Prepared by the staff of The Business Council August 11, 1999
OVERVIEW | Construction | Economic Development | Education and Job Training | Environmental Conservation | Financial Services | Gov. Office of Regulatory Reform | Health | Human Rights | Labor & Human Resources | Small Business | Taxation | Transportation
The state Legislature passed the 1999-2000 budget on August 3rd. The 1999-2000 State Budget totals $73.3 billion in All Funds, a 3.8 percent increase over the 1998-99 Budget. On a State Funds basis, the Budget totals $49.8 billion, an increase of 3.9 percent over 1998-99. The General Fund will total $37.4 billion, an increase of 2.4 percent.
Among the highlights of the 1999-2000 budget:
- $375 million in new tax cuts, including cuts in bank and insurance tax rates, a further cut in the alternative minimum tax and expansion of the earned income tax credit for low-income workers.
- Jobs 2000, a $522 million economic development program that significantly increases support for high-technology academic research and business growth. $34 million is for employer-directed job training.
- Preservation of the entire $1.8 billion surplus generated during the 1998-99 fiscal year.
The budget also includes two important property tax reforms:
- Property tax reporting - will require school districts to tell residents how the growth in budgets and tax levies compare to the consumer price index; and
- Districts will also be required to inform the Education Department of proposed tax levy increases - allowing comparisons of district-by-district tax increases - before the statewide date for budget votes.
Alcoholic Beverage Tax - Article 18
Reduced the Beer Excise Tax (BET) from 13.5¢ to 12.5¢ per gallon on 4/1/01.
Doubled -- to 200,000 barrels - the New York-brewed exemption from the BET effective 3/1/01.
Bank Tax - Article 32
Reduced the tax rate from 9% to 8.5% for calendar tax year 2001, to 8% for calendar tax year 2002, and to 7.5% for later tax years.
Corporation Tax - Article 9
Exempted telecommunication firms with fewer than 1,000,001 New York access lines from the Section 183 Dividend Tax effective 1/1/02.
Exempted gas purchased by non-regulated electric-generating utilities and by IPPs (Independent Power Producers) who do not sell electricity directly to a regulated utility from the GIPT (Gas Import Privilege Tax) effective 1/1/01.
Corporation Franchise Tax - Article 9-A
Reduced the tax rate on Minimum Taxable Income (MTI) from 3% to 2.5% effective in 2001 (or fiscal tax years commencing after 6/30/00).
Eliminated the accounting loss of a firm's earned, but not yet used, Investment Tax Credit (ITC) following a stock acquisition of that firm effective 1/1/00.
Reduced the Subsidiary Capital Tax of energy utility (Section 186) subsidiaries by 30% effective 1/1/00 and by 100% (complete exemption) effective 1/1/01.
Exempted from the Subsidiary Capital Tax bank (Article 32) subsidiaries and insurance (Article 33) subsidiaries effective 1/1/00.
Reduce the business income tax on airlines by 40% effective 1/1/01.
Insurance Tax - Article 33
Reduced the tax rate on income from 9% to 8.5% for calendar tax year 2001, to 8% for calendar tax year 2002, and to 7.5% for later tax years.
Reduced the tax cap for other than life insurance companies from 2.6% of premiums to 2.4% of premiums for calendar tax year 2001, to 2.2% for calendar tax year 2002, and to 2% for later years.
Petroleum Business Tax - Article 13-A
Eliminated the supplemental tax and reduced by 20% the basic tax on fuel used for non-residential heating effective 4/1/01.
Exempted (via refund after purchase) fuel used in the production of tangible personal property by mining or extracting effective 4/1/01.
Sales and Use Tax - Articles 28 and 29
Removed the local tax on RIM (Repair/Installation/Maintenance) services performed on exempt machinery and equipment as of 3/1/00.
Recalculated the tax on self-manufactured, self-used products on the basis of the component material cost, not the selling price, on 3/1/01.
Exempted machinery and equipment used to upgrade CATV systems to telecommunication system use or to provide Internet access for sale effective 3/1/01.
Exempted computer hardware used in developing Internet web sites effective 3/1/01.
