Prepared by the staff of The Business Council - January 23, 1998
Overview | Taxation | Economic Development | Environment | Regulatory Reform | Education | Health | Transportation/Construction | Labor | Energy & Telecommunications | Banking | Insurance | Workers' Compensation | Technology
Key points of Governor Pataki's 1998-99 Executive Budget
Taxes: Continues tax cuts enacted last year, including $380 million that take effect in the coming fiscal year (primarily, starting reductions in the Gross Receipts Tax and the assessments on hospitals/nursing homes). Devotes $100 million to accelerate some of those tax cuts (to be determined in budget negotiations) in coming year. Proposes conformity with federal estate tax exemption for small businesses of $1.3 million. Proposes new requirement that any tax increase over $50 million have two-thirds approval by the Legislature.
Accelerates STAR program.
Spending: Increases overall spending by 7.6% (excluding STAR funding, which pays for a local tax cut, the overall increase is 6.5%). State-funded spending (paid for by state taxes, fees and other charges) would rise 8.5% (excluding STAR, 6.9%). The General Fund, the state's main budget fund, would rise by 2.9% (the figure that some newspaper reports cite). Budget estimates inflation in the coming year at 2.2%.
Economic outlook: Predicts job growth of 100,000, or 1.3%, in 1998.
Surplus: Current fiscal year estimated to end with surplus of $1.8 billion, to be devoted largely to reserve funds and debt payments.
Budget reform: Proposes increase in legal limit on reserve funds; requirement that enacted budgets be balanced; and enactment of Executive Budget if Legislature does not act on time.
Economic development: Increases JOBS NOW fund for major new businesses to $45 million.
Education: Renews Governor's call for authorization of charter schools, legally and fiscally autonomous public schools that would be free from many mandates. Proposes total state spending for school aid of $11.45 billion, an increase of $518 million or 4.7%. Includes major new funding for buildings, including $50 million for school maintenance; thepre-K program created last year; a new summer reading program for fourth-graders; creation of a new 3-7 p.m. after-school program.
Mandates/local governments: Increases general aid by $25 million or 3%; raises exemption from Wicks Law to $500,000; reforms rules for asbestos removal; eases sharing of services.
Environment: Recommends increased fees on industrial air emissions.
Social services: Proposes faster decisions on child support through administrative rulings. Projects continuing decline in welfare caseload.
Miscellaneous: Reduces auto registration fees for passenger vehicles (not including commercial vehicles) by 25 percent for savings to motorists of $50 million. Proposes one new, 750-bed prison.
All figures are reductions in revenue for the 1999 State Fiscal Year ending March 31, 1999:
Estate and Gift Tax -- $3 Million
- Conformance of State law to Federal treatment of family-owned businesses.
- Elimination of the $10 fee for obtaining releases of lien.
Motor Vehicle Fees -- $49 Million
- Reduction of passenger vehicle registration fees by 25% effective July 1, 1998.
Pari-Mutuel Taxes -- $1 Million
- Extension of expanded simulcasting authority and of current (lower) NYRA tax rates for another year, to July 1999.
Personal Income Tax -- $360 Million
- Acceleration of the higher base acreage limitation scheduled for 1999 and thereafter under the agricultural school property tax credit to the 1998 tax year. Acceleration of the enhanced senior citizen School property TAx (STAR) exemption and a portion of the New York City School Tax Reduction currently scheduled for full implementation in 2001-2002 into the 1998-1999 school.
- Exclusion from Adjusted Gross Income of payments from new European World War II reparation institutions.
Sales and Use Tax -- $25.3 Million
- Inclusion of footwear in the already-enacted up-to-$100, clothing tax-free week scheduled for September 1-7, 1998.
- Creation of an up-to-$500, clothing (including footwear) tax-free week for January 16-22, 1999 with a local option to match.
