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NYS Division of the Budget: Andrew M. Cuomo, Governor; Robert L. Megna, Budget Director Division of the Budget Home Page

NYS Division of Budget

Andrew M. Cuomo, Governor
Robert L. Megna, Budget Director

2009-2010 Executive Budget – Briefing Book


2008-09 Deficit Reduction Plan

In order to close a current-year shortfall of $1.7 billion, Governor Paterson has put forward a 2008-09 Deficit Reduction Plan as part of his Executive Budget.

Since he took office, Governor Paterson has taken significant actions to reduce state spending in response to dramatically deteriorating revenues caused by the national fiscal crisis. He has twice called for and implemented reductions in state agency spending that totaled 10 percent in the current year, and in August, 2008, the Governor worked with the legislature to enact $1.0 billion of savings over a two-year period, including $427 million of savings in 2008-09.

On November 12, 2008, Governor Paterson presented the Legislature with a comprehensive two-year $5.2 billion deficit reduction plan that would have entirely eliminated the state’s 2008-09 shortfall, guarded against further revenue deterioration, and made a substantial down payment on the 2009-10 deficit. These proposals would have produced $2.0 billion of savings in 2008-09 and $3.2 billion in 2009-10.

The Governor convened a special emergency session on November 18, 2008 for the Legislature to consider these proposals. At that session, the Legislature did not act on his plan.

The $1.7 billion Deficit Reduction Plan included in the Executive Budget contains many of the same proposals from the $2.0 billion plan presented to the Legislature in November. More than $1.0 billion of the previously issued savings proposals have been withdrawn, however, because they are no longer achievable before the end of the fiscal year. These include an $836 million School Aid reduction, $72 million in Medicaid savings, an increase in CUNY annual undergraduate tuition, a reduction in local aid payments to New York City by $41 million, and other actions.

These lost savings proposals have been replaced with $771 million in new actions. The proposals Governor Paterson has put forward rely more heavily on non-recurring actions than the previous plan because, with significantly less time left in the fiscal year, there are fewer options for recurring savings to close the current-year budget gap. The Financial Plan assumes that the Legislature acts on this Deficit Reduction no later than February 1 to ensure the budget will end the year in balance.

The Deficit Reduction Plan would also produce $2.0 billion in 2009-10 savings to help address that year’s $13.7 billion budget deficit. The 2009-10 Executive Budget gap-closing plan assumes enactment of these proposals.

2008-09 Deficit Reduction Plan ($ in millions)
2008-09
Medicaid/HCRA/Insurance (Includes Deferrals) 500
Higher Education 68
Increase SUNY Tuition $620 per SUNY Board 62
TAP Award Increases (9)
Reduce SUNY/CUNY Community College Base Aid 15
Other Education 7
Reduce Arts Grants 7
Local Governments 93
Change Timing of NYC STAR Payment 93
Human Services 15
Reduce Human Service COLA by 1% effective January 1, 2009 5
Delay Foster Care Bridges to Health Implementation to 2011-12 1
Reduce Prevention Funding 3
Eliminate Unified Services Enriched Funding 1
Eliminate NYCHA Operating Subsidy 3
Reduce Neighborhood and Rural Preservation 2
Other Actions 244
Reduce New 2008-09 Legislative Additions 50 Percent 30
EPF Reduction 50
Expand Bottle Bill and Sweep EPF 25
Housing Bond Financing (SONYMA/MIF) 25
Reduce Economic Development Programs 8
Other General Fund Transfers 106
Workforce 9
Rescind Vacation Exchange Program 5
Medicare Part B Premiums 3
Modify Retiree Contributions for Health Care 1
New Actions 771
NYPA Payments 306
Department of Law Litigation Settlements 91
Manhattan District Attorney Settlements 75
WCB Recalculation 50
Existing Fund Balances/Debt Reduction 100
No Member Item Transfer 45
Reduce Local Incentive Grant Programs 2
Transfer Accumulated Balance Volunteer Recruitment Scholarship 2
Statewide Spending Controls 100
Total Savings Measures: 1,707