Reimposed the tax on clothing costing under $110 for December '99, January '00, and February '00.
Exempted clothing costing under $500 from the State 4% and MCTD ¼% portions - with an option for localities to do likewise - for the weeks September 1 through 7, 1999 and January 15 through 21, 2000.
Authorized localities to repeal or to reimpose their local tax portion annually effective each March 1 on clothing costing under $110.
Banking and Insurance Corporate Franchise Tax Reduction
Reduces the corporate tax rate for banking and insurance companies from 9% to 7.5%. Fully effective July 1, 2002.
Exemption From Subsidiary Capital Tax for Banks & Insurance Companies
Excludes certain stock of banking and insurance subsidiaries from the .075% business corporation franchise tax.
Below is a listing of funding levels for key economic development programs contained in the 1999-2000 State Budget.
Economic Development programs (UDC)
Jobs Now Program $45 million
Empire State Development Fund $40 million
Urban & Community Dev. program $3.5 million
Minority & Women-owned Business Program $3.5 million
Empowerment Zone administration $10 million
NY Stock Exchange retention project $10 million
Delphi/Harrison retention project $19 million
Plattsburgh & Griffis Air Base improvements $2.5 million/each
Unspecified economic development projects $19 million (Subject to MOU agreement between legislative leaders)
Small Business Capital Access program $1.25 million
Economic Development programs (ESD) ED Zone administration $2.9 million
Business Marketing $4.5 million
Tourism Marketing $11 million
Tourism Matching Grants $4.275 million
Western NY Business Marketing $500,000
Central NY Business Marketing $500,000
Entrepreneurial Assistance program $500,000
Economic Development programs (Science & Technology Foundation)
NOTE: Programs administered by the Science & technology Foundation will be transferred to the new Office of Science, Technology, and Academic Research created as part of the Jobs 2000 program).
Centers for Advanced Technology $13 million
TDO Competitive Matching Grant program $1 million
Industrial Technology Extension Service $1 million
Focus Center - New York $5 million
The program creates a new office called the Office of Science, Technology and Academic Research. The Science and Technology Foundation will be transferred from ESD to this new office, however, programs at SED originally proposed to be transferred, will not move. The CATs program will also be transferred to NYSTAR, and funds are also provided for a Science & Technology Law Center.
The NYS Venture Capital Fund $250 million (From Common Retirement Fund)
$34 million will be provided for job retraining through the Strategic Alliance Training Program. 20% will be set aside for strategic alliances and business consortiums, 20% for small business (These two groups are not mutually exclusive), and the rest will be made available on a competitive basis to any applicant meeting the goals of the program, including individual businesses. Also, a statewide Workforce Investment Board will be created consisting of 41 directors:
- 31 to be appointed by the Governor;
- 21 to be representatives of business;
- 4 from labor;
- 2 from local government;
- and 2 miscellaneous appointments.
$51.5 million will be provided for loans and grants to eligible recipients for the creation and expansion of water supply and distribution systems for economic development purposes.
Industrial Access Program
The governor proposed increasing funding to this DOT program from $5 million to $25 million. The legislature reduced funding to $15 million, but agreed to spend the other $10 million on projects subject to an MOU between the Speaker and Majority Leader in the Senate.
Modernization of State Building Code
$1.44 million is provided to adopt a model international building code.
$500,000 is provided for smart growth demonstration projects.
Provides an overall $913 million increase in state aid for elementary and secondary education for the 1999/2000 school year. This is comprised of an increase in regular school aid formulas and other aids of $918 above the 1999-99 school-year and a reduction of $5 million in miscellaneous grant reductions. In addition the legislature funds a new school capital facilities initiative of $145 million to be spent over the next two years, bringing the total value of the school aid package to nearly $1.06 billion.
Some of the details include the following:
- Provides a $137 million increase in operating aid.
- Provides a $20 million increase in operating standards aid.
- Funds LADDER - $43 million for universal Pre-K, $75 million for class size reduction, $6.5 million for shared services, and $16 million for instructional computer technology.
- Restores BOCES aid to the statutory level (adds $40 million over 1998-99 school year levels).
