Government Affairs Albany Update
November 9, 2009
- Governor Issues Proclamation for November 10th Extraordinary Session
- Assembly Analysis of DRP Proposal
- Senate Deficit Reduction Actions
Governor Paterson signed a proclamation calling an extraordinary session of the Legislature on Tuesday, November 10. According to the Governor's press release, the purpose of the extraordinary session is to address the current-year deficit and additional legislation that was not finished at the end of session last June.
Along with Governor Paterson's Deficit Reduction Plan (DRP), the extraordinary session proclamation contains eight legislative items to be addressed by the Legislature; including the Governor's proposed cap on State spending which includes a circuit-breaker property tax relief program, structural reforms to the State pension system and public authorities reform. In addition to the aforementioned legislation, negotiations are on-going about a host of other issues.
Last week, the Assembly Ways & Means Committee issued a detailed overview of the Governor's proposed deficit reduction plan. It is available here: http://assembly.state.ny.us/comm/WAM/20091029/2009defred.pdf
Among its key observations:
INTRODUCTION. Compared to the adopted budget, the DRP would result in $645 million reduction in state operations, $1 billion in non-recurring actions, and $1.3 billion reduction in local assistance. School aid and STAR benefits are subject to lower. The DRP is projected to reduce spending $2.6 billion below current baseline levels in Fiscal 2011 and a combined $9.7 billion over a five year period. (see p. 1)
ECONOMY. Ways and Means says that employment in New York has fared better than the nation as a whole since December 2007, with construction and manufacturing less hard hit. They also found that personal income will fall faster in 2009 (-5.1%) than in 2002 (-2.6%) or 1991(-0.2%). (TBC note: our relative job performance in the last year is in part due to the fact that we had less far to fall. In the 3 year period, change in NYS manufacturing employment was -7.3 percent, worse than all but 4 other states, and much worse than a national decline of 1%; in construction, while NYS employment increased by 8.8% from 2005 to 2007, it also was below the national average of 9.9% growth, and only 23rd best among the states.) (see pp. 3 - 4)
FINANCIAL PLAN UPDATE. The W&M analysis notes that on a year to date basis (see pp. 7 - 8 and 11- 14):
- all funds local assistance disbursements are up $3.5 billion or 9%
- all funds personal service disbursements ar up $436 billion or 6.9%
- all funds non-personal service disbursements (including contract expenses) are down $387 million or 11.9%
- all funds tax receipts are down $3.6 billion or 16.7%
- PIT receipts are down 21.6% ($4.4 billion)
- sales and use taxes are down 4.2%, or $310 million, while the state sales tax alone is down $477 million or 8%, offsetting growth in other categories of use taxes (mostly related to vehicles & fuels, tobacco and alcohol)
- business taxes are up $79 million or 2.3%, largely due to new legislation subjecting HMOs to the state insurance tax
- other taxes (primarily estate/gift and real property transfer) are down 40%, or $478 million
- all funds non-tax receipts (federal grants and miscellaneous receipts) are up 22.7%, or $5.8 billion
PROPOSED DRP. The $1.3 billion in proposed local assistance cuts for the remainder of this fiscal year would impact the following programs (p. 16):
- $480 million in reduced school aid
- $287 million in reduced medicaid spending
- $184 million in "other health/mental hygiene"
- $125 million in reduced transportation spending
- $67 million in aid to municipalities
- $62 million in reduced higher education spending
- $45 million in "other education"
- $28 million in social services
- $9 million in "other" cuts
The remainder of the document includes agency-by-agency and program-specific summary of spending cuts, including cuts in municipal aid by city (p. 78), and identifies specific AIM program that are exempt from any reductions under the DRP; fund "sweeps"; and other components of the proposed DRP. It does not include district-by-district reductions in state school aid.
The Senate last week introduced S. 6275 (Kruger), the purpose of which is to close the current fiscal year budget gap and includes a State Spending Cap tied to inflation. The Senate estimates that these measures, if enacted, would result in a savings of $1.878 billion in the 2009-2010 fiscal year. The provisions do not include any mid-year cuts to education aid. The following are the principle parts of the bill:
- A tax penalty forgiveness program estimated to generate $250 million in new revenue this fiscal year
- A transfer of $200 million from the Battery Park City Authority, and $200 million from the Port Authority
- Sweeps and transfers of $348 million, with authorization for an additional $300 million from Public Authorities and other accounts to the State General Fund
- Authorization for NYSHIP to operate as a self insured plan. Would have $5 million in revenue to the State in the 2009-2010 fiscal year, with up to $30 million in savings when fully annualized
- Tobacco Bond Refinancing, which could generate up to $500 million in net bond proceeds
- Expanded VLT hours, estimated to generate $39 million this fiscal year
- Amendment of the Diesel Emissions Reduction Act, which generates savings to local transportation authorities
- State Spending Cap tied to the rate of inflation
- Creation of a commission on Governmental Restructuring
We are currently reviewing the provisions of the legislation. While we generally support the principles related to a state spending cap and a commission on restructuring government to make it more cost-effective, we are concerned that it contains no spending cuts or actual program restructuring. Without these types of measures, we are concerned that this package will do little to address the state's structural imbalance between spending levels and revenues. It is expected that the Senate will act on this legislation today.