Medicaid/HCRA/Insurance

$429 million of the 2009-10 Medicaid/HCRA/Insurance savings are attributable to 2008-09 actions effective January 1, 2009 that, due to the timing of payments, will not produce cash savings until 2009-10. Therefore, $429 million in other 2008-09 expenses outside of Medicaid/HCRA/Insurance will be deferred until early in the 2009-10 fiscal year to offset this timing related issue and ensure budget balance.

Medicaid/HCRA/Insurance
Proposal 2008-09
($ in millions)
2009-10
($ in millions)
Medicaid/HCRA/Insurance 500 1,240
Savings 71 1,669
Payment Deferral to Realize 08-09 Savings 429 (429)

Pharmacy
(2008-09 Savings: $0; 2009-10 Savings: $25.2 million)

  • Expand Medicaid Preferred Drug List. Expand the Medicaid Preferred Drug List to include anti-depressants. (2008-09 Savings: $0; 2009-10 Savings: $3.3 million)
  • Reduce Reimbursement. Reduce reimbursement for pharmacies in the Medicaid and EPIC programs from Average Wholesale Price (AWP) minus 16.25 percent to AWP minus 17.25 percent. (2008-09 Savings: $0; 2009-10 Savings: $21.9 million)

Hospital/Clinics/HCRA
(2008-09 Savings: $55.2 million; 2009-10 Savings: $535.3 million)

  • Re-institute Assessment. Re-institute the 0.7 percent assessment on hospital inpatient revenues. (2008-09 Savings: $0; 2009-10 Savings: $316.4 million)
  • Reduce Grant Funding. Reduce Public Hospital Recruitment and Retention grant funding. (2008-09 Savings: $9.0 million; 2009-10 Savings: $12.0 million)
  • Eliminate HCRA Funding for Certain Programs. Eliminate unspent funding for selected HCRA programs, including a disproportionate share adjustment for non-public hospital grants that is not needed, the Regional Pilot Individual Subsidy Program, and worker re-training. (2008-09 Savings: $18.2 million; 2009-10 Savings: $29.8 million)
  • Eliminate Grant Funding. Eliminate unspent grant funding for the Adirondack Cancer Network. (2008-09 Savings: $4.6 million; 2009-10 Savings: $0)
  • Reduce Unspent Graduate Medical Education Funding. Reduce unspent Graduate Medical Education funding by 20 percent. (2008-09 Savings: $23.4 million; 2009-10 Savings: $23.4 million)
  • Reduce Rates. Implement an across-the-board rate reduction of 8 percent in 2008-09 and 2 percent in 2009-10. (2008-09 Savings: $0; 2009-10 Savings: $66.1 million)
  • Eliminate 2008 Trend Factor. Eliminate the remaining share of the calendar year 2008 hospital trend factor (1.495 percent). (2008-09 Savings: $0; 2009-10 Savings: $36.8 million)
  • Eliminate 2009 Trend Factor. Eliminate the calendar year 2009 hospital trend factor (2.1 percent), effective January 1, 2009. (2008-09 Savings: $0; 2009-10 Savings: $50.8 million)

Insurance
(2008-09 Savings: $0; 2009-10 Savings: $644.8 million)

  • Change Public Health Program Financing. Shift financing for selected public health programs to assessments on the insurance industry. (2008-09 Savings: $0; 2009-10 Savings: $99.8 million)
  • Change Timothy’s Law Financing. Finance the costs of assistance to small businesses to implement Timothy’s Law from insurance assessments. (2008-09 Savings: $0; 2009-10 Savings: $179 million)
  • Increase Assessment. Increase the covered lives assessment on the insurance industry. (2008-09 Savings: $0; 2009-10 Savings: $240 million)
  • Increase Hospital Surcharges. Increase HCRA surcharges on hospital patient service revenues. (2008-09 Savings: $0; 2009-10 Savings: $126 million)

