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March 16, 2005

Governor reportedly secures new conditional federal Medicaid aid
Legislators negotiate details of their agreement to increase spending

As state legislators negotiated the details of their agreement to increase state spending by $1.55 billion more than the Governor proposed in his Executive Budget, Governor Pataki has apparently secured a promise of new federal funding for Medicaid—if legislators agree to his cost-containment proposals.

Governor Pataki had told legislative leaders Tuesday that he planned to seek the additional money on the condition that it be used to support his reforms in Albany. The Associated Press reported that the new federal dollars would make possible the shift of some Medicaid patients from hospital care to more cost-effective alternatives, making it more plausible for New York to close hospitals and programs. That, in turn, could save local, state, and federal governments considerable taxpayer dollars.

The money would also be used to invest in computerized information systems to handle prescriptions, medical records and regional health data, the Associated Press said.

The development Wednesday came a day after legislative leaders reportedly reached “conceptual agreement” on a state budget, prompting some lawmakers to profess optimism about the possibility of the state’s first on-time budget in more than two decades. The state Constitution requires lawmakers to agree on a budget each year by April 1.

However, Governor Pataki Tuesday sharply criticized lawmakers’ plans to increase state spending by $1.55 billion beyond what he proposed in his Executive Budget, which was $105.5 billion. The Gannett News Service quoted the Governor saying the additional spending “is not something I can accept.”

Earlier this week, the state Senate approved a budget proposal that it said includes a $2.3 billion tax-cut plan. It was not immediately clear if the Senate proposal would be a one-house bill, or if the state Assembly shared the Senate's support for tax reductions.

The Senate tax-cut plan includes two Business Council priorities: expansion and extension of the state’s powerful Empire Zone economic-development program and enactment of the single-sales factor reform. The single-sales factor reform would base corporate taxes on just one factor, in-state sales. Currently, those taxes are based on three factors, in-state sales, payroll, and property. Because state taxes now increase as in-state jobs and sites increase, companies are effectively encouraged to put jobs and plants elsewhere.

A 2001 study by The Public Policy Institute, The Business Council’s research affiliate, concluded that fully enacted single-sales factor reform would ultimately lead to 133,000 new jobs and a net increase in state revenues.

The Senate press release said the plan includes almost $1 billion in business-tax cuts and almost $1 billion “direct school property tax relief.” The Senate release said the plan includes: tax credits for biotechnology; a small business health insurance tax credit; a direct school property tax relief rebate program; expansion of the Empire Zone program; and adopting a single sales factor to boost manufacturing jobs and investment in emerging technologies.

The Senate said its tax-cut plan would save $273.6 million in 2005-06, increasing to $2.3 billion in four years.

Details of the Senate's tax-cut proposal are in its news release, which is available at www.senate.state.ny.us/pressreleases.nsf.