SUMMARY OF THE GOVERNOR’S PROPOSED 2008 BUDGET
Prepared by the staff of
The Business Council
January 25, 2008
Following are the specific budget summaries by issue area:
- Contract Procurement
- Economic Development
- Financial Services
- Health Care
- Mandate Relief/Government Reform
- Unemployment Insurance
- Workers' Compensation
Procurement Stewardship Act (PSA) (S.6806/A.9806, Part F)
- Removes the sunset provision in the act and makes the act permanent. The PSA is currently set to expire on June 30, 2008.
Centralized Procurement Contract Fee (S.6806/A9806, Part F)
- Imposes a 0.5 percent “centralized procurement contract fee” to all state centralized contracts for commodities, services or technology and includes language which exempts certain types of contracts from the fee. Requires fee to be electronically remitted to Department of Taxation & Finance quarterly. Fees, less administrative costs incurred by Tax & Finance, are to be deposited in the state’s General Fund.
State Procurement Council (S.6806/A.9806, Part F)
- Membership expanded from 19 to 25 members;
- Adds the Office of Court Administration and the state’s chief information officer as statutory members; increases from 7 to 11 the members from state agencies; and charges the Council with “developing, using and amending policies and recommendations for changes to procurement processes”.
Local Government contracting flexibility (S.6806/A.9806, Part Q)
- Makes permanent local government’s authorization to use electronic bidding tools.
- Increases the competitive bidding thresholds from $10,000 to $20,000 for commodities and from $20,000 to $50,000 for public works projects.
- Allows for services to be awarded on the basis of “best value” rather than lowest bid.
- Allows the purchase of IT products and services through cooperative purchasing under the federal GSA Information Technology Schedule 70.
- Allows localities to purchase materials, equipment and supplies through certain contracts let by other states and local governments.
Omnibus Economic Development Investment Act (S.6809/A.9809, Part V)
- $350 million for the Upstate Regional Blueprint Fund to support projects identified in the Governor’s Regional Blueprint’s Initiative including: projects identified through regional collaborative efforts; business attraction and expansion projects; land acquisition costs related to eligible projects; and other categories. Assistance will be in the form of loans orgrants.
- Downstate Revitalization Fund to assist projects in distressed downstate communities, including business development efforts.
- Upstate Agricultural Economic Development Fund to assist with farm expansion, farm retention and agribusiness projects.
- Arts and Cultural Capital Grants Program, to support preservation and expansion of cultural institutions with costs of $250,000 or more.
- Economic Community Reinvestment Program, to support educational, recreational, tourism and infrastructure projects with costs of $250,000 or more.
- Creates a $150 million fund to be administered by Urban Development Corporation.
- Projects can be sponsored by the state, a municipality, a not-for-profit entity or a business.
- Funding will target major projects with significant regional economic development benefits.
- Projects will be solicited on periodic basis through a competitive RFP process.
- Criteria will include long-term creation or retention of jobs; local and regional partnerships; and promotion of private sector investment.
- Eligible costs include: site acquisition, clearance and environmental remediation; constructions and expansion of facilities; machinery and equipment; planning, architectural and engineering services; and other project related costs.
Electricity Cost Savings Program (S.6809/A.9809, Part Y)
- Extends existing Power for Job and energy cost benefit savings benefits for one year (to June 30, 2009).
- Creates new Energy Cost Savings Program, with total program benefits equivalent to 1000 MW of load; annual financial support of $120 million from NYPA; seven year program duration, with a June 30, 2016 sunset.
- Under ECSP, benefits will be in form of a monthly electric bill credit (on a per kWh basis); the per kWh benefit, and the duration of a benefit contract, will be established on a business-specific basis.
- Criteria for benefits for ECSP will include: energy costs as percentage of total operating costs; impact of a potential benefit on an entity’s operating costs; willingness to commit to job growth/retention and/or capital and/or energy efficiency investments; value of total payroll and benefits; local impact of entity; and for not-for-profits, extent to which it provides “critical services to the local community.”
- Allocations will be made through the Economic Development Power Allocation Board.
