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Government Affairs Albany Update

April 13, 2006

Budget Spending Vetoes

Citing excess spending levels as well as constitutional issues, Governor Pataki has issued more than 200 separate veto messages aimed at the legislature-approved budget, affecting $4.2 billion in appropriations and $2.8 billion in anticipated cash disbursements for the 2006-07 state fiscal year. On many issues, the Governor has argued that his vetoes are not subject to legislative override because they represent an unconstitutional modification of the Executive Budget.

Among the larger items vetoed:

  • more than $1.3 billion in new medicaid spending (and nearly $200 million in other health care-related spending), and a $805 million property-tax rebate plan.

Other significant vetoes included:

  • $470 million for the State University of New York
  • $415 million for the City University of New York
  • $200 million “community projects fund,” and $78 million for “economic development projects,” which would have supported unspecified legislative member items.
  • $150 million for infrastructure improvements related to New York City stadium construction.
  • $119 million increase in the state's tuition assistance program.

Vetoes of particular interest to The Business Council include:

  • $165 million appropriation governing the use of revenues derived from assessments on electric power to support the System Benefit Charge and Renewable Portfolio Standard programs. We opposed legislative appropriation of these funds.
  • extension of the Power for Jobs program and the Energy Cost Savings program through December 31, 2007, and commitment of General Fund resources to guarantee full financing of these programs. The Business Council supports the extension of these programs, recognizing that the state needs to develop a new financing mechanism.

Legislative leaders are considering overrides when they return to Albany on April 24 if agreements cannot be reached with the Governor on these issues.

Revenue Bill Veto

Governor Pataki has vetoed S.6460C - the Legislature's version of a Revenue Budget Bill that had passed both houses on March 31. S.6460C as drafted jointly by the Assembly and Senate did not include a single tax reduction of the eleven broad-based business tax reductions advocated by The Business Council membership (see listing below).

The Governor's grounds for issuing Veto Message 208 cited that the Legislature's rewriting of the Governor's proposed real property tax rebate program represented "an unconstitutional alteration of an appropriation proposed in my Executive Budget". The Governor's position on a possible Legislative override of a Budget Bill veto that had been based on unconstitutional grounds can be gleaned from Veto Message #74 of 2006: "The Governor's disapproval of an item on the basis of its unconstitutionality is not subject to override by the Legislature. See Silver v. Pataki, 4 N.Y.3d 75 (2004) (dismissing challenge by Speaker of the State Assembly to the Governor's disapproval of 55 unconstitutional items added by the Legislature to the 1998-99 budget); 1982 N.Y. Op. Att'y General 21 (recognizing that the Governor's disapproval of unconstitutional budget items 'is not subject to override by the Legislature'). Even a vote by two-thirds of the members of both Houses of the State Legislature cannot transform an unconstitutional budgetary item into a law that may be validly executed by responsible state officials."

If the Senate, Assembly, and Governor can not work out a three-way budget agreement on revenue, then the Legislature might attempt an override of Veto Message 208 and, if successful, hope that the Governor would not execute only the real property tax rebate program (the single Part of the 27-Part S.6460C vetoed on unconstitutional grounds) while allowing the other 26 Parts to be effective. On the other hand, the real property tax rebate program is the largest tax relief portion of S.6460C (averaging some $900 million over the next two years) and was the number one item sought by the Senate.

Other faults noted in the Governor's Veto Message included: "I am also concerned that the Legislature rewrote my tax cut proposals in a way that rejects reform. For example, I proposed a refundable education tax credit in order to encourage parents to become more involved in their children's education and provide them with new resources and flexibility to help them meet the educational needs of their children. The Legislature converted my proposal into a generic child tax credit of a reduced amount that abandons the important linkage to parental involvement and improved educational opportunities. Similarly, my Executive Budget proposed a STAR Plus property tax rebate of $400 for homeowners who reside in school districts that agree to restrain the growth of school spending. This proposal built on my historic STAR initiative, which has provided nearly $18 billion in savings to homeowners across the State. However, in many cases, the STAR benefit has been undercut by school districts, which, despite record State aid increases, continue to increase their spending and taxes at levels that far exceed the rate of inflation. Accordingly, I proposed a tax rebate program that would not only allow homeowners to keep more of their earnings, but also encourage local school districts to hold the line on spending and, ultimately, reduce the burden of school property taxes. Unfortunately, the Legislature eliminated this important protection for taxpayers, and I am concerned that tax rebates could be offset by an equal or greater increase in property taxes."

The following are the eleven broad-based business tax reductions that the Legislature chose not to include in their revenue Budget Bill, S.6460C/A.9560B:

  • reduce the general business income (Article 9-A) tax rate from 7.5% to 6.75%;
  • reduce the bank income (Article 32) tax rate from 7.5% to 6.75%;
  • eliminate the general business income (Article 9-A) alternative tax on business capital;
  • eliminate the bank income (Article 32) alternative tax on (gross) assets;
  • eliminate the bank income (Article 32) alternative minimum tax on income;
  • eliminate the general business income (Article 9-A) alternative tax on minimum taxable income (the "AMT");
  • eliminate the additional general business income tax (Article 9-A) imposed on subsidiary capital;
  • expense (deduct) the full cost of depreciable property in the year that the property is placed in service;
  • phase out and eliminate the estate tax by conforming State exemptions to Federal levels;
  • decrease the maximum and minimum limitations on the business tax applicable to life insurance companies; and
  • repeal the general business income tax (Article 9-A) on manufacturers.

Senate Majority Roundtable on Workers' Compensation

Senator George Maziarz, Senate Labor Committee chairman, convened the second roundtable on Workers' Compensation on Monday, April 10, 2006 in Albany. The purpose of the roundtables is to generate discussion and solutions to New York's high cost-low benefit workers' compensation system.

Participating in the roundtable and providing testimony were:

  • Tony Rosasco and John Sciortino, co-chairs of the legislative committee of the New York Workers' Compensation Alliance

  • Ted Potrikus, Executive Vice-President/Director of Governmental Relations for the Retail Council of New York State

  • Mark Alesse, New York State Director for the National Federation of Independent Business (NFIB)

  • David Dudley, lobbyist for the New York State Trial Lawyers Association

  • Randy Wolken, President of MACNY, the Manufacturers Association of Central New York

  • Joel Shufro, President of the New York Committee for Occupational Safety and Health.

The first roundtable was held on March 13, 2006 and included testimony from Dan Walsh, Business Council President and CEO, and Dennis Hughes, State AFL-CIO President among others.

A third roundtable may be held in western New York.

PSC Adopts Telecom Policy to Address Changing Industry

On Tuesday the Public Service Commission adopted an order that acknowledges the increasing competition in the telecommunications industry. The order grants incumbent telephone companies the flexibility to respond to competitive forces while maintaining appropriate protections, such as lifeline and basic service, to ensure that customers have access to quality telephone service at just and reasonable rates.

The proceeding, known as Competition III, was a logical progression of the Commission's pro-competitive telecommunications policies that have been developed over the past 21 years. Competition III was initiated to examine issues related to the rapid development of voice and other telecommunications services now being provided by new networks that are different from, and compete with, the traditional wireline networks. The policy was designed to establish a more flexible regulatory framework that will promote innovation, increase consumer benefits, and encourage economic investment in the state's telecommunications infrastructure.