What's New

Zack Hutchins
Director of Communications

January 11, 2000

Governor Pataki: Let's cut taxes and limit new spending; GRT savings would start immediately for manufacturers; spending rises 4.3%

Governor Pataki announced Tuesday a proposed new state budget that would cut energy taxes on manufacturers retroactive to January 1, provide other new tax cuts, restrain the growth of state debt, and limit new spending.

"We're on the right path - the path of limited government, controlled spending, lower taxes, and more jobs," the Governor said in his budget address to the Legislature. "The budget I submit today moves us further along that path."

The proposed Executive Budget, along with amendments expected within the next 30 days, would eliminate the percent gross receipts tax on energy utility bills over five years, for eventual savings of $375 million annually. Utility companies would instead pay tax based on their profits, as other business corporations do now.

Governor Pataki announced Monday, in an address to the Manufacturers Association of Central New York, that repeal of the 3.25 percent GRT would begin this year, retroactive to January 1, for utility bills paid by manufacturers. Savings for manufacturers in the coming year would total an estimated $38 million.

Beyond the tax cuts already announced, the Governor's budget includes $25 million in unspecified reductions to be agreed upon with the Legislature; and a new Transportation Infrastructure Tax Credit for companies that invest $10 million or more toward a transportation-related project that would result in creation of more than 1,000 new jobs.

Other new tax proposals include exempting from sales tax any equipment used to develop host facilities for large Internet servers, for estimated tax savings of $9 million; and elimination of the minimum petroleum business tax, to reduce paperwork burdens on fuel and aviation companies.

Message emphasizes spending restraint and debt reform

The Governor emphasized the importance of limiting new spending and debt in the coming year. His budget proposal includes steps to pay down some of the state's existing debt; to reduce the level of new borrowing from previously estimated levels; and to enact legal limits on future debt while restricting it to capital purposes.

Total spending would increase 4.3 percent under the Governor's budget, not counting the money the state will spend on the STAR school-tax refund program.

State-funded spending (total expenditures minus federal funds) would rise by 3.5 percent, again excluding the STAR program. Including the school-tax refunds, the overall budget would rise by 5.5 percent, and state-funds spending by 5.1 percent.

As part of a "Schools 2000" agenda, Governor Pataki proposed $6 million for a Charter School Stimulus Fund to help pay for capital and other start-up costs of charter schools; $141 million in additional operating aid to help districts meet the Regents' higher standards; and $35 million in new support for pre-kindergarten programs. Total aid to public schools would rise a total of $355 million, to $12.9 billion. Budget documents point out that increase comes on top of $2.2 billion in new funding - a 22 percent increase - in the previous three years.

Programmatic reforms proposed by the Governor include allowing children in failing public schools to attend other schools in the same district; enacting further reforms to special education, so that fewer children would be steered into such programs; and redirection of funding to emphasize reading initiatives that require demonstrated results.

Other education-related proposals are aimed at improving the effectiveness of New York State's teachers, including a program of vouchers for teachers who need further education.

The Governor also proposed major changes in the state's education system, including giving the Governor authority over the appointment of members to the state Board of Regents and the Education Commissioner.

The budget proposes a new, $10 million Biotechnology Industry Growth Fund that would provide start-up capital for companies seeking to bring laboratory innovations to the marketplace. Another $1.7 million would be available as employment incentives for high-tech companies to offer prospective employees who graduate from New York educational institutions.

Message highlights tax cuts already enacted

Governor Pataki's budget also goes forward with tax cuts enacted in previous years and scheduled to take effect in coming months. Those include:

Elimination of New York's additional estate tax on February 1, for estimated taxpayer savings of $300 million in the 2000-01 fiscal year.

Reduction of the corporation franchise tax - the main New York business tax paid by some 250,000 corporations - from 8.5 to 8 percent, for tax years starting after June 30, 2000.

The alternative minimum tax for companies with large credits (primarily manufacturers and securities firms) will fall from 3 to 2.5 percent on the same schedule. Taxpayer savings from these and related reductions in the coming year: $262 million.

Reduction in bank and insurance tax rates from 9 to 8.5 percent for taxable years starting after June 30, 2000, for estimated savings next year of $2 million.

Wicks Law reform for schools proposed

The Executive Budget includes a proposal to exempt all school districts from the Wicks Law, which drives up the cost of public construction.

The Budget Division said the proposal would cut annual school construction costs more than 10 percent. Local governments would benefit from an increase in the project level at which the Wicks mandate applies - from the current $50,000 to $2 million for most municipalities.

Surplus cash available next year from the 1999-2000 budget is now estimated at $625 million, an increase of $600 million over the surplus estimate issued in early November. The newly available surplus consists of $374 million in net higher projected receipts, and $251 million in lower estimated spending.

The entire $625 million would be set aside to pay for proposed new tax cuts in 2001-02 and 2002-03, and to increase the Debt Reduction Reserve Fund.

Projected outyear budget gaps are reduced sharply, under the proposal.

The Budget Division estimates that, if the Governor's budget is enacted as proposed, the projected gap for 2001-02 would fall to $1.2 billion, and for 2002-03 to $2.6 billion. Previous estimates for both years were above $4 billion.

"The Governor is right: Restraining spending, and reserving the surplus, are absolutely essential to cutting taxes, reducing the debt and securing opportunity for the next generation of New Yorkers," said Business Council President Daniel B. Walsh.

Walsh said The Council also welcomes "the Governor's emphasis on educational excellence, and on the state's high-technology opportunities."

Governor Pataki proposed that revenue from the national tobacco settlement be entirely devoted to health-care spending in 2000-01 ($418 million, including some funds from 1999 payments); 2001-02 ($396 million); and 2002-03 ($474 million).

The budget projects that private-sector employment in the state will grow by 1.8 percent in 2000. That would represent a decline from the estimated 2.6 percent growth in the past year.

The economic forecast underlying the budget's revenue estimates projects that New York ended 1999 with private-sector job growth ahead of the national pace, after more than a decade of lagging behind the nation. The state's growth rate is expected to surpass the nation's pace again, though by a lesser amount, in 2000, according to the forecast.

For the full text of the Governor's proposed budget click here.