- Business-specific allocations will include the total amount of the electric cost discount benefit; the effective term of the benefit contract; provisions for periodic audits of contract and program compliance; provisions for total or partial withdrawal of benefits based on non-compliance with contract commitments.
- Allows the state to require reimbursement from Industrial Development Agencies the cost of state-provided centralized services.
- $5 million per year.
UDC Loan Authority (S.6809/A.9809, Part W)
- Makes permanent the Urban Development Corporation’s general power to make loans, currently set to expire on July 1, 2008. This loan authority has been extended on an annual basis.
School District Funding and Accountability (S.6807/A.9807)
- The budget includes a record $1.46 billion increase in overall funding; with a state General Fund & Lottery commitment to P-12 education of $21 billion.
- Requires school districts which receive significant state aid increases AND which have at least one school identified as having ‘deficient’ performance, to enter into a “Contract for Excellence” guaranteeing that additional aid will be spent on approved programs proven to improve student achievement. School districts that receive an increase of at least 10 percent or $15 million in school aid will be required to file a CFE. Exempts districts from the CFE requirement if all deficient schools make ‘adequate yearly progress’ in the base year or if deficient performance of their schools does not persist for at least two years.
- Requires the Commissioner of Education to develop standards of excellence to be used to assess the performance of school leaders and schools and that such school leadership report cards and school progress report cards be made public.
SUNY/CUNY Procurement Enhancements (S.6807/A.9807, Part D)
- Permits SUNY & CUNY to purchase goods and services without prior approval by any state agency; to sell or exchange any personal property without prior approval by any state agency; and to sell or exchange real report for fair market value with the approval of the Director of the Budget.
- Amends the Public Authorities Law to make SUNY’s affiliated not-for-profit corporations eligible to obtain financing through the Dormitory Authority.
- Allows the SUNY Construction Fund to establish guidelines for procurements consistent with the standards that apply to public authorities.
Endowing Education through Monetization of the Lottery (S.6807/A.9807, Part E)
- Authorizes the Director of the Lottery to enter into a transaction under which the State will receive advance payment in return for receipt of future Lottery revenues. Specific terms and conditions of the monetization will be addressed pursuant to a future chapter. Two funds would be created: a K-12 Trust Fund and a Higher Education Endowment.
SUNY/CUNY Capital Projects (S.6807/A.9807, Part L)
- Establishes a University Capital Projects Review Board to receive, review and approve or reject schedules of capital projects submitted by the SUNY and CUNY Boards of Trustees. (Separately the budget provides for $2.56 billion in dedicated capital projects appropriation authority for SUNY & CUNY campuses; that list of projects can be found in the ELFA appropriations bill, S.6083).
Public Assistance Cost Shifting (S.6807/A.9807, Part Y)
- Shifts the cost-sharing formula for public assistance recipient costs from the state to the counties, requiring counties to pay 2% more (and the state 2 percent less) for each category of public assistance. This cost shifting is budgeted to generate $40.5 million in General Fund savings and induce counties to put a stronger emphasis on guiding public assistance recipients toward self-sufficiency or secure other appropriate government supports.
Increased Use of Wage Reporting for Enforcement Purposes (S.6807/A.9807, Parts M and V)
- The budget proposes language which would expand the sharing of the employer-provided quarterly Wage Reports submitted to the Department of Tax & Finance for numerous purposes. These quarterly reports accompany remittances of state withholding and unemployment insurance taxes. Proposed expanded use of the data to agencies to increase collections for certain defaulted student loans, for reporting by the Office of Temporary & Disability Assistance to determine employment outcome and retention data on former public assistance recipients, and to allow for the eligibility of children for foster care and adoption assistance pursuant to Title IV-E of the federal Social Security Act.
Assessment on nuclear power plant licensees (S.6810/A.8910, Part K)
- Requires nuclear electric generating facility licensees to pay an assessment to enable the State to recover the costs and expenses incurred for the deployment of the State organized militia to provide security for such facilities.
- Generates $11.7 million.
