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Government Affairs Albany Update

March 25, 2005

Progress on Budget

The General Budget Conference Committee reached agreement today on a wide range of budget issues. Included in these agreements were action on some of the top priorities of The Business Council. Below is a quick summary of the status of some of the most significant business issues.

Single Sales Factor - Adopted for all Article 9-A taxpayers. Phase in is 60% in 2006, 80% in 2007, 100% in 2008 .This would produce net increased revenues in the current fiscal year; full implementation impacts are estimated at ~ $240 million reduction in tax liability for beneficiaries; net reduction in state revenues of about $140 million.

Empire Zones - The legislature has yet to settle on the key issue of grandfathering benefits for all existing QEZEs. Original conference committee report seemed to endorse across-the-board grandfathering. Other key changes agreed to include: 10 year duration of benefits for newly certified businesses; establishment of 12 new zones over a 4 year period; program extention through 2015; reconfiguration of boundaries for existing zones; new benefit criteria for manufacturing and technology industries; and new program management and accountability provisions.

Power for Jobs - No agreement has been reached as yet on an extension of the Pfj program; the Senate is looking for a 1 year extender while the Assembly is looking for a three year extender, plus reinstatement of all currently disqualified participants (based on achievement of contractural employment targets).

REITs - The legislature rejected the Governor's proposal to disallow the 60 percent exclusion of dividends received from a Real Estate Investment Trust subsidiary. This would have increased Article 32 (Bank) Taxes by $50,000,000 in FY2006.

Surcharges - The legislature did not extend the personal income tax and NYS sales/use tax surcharges, due to expire in 2006; the legislature also rejected the Governor's proposal to accelerate phase-out of the PIT "surcharge" (actually a new top bracket).

Transportation Support - The legislature has not yet completed negotiations on a revenue package to support transportation-related spending, including MTA capital plan and a road and bridge bond act. Note that the Senate had previously approved an expansion of the MTA surcharges to cover non-incorporated businesses in the MTA service area - a measure that would have netted an estimated $250 million per year.

Medicaid Cap - The legislature has agreed to cap the local share of Medicaid costs. The mechanism for the cap needs to be negotiated but will likely be similar to what the Governor proposed - a cap at the local's 2005 level with the counties being responsible for cost increases of 3 to 3.5% each year. The legislature also agreed with the Governor's proposal to accelerate the state takeover of Family Health Plus costs.

Conference Committee Reports

The following subcommittee reports can be found at:

Education for SFY 2005-2006
Health for SFY 2005-2006
Higher Education for SFY 2005-2006
Human Services/Labor for SFY 2005-2006
Economic Development for SFY 2005-2006
Mental Health for SFY 2005-2006
Public Protection for SFY 2005-2006
Agriculture/Environment/Housing for SFY 2005-2006
General Government/Local Assistance for SFY 2005-2006

Economic Development

Staff Contact: Ken Pokalsky
The legislative budget conference committee on economic development issued its report this week, without full agreement on two key areas of concern to The Business Council.

Otherwise, the legislature agreed to fairly significant restructuring of the Empire Zones program; to replacing NYSTAR with a new public benefit corporation with ten regional development partners charged with reviewing proposals for local development projects; and a one-year extension of the Empire State Development Fund.

Empire Zone changes include: 10 year benefits for newly certified businesses; establishment of 12 new zones over a 4 year period; program extension through 2015; reconfiguration of boundaries for existing zones; new benefit criteria for manufacturing and technology industries; and new program management and accountability provisions.

The conference committee rejected the Governor's SPUR program for upstate revitalization and his request for $300 million in bonding for the NYC sports and convention center, and failed to reach an agreement on his $250 million capital request for technology and development programs. Unresolved issues were referred to the General Conference Committee for further consideration.


Staff Contact: Lev Ginsburg
Co-chairs Senator Hannon and Assemblyman Gottfried submitted the report of the Health Budget Subcommittee on Thursday, March 24th. Major items in the report were:

  1. support, with amendments, to the Governor's Preferred Drug List proposal;
  2. endorsement of a Hospital/Nursing home right-sizing Commission with a provision for regional input;
  3. a .35 percent assessment on hospital revenues (the Governor had proposed .7);
  4. expansion of the disease state management program authorized as part of the 2004-05 budget;
  5. extension of the Health Care Reform Act to 6/30/2007;
  6. endorsement of the Governor's $1 billion capital improvement plan for information technology;
  7. a cap on the local costs of Medicaid (although the committee could not agree on a specific cap).

Human Services and Labor

The Human Services and Labor Subcommittee, chaired by Senator Ray Meier and Assembly member Deborah Glick, submitted their final report to the General Budget Conference Committee on Wednesday, March 23. Of note was the rejection of the Governor's budget proposal to merge the state Workers' Comp Board with the state Labor Department. They also rejected the proposal to repeal the Wicks Law.

Freedom Health Plan Bill Reported out of Senate Insurance Committee

On Monday, March 21st, S.1405 was reported out of the Senate Insurance Committee. We applaud Senator James Seward, Chairman of the committee, for spearheading initiatives designed to address the biggest concern for New York State businesses: the cost of health insurance.

S.1405 would create a 43 percent tax credit that, when combined with the existing health insurance tax deduction, would result in an effective tax credit of 50 percent for health insurance costs. The new credit would be available to businesses with 50 or fewer employees and with earned net income of $29,000 or less. The bill also authorizes insurers and HMO's to offer “Freedom Policies”, which would have higher deductibles and which would be coupled with new Health Savings Accounts (HSA's). HSA's are accounts to which individuals can contribute pre-tax income to cover health-care expenses.

Department of Health Releases Medicaid Disease State Management RFP

Staff Contact: Lev Ginsburg
The New York State Department of Health released a request for proposals for "Medicaid Disease and Care Management Demonstration (CMD) Programs". The demonstration projects were authorized as part of the 2004-05 state budget as a way to provide better care at less cost to Medicaid recipients with chronic conditions. The legislation authorized six (6) demonstration programs. As part of his proposed budget, Governor Pataki has proposed lifting the cap on the number of demo projects. Should that occur as part of the 2005-06 state budget, then the Health Department may award additional projects beyond the six.

The Health Department has scheduled a pre-bid conference for Tuesday, April 12 from 11:00 a.m. to 1:00 p.m. at the Empire State Plaza, Meeting Room 4 in Albany. Reservations are required: please contact Janice Rayball at (518) 473-7735 by 4:00 p.m. on April 8. Proposals are due by May 31. Current available funding for the demonstrations is $4.5 million.

Click here to view the RFP