credit for farmers for property tax paid on land related to conservation easements.

Extend LLC fees for three years increasing, the filing fees for every subchapter K limited liability company, every limited liability company which is a disregarding entity for Federal income tax purposes, every limited liability partnership under Article 8-B of the Partnership Law and every foreign limited liability partnership which has income derived from NY sources.

Address deficiencies in existing law relating to the collection of taxes with respect to sales of goods and services on Indian reservations to non-Indians. Proposal will also delay the effective date of a law requiring the Department of Taxation and Finance to collect taxes on sales of cigarettes, motor fuel, and other products sold by Native American tribes to non-Native American New Yorkers.

Environment

Revenues

The cap on Title V air permit fees is increased to $67 per ton, and a minimum fee of $1250 per facility is established, raising program revenues by $6.1 million per year. DEC has told us that their Title V account will finish the current fiscal year with a first-time deficit. Based on last year's fee calculations, fees under then new budget would hit $67 per ton this year.

A $3.7 million per year increases in various other DEC regulatory fees. These include: reimposition of the $6,000 surcharge for hazardous wastewater; an increase in private/commercial/institutional SPDES fees; an increase in general permit for CAFOs; and new dam construction and repair fees.

An increase in freshwater wetlands fees would raise $1 million per year, in part to help implement a proposed broadening of New York's wetlands regulatory program.

Under the banner of making the program "more efficient," property located in Manhattan between 96th Street and Canal Street would no longer be eligible for brownfield redevelopment tax credits or real property tax credits.

New and extended tax credits are proposed for the purchase of certain alternative fuel vehicles, and for production of alternative fuels. The budget also proposes to exempt certain alternative vehicle fuels from the state's petroleum business tax, sales tax, and other sector specific taxes.

Spending

DEC general operations budget is proposed at $455 million, an increase of $24 million or about 5.6%. Most of the spending increase is financed through projected increases in revenues from state-imposed fees.

DEC staffing would increase to 3,378, an increase of 43 positions. Most new positions are in air/water quality programs (14 positions) and fish/wildlife/marine resources (12 positions, some likely related to an expanded wetlands program) and solid/hazardous waste management (7 positions).

The Governor is proposing to expand the Environmental Protection Fund from $150 million/year to $180 million/year, by shifting existing revenues derived from the state's real estate transfer tax.

The budget again proposes $135 million to support the state's superfund program, based on the 10 year spending program authorized by the 2003 "brownfield act." $7.4 million is proposed to support DEC oversight of the brownfield and voluntary cleanup program.

$27.5 million is proposed for waste tire remediation efforts, with funds coming from existing tire fees.

Energy

Economic Development Power
The Power for Jobs and Energy Cost Savings Benefit programs and their existing funding mechanisms, currently set to expire on December 31, 2006, will be extended until March 31, 2007. The Energy Cost Savings Benefit program continues low cost power for businesses that were formerly served by contracts from the Fitzpatrick nuclear power plant when it was owned by NYPA. A commission, which will include legislative and business leaders, will be established to develop recommendations on future uses for the states's hydroelectric and other economic development power resources.

Renewable Energy
The Governor has proposed a multi-faceted plan to encourage the production and use of renewable fuels in New York. The plan includes:

Clean Coal Initiative
Establishes a program to provide shovel-ready sites and financing assistance for advanced clean coal gasification plants. NYPA will provide $50 million to private sector generators who agree to host research and development of new technologies that would reduce carbon dioxide emissions. Existing brownfield properties would receive priority during the siting process. NYPA would buy power from this facility.

Energy Efficiency
Creates two sales tax free weeks for ENERGY STAR products. Provides a tax credit for homeowners who replace home heating systems with new, high-efficiency systems that meet or exceed ENERGY STAR standards.

Centralized Electricity Purchases
The Office of General Services' authority for centralized services related to electricity purchases from NYPA is expanded to apply to the purchase of electric power, electric generating capacity, renewable energy and/or renewable energy credits from either the Power Authority or “other power suppliers.” In addition to state agencies, participants in these centralized services would be expanded to include political subdivisions of the state, public authorities, and pubilc benefit corporations.

Transportation

The 2006-07 All Funds appropriation is $6,736,209,000.

2006-07 marks the second year in the five-year $35.9 billion capital plan passed in 2005.