NYSERDA funds transfer authorization (S.6809/A.8908, Part T)
- Authorizes the New York State Comptroller (Comptroller) to accept and deposit to the General Fund an amount of up to $913,000 from the New York State Energy Research and Development Authority (NYSERDA).
- The transferred funds are used to pay debt service on the Western New York Nuclear Service Center.
Authorizes NYSERDA to utilize electric and gas assessments to fund programs (S.6809/A.8909, Part S)
- Specifies that certain expenditures by the Departments of Agriculture and Markets, Economic Development, Parks and Recreation, Consumer Protection Board, Environmental Conservation, and Homeland Security are recoverable from energy utilities under Section 18-a of the Public Service Law.
Increase Title V Permit (S.6809/A.9809, Part EE)
- Would increase operating permit fees from $45 to a maximum of $80 per ton. Annual adjustment of maximum fees based on the Consumer Price Index.
- Establishes a minimum fee of $5,000 for permitted sources.
- Eliminates the current 6,000 ton per-contaminant cap on fees.
Reform of the Brownfields Tax Credits (S.6810/A.9810, Part D)
- Would require DEC to determine whether multiple sites are associated with a singular reuse or redevelopment project. If multiple sites are for the same purpose, the project will be treated as a single project for purposes of calculating tax credits.
- Would authorize DEC to reject a Brownfield cleanup application if the reuse or redevelopment would have occurred without the credit.
- Would cap the tangible property tax credit at $10 million.
Reform of the Brownfields Cleanup Program (S.6810/A.9810, Part E)
- Would exclude cleanup projects that would likely be developed in the absence of tax credits.
- Would cap the amount of the tangible property tax credit at $15 million.
- Provide enhanced credits to developers who agree to remediate to higher standards.
- Allows applicants that do not want tax credits to participate in program under DEC oversight and receive liability protection.
- Amends the definition of “Brownfield” to include property where a contaminant is known or is expected to be present at levels exceeding health or environmental standards.
Expand the “Bottle Bill” (S.6809/A.9808, Part GG)
- Would cover additional beverage containers (excluding liquor, wine, milk, infant formula, soups, medications, and nutritional supplements).
- Would require bottlers or distributors to pay unclaimed deposits on a quarterly basis to the Department of Taxation and Finance for deposit in the Environmental Protection Fund (EPF).
Repeal of the private label credit card law (S.6810/A.9810, Part F)
- Repeals Tax Law § 1132(e-1), which allows private label credit card lenders, as well as vendors who use private label credit card lenders to finance their credit card sales, to claim a sales tax credit or refund on accounts assigned to the lender that are written or charged off as uncollectible.
- $7 million in 2008-09 and $9 million in 2009-10.
Elimination of certain Real Estate Investment Trust (REIT) and Regulated Investment Company (RIC) provisions - (S.6810/A.9810, Part U)
- Requires all captive REITs and captive RICs to file a combined return with the closest corporation that directly or indirectly owns or controls them.
Classifying credit card companies doing a specified level of business in New York - (S.6810/A.9810, Part Y)
- Ensure that banking corporations involved in the credit card business are subject to taxation in New York when their operations in New York meet certain customer and/or revenue thresholds.
- Proposed thresholds include: issuing credit cards to 1,000 or more customers with mailing addresses in New York State; 1,000 or more merchant customers located in New York State to whom the banking corporation remitted payments for credit card transactions; has receipts of $1,000,000 or more from customers that have mailing addresses within New York; receipts of $1,000,000 or more from merchant customers located in New York arising from credit card transactions; or has either 1,000 or more customers who are card holders or merchants in New York, or receipts of $1 million or more from customers who are cardholders or merchants in New York arising from credit card transactions.
- $95 million in SFY 2008-09 and $75 million in SFY 2009-10.
HCRA Extension & Amendments (S.6808/A.9808, Part B)
- Increases the Covered Lives Assessment by $140 million, to $990 million. One of two Health Care Reform Act (HCRA) taxes, the Covered Lives Assessment is a regional tax collected from health plans on the basis of individual and family policies issued and used in part to fund Graduate Medical Education (GME). $100 million of the proposed increase would fund HCRA initiatives, and $40 million would go to the General Fund.
