Governor Spitzer's first Executive Budget calls for reducing growth in Medicaid spending, providing the largest-ever increase in school spending, and raising $600 million by closing "loopholes" in business taxes.
"This budget makes targeted investments in our future, provides overdue property tax relief to middle class homeowners and drives resources to communities in need," Governor Spitzer said. "It also makes the tough decisions necessary to bring spending growth under control."
The plan totals $120.6 billion, an increase of 6.3 percent from the current year. The state Budget Division projects inflation at 2.3 percent for 2007.
The Governor proposed Medicaid changes, including elimination of planned inflation-level funding increases for hospitals and nursing homes, that would save an estimated $1 billion. Other cost savings would come from eliminating some housekeeping services under Medicaid's personal-care program and strengthening efforts against fraud. A new Office of Information Technology would help promote expanded use of electronic health records and related technologies. The Business Council has encouraged such efforts as steps toward more effective and cost-efficient health care.
To reduce Medicaid costs in the state's General Fund, the budget proposes an increase of $75 million, or 10 percent, in the "covered lives assessment" on health-insurance policies purchased by employers and individuals. It would also extend a 0.35 percent assessment on hospital bills that is scheduled to expire this year, providing $137 million in revenue. The Council has urged Governor Spitzer and the Legislature to reduce such charges.
The budget calls for raising more than $600 million in new revenue by closing what the Governor called "loopholes" in corporate taxes. Companies that conduct "substantial intercorporate transactions with affilited companies" would be required to file combined, rather than separate, corporate tax returns; that step will produce $215 million annually, according to the Budget Division. Changes to the Bank Tax would increase taxpayer costs by some $77 million. Governor Spitzer proposed uncoupling New York tax law from the federal American Jobs Creation Act of 2004, which created a deduction for certain production costs for manufacturing and other industries. Other tax and fee changes would affect certain real estate investment trusts, S corporations, limited-liability corporations and partnerships.
The budget also calls for expanding the state's bottle-deposit law to certain non-carbonated beverages, raising $25 million in the coming year and $100 million annually thereafter. Other fee increases would include $6.4 million in air-permit fees; $10 million in security charges for nuclear-power plants; and $6.5 million in utility charges to fund the Department of Public Service and Energy Research and Development Authority.
The Governor proposed a $1.4 billion increase in funding for public schools. For the first time, under the plan, major increases in state assistance would be linked to firm standards for accountability and results. The budget also calls for a major expansion of charter schools, from the current limit of 100 to 250 statewide, and $25 million in tax credits for parents who send their children to private schools.
A $300 million Investment and Job Creation Program would apply competitive procedures and "rigorous" job-creation standards to new and existing economic-development programs. Governor Spitzer said he will ask voters to approve a $1.5 billion Stem Cell and Innovation Fund Bond Act in 2008; for the coming year, the budget includes $100 million for such such projects. The budget calls for $300 million in funding for "development of an international computer chip research and development center," with details expected later. Additional staff at the Department of Environmental Conservation will help make the state's brownfields program "a resource -- rather than an impediment" to redevelopment in many urban areas, the Governor said. The budget also provides $50 million to make broadband Internet service more widely available.
Proposals to restrain state spending in coming years include a prison-closing commission that would issue binding recommendations subject to rejection by the Legislature, similar to the Berger Commission that has recommended reducing hospital capacity across the state.
Governor Spitzer proposed new financial aid for municipalities that merge or consolidate services, and called for changes in the Wicks Law to reduce public-construction costs. He said the state will make available a lower-cost health-insurance plan to restrain the rising cost of public-employee health coverage. Localities will also benefit from changes in liability laws affecting injury and wrongful-death claims, the Governor said.