CHIPs and Marchiselli local transportation programs
Authorizes the 2006-07 CHIPs program at $289.5 up from $276.7 million and the Marchiselli local capital highway assistance program at $39.7 million, unchanged from the 2005-06 enacted budget.

Industrial Access Program - $9 million

Authorizes limited design-build project delivery processes
New sections of the Highway Law and Public Authorities would allow the DOT and Thruway Authority to undertake a pilot design-build program and participate in a maximum number of design-build projects, twelve for the DOT and five for the Thruway Authority. Design-build contracts combine the design work and construction activities into a single contract. Design-build bills were introduced in the past but were never enacted.

Reforming Transportation Finances
The budget authorizes public-private partnerships called Transportation Development Partnerships. This would allow transportation agencies to partner with private sector builders, operators and investors to complete needed projects faster and with less demand on public resources than can currently be accomplished.

Full Dedication of Transportation Revenues
The budget ensures that all transportation-related revenue, and transportation user fees and taxes be fully dedicated to improve the system and support operational performance.

Transit Systems
The MTA will receive over $2.1 billion, an increase of $318 million or 17.5%, over last year. Other transit systems will receive $379 million, an increase of $62 million or 19.5%.

Construction

Authorize a pilot program for the Department of Transportation and the Thruway Authority to bid construction projects inclusive of professional engineering costs. Pilot program allows for “design-build contracts” to combine the design work and construction activities into a single contract.

Authorize the Department of Transportation, the Thruway Authority, and the Metropolitan Transportation Authority to enter into transportation development partnerships with public and/or private entities.

Authorizes use of law enforcement cameras at work zones and dangerous stretches of highway.

Telecommunications

Wireless Surcharges

The Governor's budget proposal amends County Law to clarify technical definitions and administrative and enforcement provisions related to the state and local wireless surcharges. In doing so, County Law will be brought into conformity with Tax Law regarding the application of the surcharges. These changes, recommended by the Department of Taxation and Finance, will clarify the wireless communication devices that are subject to the state and local surcharges and provide a better mechanism for collecting the surcharges on prepaid wireless service.

The bill consolidates 37 current subdivisions of County Law into a single subdivision authorizing a list of specific counties to levy local wireless surcharges. Currently, each county's authorization to levy a surcharge is provided in a separate subdivision of law. The bill amends the County Law to conform the permissible uses of revenues from the city and county wireless surcharges. Legislation passed in 2002 permitted 19 counties and New York City to use local surcharge revenues for “costs associated with the design, construction, operation, maintenance, and administration of public safety communications networks.” All other counties authorized since are limited to using the surcharge revenues only for payment of “eligible wireless 911 service costs.” This would permit the second group of counties the same broader uses as the first group once they have attained compliance with enhanced wireless 911 standards.

Lastly, the bill amends County Law to direct the deposit of the full amount of the monthly state wireless communications service surcharge into the Statewide Public Safety Communications Account.

Labor & Human Resources

The state Labor Department has almost 84% of its workforce financed by Federal grants and 15% by fees and assessments. Less than one percent of the positions are supported by State tax dollars from the General Fund. There are two unemployment Insurance Telephone Claim Centers and eight employment service regional offices that oversee employment services staff at 83 locations throughout the State. Overall employment levels in 2006-07 will be 3,946. The all funds appropriation recommendation is $4,670,351,000.

The Division of Human Rights, charged with investigating and resolving complaints of illegal discrimination, promoting human rights awareness through education and acting as a resource in the prevention and elimination of discrimination, will see an increase of $307,000 in their all funds appropriations in 2006-07. It will take them from $18,954,000 to $19,261,000. The Division operates from its main office in the Bronx and from nine regional and two satellite offices across the state. Full time equivalent positions will remain at 203. The Division continues to make progress in reducing the number of open cases. Open cases totaled 5,104 as of November 2005 down from 16,880 in January 1995. The division has added an Outreach unit and a Mediation unit.

Consumer

Authorize two sales tax free weeks for the purchase of “Energy Star” appliances and home weather stripping, caulking, and insulation products.

Make the clothing exemption permanent for purchases up to $250 for two weeks annually (sales and use tax exemption periods).

Exempt the sale of alternative fuels from motor fuel and sales tax.

Require the Department of Agriculture and Markets to conduct food safety inspections on a risk-based frequency.

Make permanent the Motor Fuel Marketing Practices Act (MFMPA) and provide for certain investigative costs.

Workers' Compensation

The Governor has sent up Governor's Program Bill #94 from 2005 as a separate Article VII bill.