- Extends HCRA for three years, which governs the financing of many state healthcare initiatives, programs and services. Scheduled to sunset on March 31, 2008, HCRA would be extended to March 31, 2011.
For-Profit HMO Premium Tax (S.6810/A.9810, Part K)
- For-profit HMOs would be reclassified as insurance companies for tax purposes, generating $247 million in 2008-09 and $288 million when fully effective through the collection of a 1.75% tax on premiums. Currently, the premium tax is assessed on for-profit health insurers; for-profit HMOs pay business corporation taxes.
Child Health Plus Expansion (S.6808/A.9808, Part B)
- The state would fully fund a proposed expansion of the Child Health Plus program by increasing income eligibility levels from 250 percent to 400 percent of the Federal Poverty Level at a cost of $37 million in 2008-09; 70,000 children are estimated to get coverage from this expansion.
Pharmacy (S.6808/A.9808, Part C)
- Prescription drug coverage for Family Health Plus enrollees would be provided through Medicaid fee-for-service rather than through health plans (Medicaid Managed Care), impacting the collection of rebates form pharmaceutical manufacturers.
- Pharmacy reimbursement under Medicaid would be reduced from Average Wholesale Price (AWP) less 14 percent to AWP less 17% for brand name drugs.
- The Commissioner of Health would be authorized to explore bulk purchasing agreements with other states.
Hospitals (S.6808/A.9808, Part C)
- Medicaid reimbursement rates for inpatient services would be updated, or “rebased,” over a four-year period, transitioning from a base of 1981 costs that is currently used to establish inpatient reimbursement rates, to 2005 costs; cost savings from this and other proposed actions would, in part, be invested in outpatient services, community-based primary care and physician-supply initiatives among others initiatives
- Reduces by 25 percent the inflationary trend factor, or annual adjustment, paid by the state to hospitals for Medicaid inpatient services. The trend factor for nursing homes and home health care providers would also be reduced by 25 percent.
- Extends the EPIC drug discounts to eligible uninsured individuals regardless of age.
Health Insurance Mandates (S.6805/A.9805)
- Provides $100 million from the General Fund to the State Insurance Department to finance provisions of “Timothy’s Law”, including full reimbursement to employers with 50 or fewer employees for costs associated with providing this mandated mental health benefit.
Insurance Department Assessment
- Increases the Insurance Department’s budget by $18.2 million to $317.4 million, funding that comes from assessments on all domestic insurers - including HMOs and not-for-profit and commercial health insurers – and from examination fees.
Local Efficiency Grants (S.6806/A.9806, Part O)
- Creates a $25 million Local Government Efficiency Grant program which restructures financial incentives for municipalities to consolidate and share services. Includes an evaluation component, improved technical assistance, new state agency services for local governments and a new “21st Century Demonstration Projects” component promoting transformative regional pilot projects.
Wicks Law (S.6806/A.9806, Part Q)
- Amends the existing multiple bidding requirements for state, municipalities, school districts and public authorities by increasing the current $50,000 threshold to $3 million for projects in New York City, $1.5 million for projects on Long Island and Westchester County; and $500,000 in the remainder of the State. Requires that the single bid submitted for public work include separate sealed list that names each subcontractor to be used to perform the work on the contract and the agreed upon amount to be paid to each.
- Adds a new section to the Labor Law defining PLAs and permits various public entities to require a contractor to enter into a PLA during and for the work involved with the project. Stipulates that when a project is undertaken pursuant to this section it shall not be subject to the requirements of the “Wicks Law”
- Provide the Commissioner of Labor with the power to enforce any provision of law requiring the preparation of separate specifications for public work contracts including the authority to issue stop-bid orders upon public entities.
MTA Surcharges (S.6810/A.9812, Part R)
- Four year extension of “temporary” MTA surcharges for Article 9, 9-A, 32 and 33 taxpayers, which were first adopted in 1982.
- Will maintain annual revenues of about $892 million.
