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August 12, 2004

Legislature approves first $100 billion budget; Governor Pataki says he will veto some spending

State Senate and Assembly members approved a 2004-05 budget that would add as much as $1 billion or more in spending, and hundreds of millions in new borrowing, to Governor Pataki's proposed fiscal plan. The Governor said the Legislature's budget is too costly and will require him to veto some of the additional spending.

The Legislature's budget totals $101.3 billion, according to a Senate summary. That would represent an overall increase of 4 percent, twice the rate of inflation for the coming year as projected by the state Budget Division.

Governor Pataki said he may have to veto some of the Legislature's spending increases, warning of the potential for "massive" budget gaps in future years. The Budget Division estimated in January that the fiscal year starting April 1, 2005, would bring a gap of $2.9 billion. The Legislature's additional spending, and rejection of cost-saving proposals made by the Governor, will make next year's gap significantly higher than previously estimated. The Senate said the total is $850 million more than the Governor's budget; The New York Times quoted Assembly Ways and Means Committee Chairman Herman Farrell Jr. as putting the figure at $1.4 billion.

The Senate and Assembly approved more than half a billion dollars in new borrowing, including $250 million for health-care facilities that had been requested by the powerful hospital workers union.

The Legislature rejected Governor Pataki's proposal to make the state's corporate tax code more friendly to manufacturers that have a high proportion of their overall jobs in New York. As a result, manufacturing corporations will continue to pay tax on every job they keep or create in New York State.

In a victory for The Council, the Legislature eliminated the "cleanup tax" it imposed in 2003 as part of that year's legislation to encourage redevelopment of brownfield sites. The 2003 law imposed new fees on hazardous wastes that companies remove from polluted sites, regardless of whether the company bears any responsibility for the contamination. The repeal is retroactive to October 2003.

The Legislature extended the Empire Zone program of incentives for economic development for one year. It did not enact reforms The Business Council had suggested to strengthen the program, nor changes that The Council had argued would weaken the Empire Zone incentives.

Benefits under the Power for Jobs program, which provides lower-cost electrical power to businesses, were extended for all current participants through December 31, 2005.

The Legislature approved a $350 million capital matching grant program, supported by The Business Council, for public and private colleges and universities. The program dedicates $175 million to independent institutions, $105 million to State University campuses and $70 million to the City University. Private institutions must raise $3 for every $1 in public funding, to be used for economic development, high technology, critical academic facilities and urban renewal/historic preservation.

Legislators rejected most of the Governor's proposals for cost-saving reforms in New York's Medicaid program, which drives up both state taxes and local property taxes. They approved a state takeover of local governments' share of the smaller Family Health Plus program, fully effective in 2006.

Senate and Assembly members also rejected Governor Pataki's proposal to reform the Wicks Law, which would have reduced public construction costs for both the state and local governments by tens of millions of dollars annually.