Financial Services

Real Estate Investment Trusts (REITs)
The Governor's budget amends the Tax Law to disallow the exclusion of dividends by a Real Estate Investment Trust (REIT) or a Regulated Investment Company (RIC) subsidiary.
The bill would disallow the exclusion of all or part of the dividends paid by a REIT or a RIC, or by a subsidiary that owns or controls over 50 percent of a REIT or a RIC from the Article 9-A General Business Corporation Tax. A comparable amendment would be made to the Bank Tax under Article 32 to exclude dividends from REITs, RICs or a REIT or RIC holding company from the 60 percent deduction allowed for dividend income from subsidiaries. Also, the 60 percent deduction for net gains from subsidiary capital would not include the gain or loss on any sale of an ownership interest in such entities to the extent such dividends, gains or losses are attributable to the ownership interest in the REIT or RIC.

Bank Taxes
Would make permanent the provisions of the New York State and New York City bank taxes dealing with the taxation of commercial banks and makes permanent the provisions concerning the bad debt deduction for commercial banks for New York State and New York City franchise tax purposes which were added in 1987 and 1988, respectively.

Gramm-Leach-Bliley Act
The bill would extend for an additional two years (through 2007) the transitional provisions in the state and city bank taxes relating to the enactment and implementation of the federal Gramm-Leach-Bliley Act (which eliminated many of the prohibitions against the affiliation of banks, insurance companies and securities firms).

Penalties and Fees
The Governor's budget proposal would:

Insurance

Tax Reductions

The Governor's budget proposal contains a provision which amends §1505 of the Tax Law to decrease the minimum and maximum limitations on the franchise tax applicable to life insurance companies. The cap, or upper limit, on the amount of tax that a life insurance company would be required to pay, would be reduced from 2% to 1.75% of taxable premiums. The floor, or lower limit, would be reduced from 1.5% to 1.25% of taxable premiums. This provision would be effective January 1, 2006.

Another provision changes the manner in which life insurance companies calculate their taxes when more than 95 percent of their total premiums consist of annuity premiums. The bill amends §1505(c) of the Tax Law that applies to life insurance companies whose premiums consist of at least 95% annuity premiums. The amendment would provide that the limitation amount is computed by using the amount of premiums of the insurance company which are in excess of 95% of total premiums. Life insurance companies whose annuity premiums do not make up more than 95% of total premiums are allowed to calculate the tax limitation by eliminating all annuity premiums.

Fee Increases

Includes provisions to raise fines and penalties for various violations of the Insurance Law. Also authorizes the Superintendent to issue cease and desist orders for violations of the Insurance Law.

Occupational Safety & Health

Increase the renewal fees for asbestos handling licenses to conform to the initial asbestos license application fees. The increase would create $185,000 in additional revenue by making the asbestos handling license renewal fee $500 (up from $300).

Miscellaneous

Temporary State Commission on Lobbying would receive $1 million increase in funding for an additional 16 positions, in part to help implement the new "procurement lobbying act."

Reform Initiatives

Constitutional Budget Reform

Require all budgets be submitted on or before January fifteenth.

Shorten the Executive amendment period from thirty days to twenty-one days.

Require the Legislature to enact a balanced budget.

Raise the level of the Rainy Day Fund to a minimum of 5 percent of the General Fund budget.

Statutory Budget Reform

Accelerate the date for convening the Consensus Revenue Forecasting Conference from March to February. If consensus is not reached, the Comptroller would provide a binding revenue amount.

Requires the Legislature to enact a budget by May 1. Requires legislative conference committees.

Amend the State Technology Law to require the State's Chief Information Officer to annually submit to the Governor and the Legislature a report relating to information technology projects costing in excess of $25 million.

Provides significant additional reporting of fiscal information.

Constitutional Debt Reform

Permanently ban back door borrowing.

Cap total debt outstanding at 4 percent of State personal income.

Cap total debt service at 5 percent of total governmental funds receipts.

Encourages greater voter participation in State debt decisions.

Reduce the maximum term of State debt to 30 years.

Other Reforms

State Lobby Commission will receive a $500,000 deficiency appropriation to add staff related to implementation of the 2005 Lobbying Procurement Act.

The budget contains $1.5 million to create the new Public Authority Budget Office within the Division of Budget; authorized by the Public Authorities Reform Act, this new office will have oversight and reporting responsibilities related to public authorities.