Nursing Homes
(2008-09 Savings: $4.2 million; 2009-10 Savings: $252.4 million)

  • Delay Nursing Home Rebasing. Delay nursing home rebasing from January 1, 2009 to April 1, 2009. (2008-09 Savings: $0; 2009-10 Savings: $22 million)
  • Reduce Rates. Implement an across-the-board rate reduction of 8 percent in 2008-09 and 2 percent in 2009-10. (2008-09 Savings: $0; 2009-10 Savings: $94.7 million)
  • Reduce Grant Funding. Reduce recruitment and retention grants for public facilities. (2008-09 Savings: $4.2 million; 2009-10 Savings: $0)
  • Reduce Transportation Rates. Reduce Adult Day transportation rates. (2008-09 Savings: $0; 2009-10 Savings: $11 million)
  • Eliminate 2008 Trend Factor. Eliminate the remaining share of the calendar year 2008 nursing home trend factor (1.495 percent). (2008-09 Savings: $0; 2009-10 Savings: $50.5 million)
  • Eliminate 2009 Trend Factor. Eliminate the calendar year 2009 nursing home trend factor (2.1 percent), effective January 1, 2009. (2008-09 Savings: $0; 2009-10 Savings: $74.2 million)

Home Care
(2008-09 Savings: $0; 2009-10 Savings: $142.3 million)

  • Modify Rates. Encourage administrative efficiencies for Certified Home Health Agencies and Long Term Home Health Care Programs by making rate modifications. (2008-09 Savings: $0; 2009-10 Savings: $48.7 million)
  • Eliminate 2008 Trend Factor. Eliminate the remaining share of the calendar year 2008 home care and personal care trend factor (1.495 percent). (2008-09 Savings: $0; 2009-10 Savings: $31.5 million)
  • Eliminate 2009 Trend Factor. Eliminate the calendar year 2009 home care and personal care trend factor (2.1 percent), effective January 1, 2009. (2008-09 Savings: $0; 2009-10 Savings: $42.7 million)
  • Reduce Rates. Implement an across-the-board 1 percent reduction in home care and personal care rates. (2008-09 Savings: $0; 2009-10 Savings: $19.4 million)

Other Actions
(2008-09 Savings: $11.1 million; 2009-10 Savings: $69.6 million)

  • Eliminate Retroactive Trend Adjustment. Eliminate the retroactive 2008 trend adjustment (to reflect the difference between the budgeted and anticipated 2008 CPI) for hospitals, nursing homes, and home and personal care providers. (2008-09 Savings: $0; 2009-10 Savings: $69.6 million)
  • Recoup Overpayments. Recoup Early Intervention Program overpayments from New York City. (2008-09 Savings: $11.1 million; 2009-10 Savings: $0)

Higher Education

  • Increase SUNY Resident Undergraduate Tuition. The SUNY Board has voted to increase annual resident undergraduate tuition by $620 (14 percent) from $4,350 to $4,970. Spring 2008-09 tuition will increase by $310. The full annual $620 increase would be effective in the following academic year. Savings will be achieved by using additional tuition revenue to offset state financial support. In a break from more than 30 years of state history, SUNY would retain 10 percent of the value of the tuition increase for new investment in 2008-09 and 20 percent of the full annual increase in 2009-10. (2008-09 Savings: $62 million; 2009-10 Savings: $122 million)
  • Increase TAP Award Spending. The recommended tuition increase for SUNY will drive higher costs for the Tuition Assistance Program. (2008-09 Cost: $9 million; 2009-10 Cost: $25 million)
  • Reduce Aid for SUNY/CUNY Community Colleges. This proposal decreases community college base aid by an average of 10 percent, or $270, from $2,675 per student to an average of $2,405 per student. To recognize the disproportionately adverse impact that this reduction could have on smaller community colleges if applied in an across-the-board fashion, legislation will be proposed to reduce the impact of the proposal on these colleges, as follows: colleges with fewer than 3,000 full time equivalent students will have their base aid payments reduced by $160 per student; colleges with between 3,000 and 6,000 students will have their base aid payments reduced by $230; and colleges with more than 6,000 students will have their base aid payments reduced by $300. (2008-09 Savings: $15 million; 2009-10 Savings: $65 million)