HMOs (S.6810/A.9812, Part K)
- Subjects for profit HMOs to Article 32 premium tax, as if they were insurance corporations, rather than the Article 9-A corporate franchise tax.
- $247 in Fiscal 2009; $288 million in Fiscal 2010.
HCRA (S.6808/A.9808, Part B)
- Increases covered life assessment on health plans to support HCRA.
- $140 million/year.
Article 9-A Capital Base Rate and Calculation (S.6810/A.9812, Part J)
- Reduces the corporate franchise tax rate on the capital base from 0.178 percent to 0.15 percent.Eliminates the $1 million cap on tax liability for non-manufacturing taxpayers paying based on the capital base.
- Conforms the definition of “manufacturing” under the capital base to that used under the entire net income base, to specifically exclude electricity generation from the definition of manufacturing.
- $98 million in Fiscal 2009, $70 million in future years.
Not-for-profit Sales Tax Collections (S.6810/A.9812, Part K)
- Subjects certain sales of goods and services made by not-for-profit entities to the state sales tax.
- Applies to sales of certain services; “remote” sales through telephone, internet or mail order; and auction sales of tangible property.
- $7.5 million in FY 2009; $15 million in FY 2010.
Credit card company nexus (S.6810/A.9812, Part Y)
- Banking company will be considered doing business in New York if it: has issued credit cards to 1,000 or more customers with instate mailing addresses; has 1,000 or more in-state merchants to whom it remitted payments for credit card transactions; has receipts of $1 million or more from in-state credit card customers; or has receipts of $1 million or more from in-state merchants related to credit card transaction.
- $95 million in Fiscal 2009; $75 million in Fiscal 2010.
Voluntary Disclosure Program (S.6810/A.9812, Part Z)
- Creates a statutory program within the Department of Taxation and Finance for taxpayers and non-filers to report deficiencies and file return; allows for waiver of penalties and criminal enforcement in certain cases; adopts new penalties for tax preparers who knowingly participate in preparation of false or fraudulent returns.
- $50 million in Fiscal 2009.
Prepayment requirements for MTA surcharges (S.6810/A.9812, Part V)
- Requires taxpayers subject to the metropolitan commuter transportation district surcharges under Articles 9, 9-A, 32 and 33 to remit 30 percent, instead of 25 percent, of their preceding year’s tax liability as their mandatory first installment payment.
- $90 million in FY 2009 only.
Sales tax nexus for vendors (S.6810/A.9812, Part X)
- Creates a presumption that vendors are subject to state and local sales tax if they enter into agreements with New York residents where the residents are compensated for referring customers to the seller and gross receipts from such sales are more than $10,000.
- $43 million in Fiscal 2009; $73 million in Fiscal 2010.
LLCs, partnerships and Joint Ventures (S.6810/A.9812, Part S)
- Repeals the organization tax and license fee; amends the maintenance fee on foreign corporations; amends LLC filing fees; imposes filing fees on partnerships, certain LLCs and joint ventures; and amends the fixed dollar minimum tax.
- $75 million.
Financial Services ITC
- Allows for the expiration of the Investment Tax Credit (ITC) for financial service industry under Article 9-A and Article 32.
- $35 in Fiscal 2009; $75 million in Fiscal 2010.
Federal Decoupling (S.6810/A.9812, Part I)
- Disallows the deduction created in the federal American Jobs Creation Act of 2004 for income from qualified production activities, including certain manufacturing, food processing, software, energy production, construction and other activities.
- $56 million in Fiscal 2009.
Motor fuel tax restructure (S.6810/A.9812, Part H)
- Consolidates and modifies the petroleum business, state/local sales and NYS fuel taxes to create a single excise tax on motor fuel, diesel fuel and residential heating oil.
- $13 in Fiscal 2009; $55 million in Fiscal 2010.
Private Label Credit Cards (S.6810/A.9812, Part F)
- Repeals 2006 legislation which allows private label credit card lenders and vendors using such lenders to finance their sales to claim sales tax credit or refund on accounts that are written off or charged off as uncollectible.