- Funds Building Aid at statutory levels which represents a $284.5 million increase over the 1998-99 school year.
- Provides $67.5 million in Teacher Support Aid for 1999-00.
- Provides $145 million for the Rebuilding Schools to Uphold Education (RESCUE) program.
- Restores $10 million to Teacher Computer Resource Centers.
The legislature denies the Executive's proposal to replace the existing funding system for special education with a system based upon enrollment and poverty levels. However, effective with the 2000-01 school year funding is to be increased for children receiving special education services for 60% or more of the school day in a general education classroom while funding for other services and excess cost save-harmless are slowly reduced. Such changes needed to be made to receive payment of $335 million in federal funds for special education.
Creates the New York Office of Science, Technology and Academic Research (NYSTAR). This new office will develop and recommend policies related to research and economic development involving colleges and universities. The office will be responsible for administering a $117.5 million research and development program and the Science and Technology Foundation is transferred to this new office.
- $95 million for constructing updating existing and constructing new research facilities.
- $7.5 million for to attract and retain top researchers.
- $5 million for technology transfer initiatives on campuses and for a science and technology law center initiative.
- $10 million for a development fund for Centers of Advanced Technology (CATs) to provide additional funds for the state's top performing CATs.
Creates the Science, Technology and Academic Research Advisory Board which will consist of eleven members with three of them representing higher education institutions, seven public members with at least five years of scientific or entrepreneurial experience with technologically oriented business and the commissioner of economic development. Two of the public members are appointed by the Speaker of the Assembly and two by the temporary president of the Senate. The rest of the members are appointed by the Governor.
Provides additional funding for the following programs:
- $3.7 million for the Higher Education Opportunity Program (HEOP).
- $2.38 million for STEP/CSTEP (Science and Technology Entry Program).
- $4.2 million for Bundy Aid (Aid to Independent Colleges and Universities).
- Provides $114 million in academic year funding to restore the Tuition Assistance Program (TAP) to the 1998-99 level.
State University of New York:
Additional academic year funding is provided for (but not limited to) the following:
- $10.2 million in Community College Aid.
- $2.59 million for Educational Opportunity Centers (EOP).
- $2.23 for state operated campus faculty lines.
- $2.32 million for Community College faculty lines.
City University of New York:
Additional academic year funding is provided for (but not limited to) the following:
- $4.2 million for Community College aid.
- $1.88 million for Senior College faculty.
- $2.04 million for SEEK and College Discovery.
Allows the City University to conduct a pilot program to allow part-time students to receive tuition assistance.
Establishes a Strategic Alliance Training Program through the J2K legislation funded at $34 million which includes $5.7 million for certain specific training projects.
The cap on Title V air permit fees was increased to $45 per ton; the 6,000 ton cap was retained. The current cap is $25 per ton, adjusted by increases in the CPI since 1990. The effective cap for 1999 would have been about $33 per ton. As part of the budget legislation, the CPI inflator has been eliminated for future years.
The licence fee on major oil storage facilities, imposed under Section 174 of the Navigation Law, has been increased from $.04 per barrel to $.08 per barrel. This fee is imposed on facilities with greater than 400,000 gallons of storage capacity, and is used to fund the state's oil spill cleanup program. There was no increase in fees on smaller oil storage facilities.
Higher fees for pesticide product applications, "temporarily” increased in 1992, have been extended until 2002. This fee income is dedicated to supporting the DEC's product registration program.
While the DEC's state operations budget was increased slightly by the legislature (by $800,000, to $353 million), it added more than $50 million to the Governor's proposal for capital projects funding. These additional appropriations are primarily from the 1996 Clean Water/Clean Air bond act and federal capital funds.
The Title V operating permit program was funded at $16.8 million - the level proposed in the Executive Budget, which includes $500,000 for the Empire State Development Corporation's small business assistance program, and $480,000 for the Department of Health's involvement in permit reviews and the setting of standards. Considering that the “billable” emissions inventory is 345,000 tons, the state will generate only about $15.5 million in permit fees to support this appropriation.