Other Education

  • Reduce Funding for Arts Grants. This proposal reflects a reduction of grant funding that has not yet been awarded. After these reductions, state funding for arts grants would total $39 million in 2008-09. (2008-09 Savings: $7 million; 2009-10 Savings: $7 million 2009-10)

Local Governments

  • Change Timing of NYC STAR Payment. Consistent with existing statutory authority, the December 2008 STAR payment to the City of New York would be moved to June 2009. This will have no impact on New York City’s Financial Plan, as the payment would be made in the same City Fiscal Year. This action has been taken administratively. (2008-09 Savings: $93 million; 2009-10 Savings: $20 million)

Human Services

  • Reduce Cost-of-Living Adjustment for Human Services Providers. The 2008-09 Enacted Budget included a cost-of-living adjustment (COLA) of 3.2 percent for human service providers effective April 1, 2008. This proposal reduces that COLA by 1 percent to 2.2 percent effective January 1, 2009 and would impact providers in the following areas: Office of Mental Health, Office of Alcoholism and Substance Abuse Services, Office of Mental Retardation and Developmental Disabilities, Office of Children and Family Services, the Department of Health, and the State Office for the Aging. (2008- 09 Savings: $5 million; 2009-10 Savings: $23 million)
  • Delay Implementation of Bridges to Health Program. The budget would delay the phase-in of 2,652 slots for the “Bridges to Health” program until 2011-12. This Medicaid waiver program was designed to provide intensive services to children in foster care, with the goal of keeping these children out of institutional settings. (2008-09 Savings: $1 million; 2009-10 Savings: $15 million)
  • Reduce OASAS Prevention Funding. This proposal reduces Office of Alcoholism and Substance Abuse Services (OASAS) funding for school-based prevention services in New York City schools. After this action, $19 million in funding would remain for this program in 2008-09. (2008-09 Savings: $3 million; 2009-10 Savings: $3 million)
  • Eliminate Unified Services Enriched Funding. Most counties or not-for-profit providers and the state share equally (50/50) in providing funding for approved net operating costs for mental health, developmental disability and chemical dependency services pursuant to approved local services plans. However, providers in certain counties receive state reimbursement ranging from 69.3 percent to 97 percent based on a 1974-75 plan that was intended to reduce the use of state inpatient services. There is currently no justification for more generous state aid treatment for providers in these five counties (Rensselaer, Rockland, Warren, Washington, and Westchester). This proposal eliminates this additional funding, effective January 1, 2009. (2008-09 Savings: $1 million; 2009-10 Savings: $3 million)
  • Eliminate New York City Housing Authority Subsidy. This proposal eliminates a $3 million operating subsidy for the New York City Housing Authority (NYCHA), which has a $2.8 billion operating budget. Currently, no local housing authority in the state other than NYCHA receives an operating subsidy. (2008-09 Savings: $3 million; 2009-10 Savings: $3 million)
  • Reduce Neighborhood and Rural Preservation Programs. The Division of Housing and Community Renewal provides financial support to 222 not-for-profit community based housing corporations across the state through the Neighborhood Preservation Program (NPP) and Rural Preservation (RPP) programs. This proposal reduces funding for the individual 2008-09 contracts by 25 percent of remaining payments. (2008-09 Savings: $2 million; 2009-10 Savings: $2 million)

