Leaders agree on budget plan combining cuts, aid, new taxes

By Irene Jay Liu and Casey Seiler

ALBANY — After weeks of closed-door negotiations and secrecy surprising even to Albany insiders, state leaders have agreed upon a $131.8 billion budget, stemming an estimated $17.7 billion shortfall through a combination of federal stimulus funds, cuts, and new taxes and fees.

The agreement attempts to close the state’s estimated $17.7 billion budget deficit through roughly $6.2 billion in federal stimulus spending, $5.2 billion in cuts to an array of programs, and $6.3 billion in new revenue — including an increase in the personal income tax on affluent New Yorkers.

The personal income tax hike would create two new tax brackets — 7.85 percent for single or married-filing-separately taxpayers making more than $200,000, head-of-household filers making more than $250,000 and married couples with incomes greater than $300,000.

For all taxpayers making more than $500,000 — regardless of filing status — the rate would rise to 8.97 percent.

Currently, New York’s highest tax rate is 6.85 percent, a rate that kicks in for single or married-filing-separately filers making more than $20,000, head-of-household filers making more than $30,000, and couples and joint filers making more than $40,000.

Based on early estimates, state spending is expected to increase around 1 percent and total approximately $54 billion. The total state budget, which includes all federal funds, will increase about 8.7 percent to $131.8 billion.

Overall, the Legislature restored $3 billion of the $9.5 billion in cuts originally proposed by the governor in December, paid for with federal stimulus money, taxes, fees and other revenue enhancements.

A large portion of the $5.2 billion in cuts will be felt by the state’s health care system, which will see about $2.3 billion in cuts statewide. A significant percentage of the governor’s proposed cuts to Medicaid were restored in the final budget using federal stimulus money. Education will be largely insulated from cuts, with $1.2 billion in federal stimulus money that was specifically designated for school aid.

The budget includes an expected savings of $481 million in state work force costs over the next two years. The governor proposed to achieve these savings by asking public employee unions to defer pay and eliminate a scheduled salary increase, but the unions refused. As a result, the governor has now proposed to achieve those savings through layoffs.

Other major budget actions include the end of the middle-class STAR rebate program, reform of the Rockefeller drug laws and a new 5-cent beverage deposit will be added to bottled water. Beverage companies would be required to turn over 80 percent of unclaimed deposit funds to the state.

There also is an increase in taxes on wireless devices, as well as cigars, beer and wine. But a proposal to sell wine in grocery stores was abandoned, as was a proposal to increase the sales tax. The proposed $10 fee to file paper state tax returns was also dropped.

State leaders dropped a proposed freeze on state tax payments to towns and school districts in regions where state-owned land makes up a large chunk of the tax base — an issue of grave concern to leaders in the Adirondacks and the Catskills.
The Assembly and Senate each appropriated $85 million in member items, or pork. The governor did not allocate any member items for himself. Since assuming the governship, Paterson has given up millions of dollars of discretionary funding to reduce the state’s worsening deficit.

Senate Republican Dean Skelos called the budget “a complete disaster” and blasted the 10 percent increasing in spending.

“At a time when we are mired in the worst economic downturn in generations, this disgraceful budget would increase state spending to unsustainable levels,” he said in a statement issued Sunday night.

Assembly Minority Leader Jim Tedisco released a statement calling the budget a “typical, backroom Albany political deal” that “means state government will dig its greedy hand even further into the taxpayer’s pocket.”

State legislators returning to the Capitol today will find more than 2,500 pages of legislation waiting on their desks, the result of a hectic final round of budget negotiations between the Democratic leaders.

The nine budget bills are now “aging” the required three days in order for voting to begin on Tuesday, the deadline for passage of an on-time budget. Two of those bills were placed on legislators’ desks Sunday morning and must wait until Wednesday, the first day of the new fiscal year, for passage.

On Sunday, the signs of round-the-clock bill drafting — including enough empty pizza and donut boxes to feed a small college dormitory — could be found throughout the Capitol.

Irene Jay Liu can be reached at (518) 454-5081 or iliu@timesunion.com.

Closing the gap

State leaders went into this year’s budget negotiation facing a deficit that currently stands at an estimated $17.7 billion, a $1.5 billion increase from the $16.2 billion estimate from one week ago. Here’s a general account of how they addressed the shortfall:

Cuts to services or aid: $5.2 billion

Cuts to health care will total $2.3 billion; outside of New York City, Aid and Incentives for Municipalities payments will be frozen at 2008-09 levels for the next two fiscal years; the middle-class STAR rebate program will be eliminated; three prisons and nine juvenile detention facilities will be closed. In early February, state leaders cut $1.3 billion in spending in this and next year’s budget.

Revenue raisers: $5.2 billion
Creates two new tax brackets to raise $4 billion: 7.85 percent for single or married-filing-separately taxpayers making more than $200,000, “head of household” filers making more than $250,000, and married couples with incomes greater than $300,000; and 8.97 percent for taxpayers making more than $500,000 regardless of how they file. The increase will sunset after three years. Another $1.2 billion will be raised from other new or enhanced taxes and fees.
Non-recurring revenues: $1.1 billion

Federal stimulus funds: $6.2 billion

Stimulus dollars enabled the state to protect education funding, but will also be used to offset reductions in health care, human services and local aid to New York City; it also enabled leaders to drop many of Gov. David Paterson’s most unpopular proposed “nuisance” taxes and fees. A press release from Democratic state leaders note that stimulus money “is required to be spent during the coming fiscal year and may not be used to fund rainy day reserves or retire debt.”