The 1998-99 budget provides nearly $210 million for programs that will help businesses continue to create and retain jobs. Highlights include:
- A $20 million increase (from $25 million to $45 million) for JOBS NOW Program. Since its inception in 1996-97, JOBS NOW has provided nearly $47 million to businesses for large-scale job creating initiatives (at least 300 new jobs). These projects will create more than 9,600 new jobs and retain more than 21,600 existing jobs. $45 million for the Empire State Economic Development Fund. $20 million for the Infrastructure Investment Program to address the road, bridge and rail needs of economic development projects (a $15 million increase over 1997-98 funding levels).
- $11 million for the I Love NY tourism marketing program, and $4.3 million to support local tourism promotion agencies throughout the State.
- The state operations budget for the Department of Environmental Conservation is proposed at $353 million -- an increase of $4.8 million from last year's budget as adopted by the legislature, and an increase of $18 million over last year's proposed budget. The DEC's operational budget will be primarily financed through state-imposed regulatory fees ($201 million or 57 percent.) The state general fund will provide $91 million (26 percent), with federal grants making up the final share. General administrative operations (+$2.4 million) and environmental enforcement (+1.7 million) will get the biggest funding boosts. Combined, air & water programs will receive a $1.1 million increase, as will the DEC's fish & wildlife division. The solid and hazardous waste program's budget will drop by $1.1 million. The budget proposes to increase the cap on Title V air permit fees to $45 per ton, plus any increase in the consumer price index after 1998. The current cap is $25 plus CPI increases since 1994. In 1997, Title V fees were $27.94 per ton. The actual fee for 1998 will be calculated later this year, based on the final appropriation and the number of "taxable tons" of air emissions in the state inventory. Under federal law, the Title V permitting program must be financed exclusively through permit fees. The proposed appropriation for this program is $16.3 million. Overall, the budget would appropriate $32.6 million for the state's clean air act related programs. This includes the $16.3 million for the Title V program, and the cost of vehicle emission inspection programs. The vehicle I&M programs are financed through vehicle inspection fees. The budget authorizes $7.4 million to develop and operate a pesticide sales and use database. This program received $2.1 million in last year's budget. This program is supported through the general fund. This database stems from the 1996 state law mandating the submission to the state of reports on the the sale and use of pesticides for commercial and agricultural purposes. This database is supposed to serve as the basis for research into possible connections between pesticide use and human health risks. The budget provides $3.3 million for a new local aid program to help offset local government property tax revenue losses resulting from State timberland tax exemptions provided to owners of forest lands. The budget includes an additional $263 million in appropriations from the 1996 Clean Water/Clean Air Bond Act. These funds are for "brownfield" restoration projects, drinking water supply projects, water quality projects and local local landfill closure and material recycling recycling efforts. Including funds from the proposed budget, a total of $759 million will have been made available so far from the $1.75 billion bond act. The budget includes $125 million in new spending from the Environmental Protection Fund. The EPF receives most of its income from the state's real estate transfer tax. It is intended to support state park improvement projects, land purchases and open space protection, waterfront revitalization, implementation of the Hudson River Estuary Management Plan, municipal recycling, and other environmental projects. The budget includes $2.1 million to implement the New York City Watershed Agreement. These funds will support the costs of state enforcement and monitoring efforts in the watershed area and technical assistance to participating watershed communities.
- The budget includes $100 million in new and accumulated funds for the state revolving loan fund for the building and rehabilitation of municipal sewage treatment facilities. These matching funds will leverage $500 million in additional Federal funds.
- The Executive Budget proposes $2.7 million in funding for the Governor's Office of Regulatory Reform, an increase of $500,000. GORR oversees agency's rule development process to assure compliance with administrative procedures and the Governor's executive orders on regulatory reform. The office also provides permitting assistance to the regulated community. Even though the statutory authority for GORR's predecessor organization -- the old Office of Business Permits and Regulatory Assistance -- has expired, the program has been continued through the budget process.
- The 1998-99 Executive Budget would provide an increase of $518.3 million (4.74%) in school aid for the 1998-99 school year. Included within the increase is a $454.3 million increase in computerized aids that reflects continuation of present law funding for major aid categories and an additional $19.3 million in support of certain multi-year initiatives. In addition, a $140.5 million increase in categorical aid programs supports a number of other initiatives described below. Coupled with the $724 million school tax relief program, (which is a funding shift from local to state) this is the largest school aid increase ever proposed by a Governor. Under this proposal, school aid, as a percentage of the General Fund, is 30.5 percent for 1998-99, and would grow to more than 35 percent by 2001-02.