The Governor had proposed nine staff positions and $1.3 million in funding to assess possible natural resource damage claims on the Hudson Rivers. The legislature financed this program through a separate appropriation from the Environmental Protection Fund.
Other “legislative initiatives” in the final budget agreement include:
$150,000 for municipal “smart growth” demonstration projects.
$250,000 to assist municipalities in implementing integrated pest management/non-toxic pest control methods.
$50,000 to support a state-wide “summit” of grass roots environmental organizations.
$100,000 to assist in the local review of wireless tower siting proposals.
$75,000 to finance the development of a database of facilities regulated under the state's water and air pollution, mineral resources, radiation, and solid and hazardous waste programs. The database is intended for unspecified “environmental equity” purposes.
Other “Budget” Issues
The final budget legislation included a repeal provisions in ECL Section 19-0319 mandating the state to develop a centrally fueled fleet “clean vehicle” program.
Provisions in the 1996 bond act that authorized a total of $30 million for small business environmental compliance assistance projects related to water quality were amended to make all businesses eligible for these funds.
Extends the Wicks Law exemption for the School Construction Authority until July 1, 2002.
Includes a $1.44 million appropriation to fund expenses related to implement a new state building code. The New York State Fire Prevention and Building Code Council will take steps to promulgate a new state building code and energy code.
The Governor's Office of Regulatory Reform was fully funded at $2.5 million.
The budget restored $351 million in Medicaid money, including $266 million to restore cuts proposed in the Executive Budget proposal and another $85 million to restore one-quarter of previously-enacted cuts. Three-quarters of the old cuts were renewed saving the state over $250 million. The $351 was allocated as follows:
- Hospitals and clinics ($134.1 million)
- Nursing Homes ($128.7 million)
- Home Care ($58.7 million)
- Other ($29.5 million)
The budget also reallocates $163 million in unspent funds under the Health Care Reform Act of 1996 (HCRA) to the following purposes:
- $45 million to the General Fund.
- $18 million for financially distressed hospitals.
- $60 million in bad debt and charity care funding for hospitals.
- $10 million in grant money for rural hospitals.
- $12 million in bad debt and charity care funding for clinics.
- $16 million, with $8 million allocated to the Health Commissioner's priority pool and the remaining $8 million to be evenly allocated to the Senate and Assembly pools.
- $2 million in additional funds for cancer mapping.
Lastly, the budget calls for the eventual privatization of the State's Medical Malpractice Insurance Association (MMIA), an entity that was created in the late 1970's. MMIA was set up to provide medical malpractice insurance to physicians. Under the privatization plan, MMIA would be dissolved and its $500 million dollar surplus would be turned over to the state.
The Office of Advocate for Persons with Disabilities will continue to perform its mission of assisting persons with disabilities with a staff of 21, unchanged from last year. Due to a reduction in federal funding , the Governor's budget reduced funding by $95,000 to $1,687,000. The Legislature added $25,000 for technical support activities.
The Legislature supported the Governor's budget recommendation to increase funding by $310,000 to $12,758.00. Staffing levels at the Division will rise from 185 to 190 positions.
The Governor's funding proposal for the Department of Labor increased appropriations by $57,840,000 to $3,519,253,700 and included 7 new positions bringing staffing to 4,589 positions. The Legislature provided funding for 10 additional programs, adding $1,750,000 to the Governor's proposal.
In addition, the Legislature adopted the Federal Workforce Investment Act which replaces the Job Partnership Training Investment Act and will allow for a one-stop program for worker training and retraining. The Legislature amended the Strategic Alliance Training Program, provided $34 million in funding and moved it to the Department of Labor from the Empire State Development Corporation.
Alternative Minimum Tax
The AMT was reduced from 3.5 to 3.0 percent last year. This years Budget reduces the tax once again to 2.5 percent as of June 30, 2000.
Earned Income Tax Credit
The state's earned income tax credit, now pegged at 20 percent of the federal credit, will be increased to 25 percent of that credit over two years. This will yield $125 million more in savings for low-income workers.