Other Actions

  • Reduce New Legislative Programs by 50 Percent. During the August 2008 special session, funding for most new executive and legislative programs was reduced across-the- board by 50 percent and 6 percent, respectively. Governor Paterson is recommending reducing new legislative programs by 50 percent of remaining spending, commensurate with the reduction enacted for new executive programs. (2008-09 Savings: $30 million; 2009-10 Savings: $5 million)
  • Reduce Environmental Protection Fund (EPF) Spending. Planned commitments from the EPF will be reduced by $50 million, from $255 million to $205 million. Even with this reduction, funding for the EPF will still have grown by 37 percent since 2005-06. An additional General Fund benefit of $39 million will be achieved in 2009-10 by reducing previously mandated Real Estate Transfer Tax cash flows into the EPF to reflect planned commitment levels. (2008-09 Savings: $50 million; 2009-10 Savings: $89 million)
  • Expand Bottle Bill and Sweep EPF. This budget would expand the current 5-cent deposit on beer and soda containers to water and other non-carbonated beverages, capture all unclaimed five-cent deposits, and use that funding to complement other financial support to the Environmental Protection Fund. Timing issues will preclude any receipts in 2008-09 from the bottle bill. Accordingly, a $25 million transfer from the EPF to the General Fund will be used to offset revenues lost from delayed approval of the Bottle Bill. (2008-09 Savings: $25 million; 2009-10 Savings: $118 million)
  • Finance Certain Housing Programs with Bonding. Eligible capital expenses for the Greater Catskills Flood Remediation Program and the Housing and Economic Stabilization for Long Island Program (HELP), that were previously anticipated to be financed on a pay-as-you-go basis, would be financed through bonding. (2008-09 Savings: $25 million; 2009-10 Savings: $0)
  • Reduce Funding for Certain Economic Development Programs. Funding for several economic development initiatives would be reduced, including local tourism matching grants ($1.5 million), JOBS Now ($1.5 million), the Focus Research Center at Albany Nanotech/RPI ($2.6 million), Technology Transfer ($1 million), and Faculty Development programs ($1 million). It is also recommended that the Centers for Applied Research and Technology program be allowed to expire at the end of 2008, providing savings of $900,000. (2008-09 Savings: $8 million; 2009-10 Savings: $9 million)
  • Other General Fund Transfers. The state would transfer excess revenues from certain state authorities and special revenue accounts into the General Fund. None of these transfers would impact current operations. These entities would include the Dormitory Authority (2008-09 Savings: $6 million; 2009-10 Savings: $0 million) and the Office of Temporary Disability Assistance’s federal administration account for child support enforcement activities (2008-09 Savings: $100 million; 2009-10 Savings: $5 million). (Total 2008-09 Savings: $106 million; Total 2009-10 Savings: $5 million)

Workforce

  • Rescind 2008-09 Vacation Exchange Program. Management/confidential employees were allowed to exchange limited amounts of unused vacation time for cash payments. This program has been rescinded for 2008-09 – an action which has been taken administratively. (2008-09 Savings: $5 million; 2009-10 Savings: $0)
  • Require State Employees and Retirees to Contribute to the Medicare Part B Premiums. The state currently pays 100 percent of the Medicare Part B premium for employees and retirees. Requiring employees and retirees to contribute toward Medicare Part B premiums would increase annual premium costs to employees and retirees by approximately $20 (individual) to $80 (family). (2008-09 Savings: $3 million; 2009-10 Savings: $30 million)
  • Modify Retiree Contributions for Health Care. The state’s contributions for future retired public employee health insurance premiums would be provided on a sliding scale based on the retiree’s years of service. Currently, the state pays 90 percent of premiums for all employees (75 percent for dependents) who retire with at least 10 years of service. Under this proposal, the state would pay a minimum of 50 percent of premiums for individual coverage and 35 percent for dependent coverage for employees who retire with 10 years of service. The state’s contribution would increase by 2 percent of the premium for each additional year of service up to a maximum contribution of 90 percent for individual coverage and 75 percent for dependent coverage for employees who retire with 30 or more years of service. (2008-09 Savings: $1 million; 2009-10 Savings: $8 million)