- The Governor's budget includes $900 million in State support for school facilities -- including $50 million in support for minor maintenance projects. This would increase the State's share of local construction costs by 10 percent, resulting in the State paying, on average, 75 percent of approved school construction costs.
The Governor proposes that this increase in State building aid be accompanied by reforms to promote increased cost effectiveness and accountability in school construction. Such reforms include:
- providing school districts throughout the State with an exemption from the Wicks Law
- replacing cumbersome capital planning requirements for school facilities with a streamlined building condition survey process.
New Program Initiatives
- Charter Schools:
The creation of charter schools continues to be a key part of the Governor's multi-year plan for educational excellence. Charter schools are widely recognized across the nation as a way to expand parental choice and involvement within the public school system. These schools are legally and fiscally autonomous educational entities operating within the public school system. The schools are governed under a charter, or contract, between the organizers of the schools and a state or local sponsor. The charter contains specific agreements on all aspects of the school's operations;
- School Violence:
To curb school violence, legislation will again be introduced to allow teachers and principals to remove disruptive students from the classroom. It will also require that school districts, in conjunction with community leaders, develop a "code of conduct" which defines standards of acceptable behavior, penalties for violations and methods of enforcement. This legislation will also require the inclusion of school violence data in the recently established school report cards;
- Summer School for 4th Graders:
This initiative would provide intensive remediation to ensure that young learners have a solid foundation in the reading and writing skills required for academic success. Beginning with the summer of 1999, the State would provide 80 percent funding for school districts that choose to provide six week summer remediation programs for fourth graders who demonstrate substandard performance on the Regents English language skills test. In the 1999-00 school year, $45 million in State funding will be provided for this initiative;
- English Immersion:
State funding is proposed for summer programs for children in grades K-2 who have limited English skills. By improving their English writing and reading skills, these children will stand a much better chance for educational success in later grades. The 1999-00 school year cost for this program is $20 million;
- Advantage Schools:
This new after-school program would bring together schools, parents, and community organizations to provide a secure and enriching environment for children after school ends but before many parents are home from work -- 3 p.m.-7 p.m. Through the creative use of State, local, private philanthropic funds, and volunteer resources, children from grades K-12 would have opportunities for enriching experiences that complement their education in a safe, supportive program operating in neighborhood schools. The Executive Budget provides $1 million in State aid for planning, growing to $10 million in 1999-00.
- Technology Investment:
By 2001-02, State aid for computer hardware aid will quadruple while software aid will experience a sixfold increase. A new education technology aid program will directly fund classroom-based technology, growing from $9 million in 1998-99 to $91 million by 2001-02.
- Textbook Aid:
State support for textbooks would more than double from $36 per pupil in 1996-97 to more than $78 per pupil in 2001-02.
- Full Day Kindergarten:
Beginning in 1998-99, school districts would be encouraged to establish full-day kindergarten programs intended to strengthen the quality of education for five-year-old children. The 1998-99 Executive Budget recommends that $14.4 million be provided to help school districts convert to full-day kindergarten programs.
- Expansion of Pre-Kindergarten:
An expanded Pre-Kindergarten (Pre-K) program would support new grants to school districts totaling $50 million in the 1998-99 school year and growing to $500 million by 2001-02. Based upon plans developed by school districts, innovative educational programming would be established for four-year-old children, featuring collaborations with existing community-based services. When fully implemented, this Pre-K expansion would serve more than 200,000 four-year-olds throughout the State.
- Class Size Reduction:
Proposes a class size reduction initiative for kindergarten through grade three to begin in 1999-00 with an investment of $75 million which would increase to $225 million by 2001-02. State grants under this new initiative would assist school districts in reducing class sizes in these early grades to 20 or fewer pupils.