Estate Tax Conformity
The change will retroactively allow estates comprised of closely held business es to choose the current State small business deduction or the Federal deduction, whichever provides the greatest benefit. In the future, estates will receive whichever benefit is greater than or equal to current State law. Tax savings: $8 million.
Farmers' Tax Credit Expansion
Expands the Farmer's School Property Tax Credit to include agricultural land set aside or retired under a Federal supply management or soil conservation program. Fully effective January 1, 2000. Tax savings: Less than $1 million.
Sales Tax on Exemption on Farm Improvements
Expands the existing sales tax exemption provided to farmers to include the purchase of fencing and certain other building materials. Fully effective: March 1, 2001 Tax savings: $1million.
Sales Tax on Clothing
The Budget postpones the permanent exemption until March 1, 2000; but allows for two additional clothing tax-free weeks to take place September 1-7, 1999 and January 15-22, 2000 for clothing and footwear less than $500.
Expansion of QETC to Income Tax
Extends the Qualifying Emerging Technology Companies (QETC) tax credit to include personal income taxpayers. Many investors in small, high technology companies are taxed under the income tax.
Expansion of QETC to re-manufacturing Technologies
Expands the existing definition of Qualifying Emerging Technology Companies to include re-manufacturing technologies.
Sales Tax Exemption for Web Site Design Hardware
Grants a sales tax exemption to software used in the development of Internet web sites. Fully effective March 1, 2001. Tax savings: $3million
Increased Small Brewer Exemption
Increases an exemption from the State's excise tax on beer for small brewers from the first 100,000 barrels of brewed beer to 200,000 barrels. Fully effective March 1, 2001.
Certified Capital Companies (CAPCOs)
Provides an additional $30 million to be invested in certified capital companies to the extent they invest in small to mid-sized New York companies manufacturing such high tech products as computers, computer software, medical equipment, biotechnology, telecommunications equipment, and conducting research and development.
State Roads & Bridges Program
Total spending agreed to by the Senate and Assembly for the State Roads & Bridges Program equals $1.6 billion in 1999-2000, including appropriations and re-appropriations. This total reflects a restoration of $120 million over the Governor's Executive Budget proposal: an increase of $100 million in project lettings and an increase of $20 million for engineering services.
Local Roads & Bridges Program
The Legislature agreed to increase the Consolidated Highway Improvement Program (CHIPS) capital funding by $25.9 million over the Governor's original budget proposal for a total of $276.7 million. Operating and Maintenance funds were also increased by $2.6 million over the Governor's budget proposal. The CHIPS program provides state and federal monies to assist localities in funding the repair and construction of roads and bridges. The CHIPS program was funded at $271 million last year.
The Legislature also agreed to $39.7 million in Marchiselli funding for 1999-2000, an increase of approximately $4.7 million over the Governor's original budget proposal. This program assists localities in leveraging financing for the repair and construction of roads and bridges. The Marchiselli Program was funded at $39.7 million last year.
In addition, the Legislature reduces the Industrial Access Program from $25 million to $15 million. The remaining $10 million will be split between the Senate and Assembly for qualified projects, subject to a memorandum of understanding. The Legislature also reduces the $35 million Regional Aviation Fund resulting from the privatization of Stewart Airport to $2.5 million. The remaining monies are reprogrammed as follows:
- $17.5 million will remain at Stewart International for the payment of liabilities;
- $2.5 for a new Airport Improvement and Revitalization Program;
- $4.5 million will go toward capital projects for airports subject to a memorandum of understanding between the Governor, the Majority Leader of the Senate and the Speaker of the Assembly;
- $8 million for the improvement of Buffalo Niagara International Airport.
Finally, the Legislature keeps whole the Governor's budget proposal of $85 million for a new Department of Transportation Rail Freight program intended to improve and stimulate the use of freight systems that serve municipalities, businesses and ports across the state.
Airline Tax Reduction
The legislature approved reducing the tax burden on airlines that do business in New York by lowering the amount of corporate income subject to state taxes. Fully effective January 1, 2001
Freight Forwarders Tax Reduction
The legislature approved allowing air freight forwarding companies to file a combined corporate tax return with an airline affiliate thus adjusting its business allocation percentage and reducing the company's tax burden.