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SUMMARY OF THE GOVERNOR'S PROPOSED
2003-2004 BUDGET

Prepared by the staff of The Business Council
January 31, 2003

Overview

Governor's 2003-04 budget preserves enacted tax cuts, keeps spending flat; some other taxes would rise

Governor Pataki proposed a 2003-04 budget that would go forward with $177 million in already enacted tax cuts, raise taxes on life, property and casualty insurers and health insurance, and leave overall spending essentially the same as this year's.

Overall spending, including federal aid to support recovery in downtown Manhattan, would drop by 0.1 percent to $90.8 billion, according to the Budget Division. The state-funds portion of the budget-including state taxes, fees, tuition and other non-federal revenue-would be reduced by a similar proportion. Including expenditures moved off-budget, overall spending would rise modestly.

Governor Pataki said the slowdown in the state's economy caused by the September 2001 terrorist attacks and the national recession created a budget shortfall of $11.5 billion for the current fiscal year and the 2003-04 year, which starts April 1. This fiscal year will end with state-funded spending having risen by an estimated 3.5 percent over the previous year.

Half of the projected shortfall for the coming fiscal year would result from a $4.6 billion increase in "baseline" spending largely caused by existing formulas for Medicaid, school aid, and other programs. The remainder stems from revenue losses due to the slow economy, and the absence of reserves used to balance the current budget.

The Governor proposed to balance the budget with a combination of spending reductions in selected programs, reduced levels of increases for others, targeted tax and fee increases, movement of some expenditures off-budget, and one-time revenues.

State aid to K-12 education would be reduced by $567 million, or 4 percent. The Budget Division said school spending in New York was the highest in the nation in fiscal 2002 at $11,400 per student, 44 percent above the national average. Spending on state agencies' operations would be reduced by $176 million, including a reduction of the state workforce by 5,000 positions.

The budget proposes to reduce projected spending increases on Medicaid and other health-care programs by $1 billion. Total expenditures on those programs would still rise, though-by $515 million, or 2 percent, for Medicaid and $225 million, or 28 percent, for Child Health Plus.

The budget proposes to securitize the state's share of the tobacco settlement raising $2.3 billion.

Following are the specific budget summaries by issue area.

TAXATION

Scheduled Tax Cuts

New Tax/Fee Increases/Changes/Continued Tax Reductions

Governor Pataki's Executive Budget proposes to:

Governor Pataki also chose to continue implementation of the following tax reductions that were previously enacted:

EDUCATION

Higher Education

ECONOMIC DEVELOPMENT

SMALL BUSINESS

ENVIRONMENT

ENERGY

Increase fees paid by operators of the six nuclear power reactors

Re-authorize the New York Power Authority to make voluntary contributions to the General Fund to fully support the Power for Jobs program in calendar year 2003

Authorize certain State agencies to finance their activities with revenues from assessments on public utilities and cable companies

Authorize assessments on utilities to be used for New York State Energy Research and Development Authority research costs

Increase oil and gas depth fees

Extend the authorization for the State to recover from the industry the cost of appraising oil and natural gas wells for local property taxation purposes

TRANSPORTATION

Additional License Plate fees for Motor Vehicles

Divisible Load Permits Included in Budget

Require Hazardous Material license holders to undergo a criminal history background check

Increase various mandatory surcharges on Penal Law and Vehicle and Traffic Law offenses

Provide the annual authorization for CHIPs and Marchiselli local transportation programs

State vehicular blood alcohol standards to meet Federal requirements

Extend and conform the State motor vehicle drug penalty standards to Federal requirements

Increase various Motor Vehicle fees and authorize that these fees and a percentage of the transportation and transmission tax be deposited in the Dedicated Highway and Bridge Trust Fund

Establish the Waste Tire Management Recycling Act

CONSTRUCTION

Wicks law repeal and mandate relief initiatives for localities in Budget

Within the budget the Governor is proposing local government flexibility and removing long-standing, State-imposed impediments to efficient government operation. According to budget memos the Governor is proposing a myriad of changes to existing law including:

TECHNOLOGY

LABOR & HUMAN RESOURCES

HEALTH

Health Care Reform Act
The Governor proposes extending the Health Care Reform Act two years from July 1, 2003 through June 30, 2005. Included are the following proposals:

Medicaid

Public Health

SUNY Hospitals

CONSUMER

RESEARCH & DEVELOPMENT

WORKERS' COMP

Prepared 01-31-03
Revised 02-03-03