New Actions

  • New York Power Authority Transfers. The New York Power Authority would transfer $306 million to the state’s General Fund in 2008-09 and $170 million in 2009-10. Of this amount, $215 million represents funds that were reserved by NYPA to pay for the disposal of waste at a federal repository. It is anticipated that NYPA will not need these funds for several years. The remaining transfer represents assets not necessary to meet NYPA’s short term operating, capital or debt service costs. (2008-09 Savings: $306 million; 2009-10 Savings: $170 million)
  • Department of Law’s Litigation Settlement Account. A total of $91 million would be transferred from the Department of Law’s Litigation Settlement Account to the General Fund in 2009-10. After these transfers, $28 million would remain in the account, which will satisfy current appropriations and anticipated spending in the account. (2008-09 Savings: $91 million; 2009-10 Savings: $5 million)
  • Manhattan DA Settlements. The Financial Plan currently assumes that the state will receive $22.5 million from various settlements anticipated by the Manhattan District Attorney. Recent reports from the DA’s office have revealed that settlements in the current year should be considerably higher than this amount. The Division of the Budget now estimates that the state will receive $75 million in additional revenue from these settlements in 2008-09. (2008-09 Savings: $75 million; 2009-10 Savings: $25 million)
  • Workers Compensation Board Insurance Assessment Recalculation. As a result of a discrepancy in current law, some insurers have collected surplus funds, which will be paid to the Workers’ Compensation Board to support reform efforts and provide financial plan savings. (2008-09 Savings: $50 million; 2009-10 Savings: $0)
  • Fund Balances/Debt Reduction Reserve Fund. The 2008-09 enacted budget approved $350 million in blanket authorization for General Fund transfers, which can be initiated at the discretion of the Division of the Budget. Previously, the Financial Plan only assumed that $300 million of this authorization would be used in the 2008-09 fiscal year. Now, that entire authorization will be used. Additionally, $50 million in the Debt Reduction Reserve Fund will be utilized for financial plan relief. (2008-09 Savings: $100 million; 2009-10 Savings: $0)
  • Eliminate Member Items Transfer. A planned $45 million transfer to the Community Projects Fund would be eliminated in 2008-09. (2008-09 Savings: $45 million; 2009-10 Savings: $0)
  • Transfer Accumulated Balance Volunteer Recruitment Scholarship. An accumulated balance in the Volunteer Recruitment Services Scholarship account will be transferred to the General Fund. This action will not have any impact on current recipients. (2008-09 Savings: $2 million; 2009-10 Savings: $0)
  • Scale Back Local Incentive Grant Programs. The 2008-09 Deficit Reduction Budget reduces local incentive grant funding under two separate programs:

    • Local Government Efficiency Grants administered by the Department of State to encourage local consolidation and shared services; and
    • Efficiency Incentive Grants for the City of Buffalo and Erie County, which are awarded by the State Control Boards that oversee these municipalities to seed cost-saving investments necessary to restructure city and county operations.
    The reductions in both programs will honor current grant awards in full, but reduce remaining available funds by 50 percent. Although direct state financial incentives will be reduced, the Executive Budget also advances a package of recommendations by the Commission on Local Government Efficiency that will provide opportunities for municipalities to restructure their operations and achieve savings. (2008-09 Savings: $2 million; 2009-10 Savings: $14 million)
  • Statewide Spending Controls. Governor Paterson recently issued an order that requires the Division of the Budget and the Office of State Operations to approve all agency contracts and capital projects. By carefully scrutinizing agency spending, significant savings are expected to be achieved. (2008-09 Savings: $100 million; 2009-10 Savings: $0)

 

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