Programs recommended for elimination:
- Teacher Support Aid Student Information Systems Teacher-Mentor Intern Program
- Electronic Doorway funding
School Property Tax Reform
- The 1998-99 Executive Budget accelerates the School Tax Relief (STAR) program enacted as part of the 1997-98 budget. It builds upon this program by eliminating the four-year phase-in period and accelerating the full tax cut -- a $724 million value -- to New York's senior citizens in the current year. Many senior homeowners will see their school property tax bill reduced by about 45 percent this year. It includes an acceleration of the New York City income tax cut for seniors. The Governor's 1998-99 Executive Budget also would save farmers $71 million annually by exempting up to 250 acres of farmland from the school property tax, one year earlier than the current law.
- The Governor's proposal uses part of the State's $1.8 billion surplus to advance these tax cuts to more than 750,000 senior citizens and more than 11,000 farmers in New York State.
- The Governor's budget recommends nearly $3.2 billion for SUNY and $966 million for CUNY to support the operations of the universities' campuses, central administration and university-wide programs for the 1998-99 academic year. This represents a General Fund increase of $118 million on a fiscal year basis and $87 million on an academic year basis. It anticipates no increase in the current tuition rates of $3,400 at SUNY and $3,200 at CUNY for in-State undergraduate students attending State-operated campuses. The Governor recommends $7 million for the Scholarships for Academic Excellence program to expand scholarship opportunities for New York residents attending public or private institutions of higher education in the State. Currently, this merit-based scholarship program provides 2,000 annual awards of $1,000 to New York's most outstanding high school scholars and 3,000 annual awards of $500 to students demonstrating high scholastic achievement. The Governor's plan would increase the top scholarship amount to $1,500 per year and would double the number of $500 awards available to 6,000 this year. In addition to expanding Scholarships for Academic Excellence, the Governor's budget recommends $615 million -- an increase of $8 million -- for the Tuition Assistance Program. The Governor proposes that over the next five years, SUNY and CUNY State-operated campuses and community colleges receive an overall State investment of more than $3 billion in their capital programs. The Executive Budget also includes administrative funding for the implementation of the new College Choice Tuition Savings program. This new program will help New Yorkers save for their children's college education by providing substantial State tax benefits on contributions made to, and interest earned on, college savings accounts. Families participating in this program can also take advantage of Federal tax deferrals on the interest earned on the college savings accounts. Bundy Aid (provided to independent colleges and universities based on degrees granted) is maintained at current levels.
- Centers for Advanced Technology are maintained at the current $13 million level.
- The Governor proposes $45 million for the Empire State Economic Development Fund to help businesses upgrade workers' skills, construct new facilities, expand operations and undertake other initiatives to promote job growth and retention.
- And $45 million for the JOBS NOW program to fund large-scale economic development projects each of which would be expected to create at least 300 jobs.
- In the 1998-99 budget Medicaid spending is projected to grow by 3-4 percent. Today, there are approximately 640,000 Medicaid recipients in managed care. By the end of 1998-99, as part of the state's mandatory Medicaid managed care program, more than 1.1 million recipients are expected to be enrolled. The Child Health Plus program will be expanded to ensure access to health care for every child in New York up to the age of 19. Legislation will be introduced soon after the Executive Budget to detail the Governor's plans for this expansion. The budget includes $620 million for public health programs, a year to year increase of approximately $43 million.
- The Governor's budget spends $1.8 billion to combat AIDS, an increase of almost $39 million. More than $100 million is provided for the AIDS Institute, including new funding of $1 million for an HIV/AIDS prevention program for women and children.
- The five-year State and Local Highway Capital Program will increase from $12.7 billion to $13 billion to meet future travel and economic development needs across the State. The budget proposes reducing passenger vehicle fees by 25 percent effective July 1, 1998. The current average two-year fee will be reduced from $54 to $41. The budget increases aid to transit operators by $161.8 million over 1997-98, providing $1.6 billion in total aid statewide. Funding is included for the "Albany Plan" for modernizing State office buildings, investing in downtown Albany and creating development opportunities at the Harriman State Office Building campus.
