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Zack Hutchins
Director of Communications
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January 20, 2004

Governor Pataki proposes 2004-05 budget
Plan would help manufacturers, raise some taxes, while restraining Medicaid, other spending

Governor Pataki introduced a proposed 2004-05 budget that would phase in a corporate tax reduction for manufacturers whose operations are concentrated in New York, while raising the minimum tax for some corporations and eliminating some Medicaid services to reduce costs.

Legislation accompanying the Executive Budget would base New York's corporate tax for manufacturers entirely on the proportion of a company's sales in the state. Replacing current law which bases the tax partly on employment and capital investment in New York, the change would encourage manufacturing employment in the state. The change, strongly supported by The Business Council, would be phased in over five years.

An increase in the state's minimum tax on corporations would take effect immediately, generating $40 million in the coming fiscal year. Businesses that generate no profit would pay on a sliding scale, up to $10,000 for a firm with payroll of $25 million or more.

Other tax increases include $183 million in higher assessments on hospitals, which could be reflected in employers' health-insurance costs.

The budget would create or increase numerous fees, including charges on banks, retail food stores, establishments with air-emission permits, and transporters with divisible-load permits.

The $99.8 billion Executive Budget would increase spending from taxes and other non-federal revenue by 2.2 percent. Adjusted for accounting changes over the past year, the spending increase is 5.5 percent. The Governor's Budget Division estimates inflation for calendar 2004 at 1.8 percent.

The Governor proposed restrictions on state-funded purchases of prescription drugs, including a "preferred" list of approved pharmaceuticals. Other cost-cutting changes to Medicaid would eliminate dental and some other treatments for adults. The state and local governments would each save hundreds of millions of dollars under the proposals.

The state government would take over localities' share of nursing-home and other long-term care costs under Medicaid. The Executive Budget would make that change contingent on measures to reduce costs, including an increase in the tax on nursing homes and steps to encourage family financial support for long-term care.

Governor Pataki proposed several steps to restrain school property-tax increases. Districts would be required to report three-year comparisons of spending and inflation. The Governor renewed his call for a statutory cap on school spending increases.

The budget would provide $10 million to extend Power for Jobs contracts through March 31, 2005, for businesses whose benefits would expire in the coming fiscal year.

The Governor proposed several measures to relieve costly mandates on localities, including repealing the Wicks Law and reforming binding-arbitration requirements on municipalities.

His press release and Executive Budget documents are available at www.budget.ny.gov.