- $9 million per year.
REITS (S.6810/A.9812, Part U)
- Makes numerous “technical” and other amendments addressing “loopholes” for real estate investment trusts and regulated investment companies.
- Amendments include: modifying criteria for combined reporting; clarifying application of Article 32 to REITs.
- No increase in state revenues is attributed to these amendments. They are intended to “preserve tax receipts currently included in the state financial plan.”
Eliminating Tax Avoidance Provisions (S.6810/A.9812, Part U)
- Eliminates the sales and use tax exemption of aircraft purchased by business for the primary purpose of transporting personnel of the purchaser and/or its affiliates.
- Eliminate the new resident exemption for sales and use taxes for an aircraft, vessel or motor vehicle purchased out-of-state by a business entity for in-state use in certain instances.
- $4 million in Fiscal 2009; $6.3 million in Fiscal 2010.
Audits & Compliance
- Improve Department of Taxation and Finance audit and compliance efforts through administrative actions.
- $230 million per year.
Mortgage Recording Fees (S.6808/A.9806, Part P)
- Authorizes New York City and counties to increase mortgage recording fees.
- Nearly $100 million in new revenues, including $27 million for New York City and $70 million for counties.
RPT Fees (S.6808/A.9806, Part T)
- Restructures and increases real property transfer fees for residential and commercial property sales.
- Revenues to be used to fund new financial incentives and investments in technology for local real property tax administration.
- $30 million in annual revenues.
Utility GRT (S.6808/A.9806, Part P)
- Authorizes cities and villages to impose utilities gross receipts tax on mobile phone services.
- $3.5 million per year.
Western Hemisphere Travel Initiative (S.6809/A.9809, Part G)
- The Department of Motor Vehicles will provide optional enhanced driver’s licenses and non-driver photo identification cards for land and sea travel border crossings.
- Creates an additional charge of $20 for the issuance of a WHTI-enhanced non-driver identification card and driver license that may be issued to New York State residents who are United States citizens.
- 30 percent of the $20 WHTI endorsement fee shall be retained by counties to offset the costs of issuing the enhanced documents.
Bridge Preservation Program (S.6809/A.9809, Part J)
- The program is established to provide assistance for restoring and preserving bridges that are in generally good to fair condition.
- The municipality shall be required to pay twenty percent of the cost of the local bridge preservation project.
Traffic Congestion Mitigation Fund (S.6809/A.9809, Part L)
- Creates a new Metropolitan Transportation Authority (MTA) fund within the Public Authorities Law (PAL) to receive revenues generated by New York City's congestion mitigation plan that are received by the MTA.
Clarify the Commissioner of Taxation and Finance’s powers under Article 21 of the Highway Use Tax (S.6810/A.9810, Part O)
- Provides for the use of license plate recognition software and related visual detection equipment as a method to check, verify and ascertain the number of miles traveled by, and the weight of, each vehicular unit on the public highways in this state.
- Would expressly include the Department of Motor Vehicles, the Department of Environmental Conservation, the Port Authority of New York and New Jersey, the Thruway Authority, the New York State Bridge Authority as entities from whom the Commissioner may request cooperation to enforce the Highway Use Tax.
- $7.5 million in 2008-09 and $15 million thereafter.
- Authorizes the continued use of funds from the employer-funded UI reemployment services surcharge, enacted in the 1998 UI reform to reduce UI claimant benefit duration, for purpose of “unemployment insurance systems modernization”. The statute requires the first $35 million of the reemployment services surcharge to be spent on reemployment services for benefit duration reduction; funds collected in excess of that along with other ‘excess’ revenues collected through various employer penalties and fees for the past several years have been used to upgrade UI technology systems. This budget proposes to continue that authorizing a total of $17 million, a decrease of $5 million from the prior budget.
Hospital Reimbursement Rates (S.6808/A.9808, Part C, Section 17)
- For hospitalized patients under Workers’ Compensation who are discharged on and after July 1, 2008, reimbursement rates will be based on state reimbursement rates in place as of December 31, 2008, adjusted for inflation.