- The budget proposes a constitutional Amendment prohibiting future unfunded mandates on local governments, wicks law reform, asbestos removal reform and enhancements for local fiscal management.
- Staffing levels in the Department of Labor are projected to remain stable in 1998. State Operations appropriations are down by $6.2 million while Aid To Localities is up by $243.3 million. This increase is in the Employment and Training Program of the Department. It is estimated that the Job Training Partnership Act (JTPA) program funding will increase by $22 million over 1997. The Division of Human Rights has a recommended increase in appropriations of $859,000 to continue the reduction of its caseload while staffing levels are to remain at 185.
- The Office of Advocate for Persons with Disabilities recommended appropriation is down $50,000 for 1998. Staffing levels are projected to remain stable at 21.
- The Department of Public Service has been recommended for an appropriation of $65,510,900 for fiscal year 1998-99, a decrease of $1,643,700 from total funds available in 1997-98. The Department is the staff arm of the Public Service Commission (PSC), which regulates the rates and services of the State's public utilities, including electric, gas, steam, water and telephone. Last year, the PSC gave its approval of the Bell Atlantic/NYNEX merger, which maintains its corporate headquarters in New York City. The PSC also oversees the siting of major electric and gas transmissions. Since 1997, the five member commission has approved restructuring plans submitted by Consolidated Edison, Orange & Rockland Utilities, Rochester Electric & Gas, and most recently by New York State Electric & Gas. The commission is also considering other proposals by Niagara Mohawk and Central Hudson Gas & Electric. The PSC expects to introduce retail competition for all of the State's regulated utilities in 1998. The New York Power Authority (NYPA), owner and operator of 12 electric generating facilities and a major transmission system, receives no state funding. NYPA finances construction projects through the sales of bonds and notes and pays the related debt service with revenues from the generation and transmission of electricity. The Long Island Power Authority (LIPA) is currently working on implementing a plan to acquire a portion of the Long Island Lighting Company's assets in order to reduce commercial and residential rates. The reduction is expected to encourage economic development and reduce the cost of living in that region. No State tax dollars are currently being used to fund LIPA.
- The Governor recommends a $30,523,000 appropriation for the New York State Energy and Development Authority, a decrease of $10,308,000 from available funds in 1997-98. State operations account for $18,206,000 and Capital Projects account for $12,317,000, while recommended reappropriations from the 1997-98 fiscal year total $3,210,000. The authority will continue to administer the Federal Petroleum Overcharge Recovery Program (POCR) which provides financial assistance to businesses, schools and hospitals in implementing energy efficiency projects.
- The Governor's recommended funding for the State Banking Department totals $60,155,700, an increase of $4,005,000 over available funds in fiscal year 1997-98. This includes $550,000 of taxpayer supported funds for the state's Holocaust Claims Processing office, established in 1997 to assist Holocaust survivors and their heirs in the search for assets that have been withheld in European institutions.
- The increase in funding will allow the Department to implement "Wild Card" provisions, enacted in 1997, and give state chartered banks parity with national financial institutions. Last year, the Governor signed legislation which authorizes the New York State Banking Board to adopt regulations that permit state chartered institutions to exercise powers already available to federally chartered banks. These parity powers will assure that State chartered banks and trust companies can remain competitive with national banks. The Department also plans to undertake an analysis of its internal programs, policies and procedures to eliminate any inefficiencies and further streamline services.
- The New York Health Insurance Partnership Program will continue to receive $6 million. The program assists small business purchase and provide health insurance to their employees and dependents. The program will subsidize up to 45% of an employer's premiums.
- The Executive Budget recommends funding for overhauling the operation of the Workers' Compensation Board. More than $15 million is recommended for the technology to make the Board a "paperless" operation, which will speed the settling of workers' compensation claims and improve the Board's responsiveness to business and injured workers.
- Governor Pataki has made Year 2000 compliance for the State's computer systems the state's number one technology priority. The budget includes $100 million for Year 2000 projects, funding that will be centrally administered by the Office of Technology.