2006 Budget Address – Governor’s Remarks
January 17, 2006

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Lieutenant Governor Donohue, Majority Leader Bruno, Speaker Silver, Leader Tedisco, Leader Paterson, Attorney General Spitzer, Comptroller Hevesi, respected members of the Legislature, and fellow New Yorkers.

Thank you for being here.

Let’s get right down to business.

Two weeks ago, in my State of the State address, I set before you an ambitious agenda that builds on the achievements we’ve realized together over the last 11 years, addresses some of New York’s most pressing challenges today, and prepares our state and its people to succeed in the global economy of tomorrow.

Today I present you a budget that furthers these and other goals and sets this ambitious agenda into motion.

It advances our efforts to make New York the safest state in our nation.

It promotes freedom and unleashes opportunity by further reducing the tax burden on our working families and job-creating businesses.

It helps ensure a brighter future for our children by providing them the best education possible to excel in tomorrow’s global economy.

It furthers our high-tech economic strategy that will help create the jobs of tomorrow.

And it helps reduce our dependency on polluting foreign oil by promoting clean, affordable renewable energy alternatives.

It heeds the lessons and successes of the past, meets the evolving demands of the present, and anticipates and addresses the emerging challenges of the future.

I believe this budget is the right one for our State, and more importantly, for the people of New York.

So this morning, with well-grounded optimism and confidence, I again seek your support and partnership.

I again urge you to join me in pursuing the limitless promise of this great state.


This past year, we held open budget meetings and we passed the first on-time budget in a generation.

Let’s build on that progress and pass an on-time and openly negotiated budget again this year.

And looking to the future, I will submit budget reform legislation that will institutionalize and build upon these important changes to help achieve a sound, on-time budget not just this year, but every year.

I will also submit a constitutional amendment that protects our credit rating and further strengthens the State’s fiscal integrity by banning back-door borrowing once and for all.

Let’s finish what we started – let’s secure a future of even greater fiscal strength by working together to get these important measures done this year.


As we go forward let’s stick to the guiding principles that have seen us through the challenges of the last 11 years. Let’s remain committed to creating jobs and improving our economic climate; building up our state fiscal reserves; cutting taxes, restraining both spending and debt and enacting the major programmatic reforms that have made our state a better place.

In 1995, New York’s economy was in a shambles, more than 500,000 private sector jobs had been lost to other states. But we reduced taxes, reformed our regulatory climate and cut our workers’ compensation costs. And by the year 2000 we created almost 800,000 new private sector jobs.

Our policies worked.

In fact, we outperformed the national job growth rate two consecutive years – the first time that’s happened in two decades. And we were poised for even greater growth.

But that progress was interrupted by the tragedy of September 11th and the national economic downturn.

Predictably the catastrophic loss of jobs contributed to plummeting revenues.

And for the first time since the Great Depression we had a loss of revenue for two consecutive years.

We were able to get through this calamity only because of the fiscal prudence we exercised in building up the state’s reserves.

When I first took office our Rainy Day fund contained a meager $157 million, not enough to cover state operations for even one week.

We’ve built it up by making maximum deposits year after year and this year it will grow to almost a billion dollars. A 600 percent increase.

But the Rainy Day Fund is just part of the story.

By 2001 we had set aside fiscal reserves exceeding $4 billion. These reserves are what got our state through the dark days of September 11th without massive cuts to health care, education and other essential services.

And all the while we never spent one penny of the state’s critical rainy day fund.

Today, once again we have built up our reserves to more than $4 billion.

But we in New York know better than anyone that in today’s world we must set aside the resources to prepare for the unpredictable, confront the unexpected, and transcend the unimaginable.

As we go through this year’s budget deliberations I urge you to keep these lessons in mind.

And the best way to ensure we have adequate levels of reserves is to restrain spending.

Together, since 1995 we have restrained spending. Not only have we kept spending growth dramatically below that of the prior twelve years, but more remarkably we have also kept spending growth in all categories below the national average.

How did we do it?

We did it by streamlining government, cutting the state bureaucracy by more than twenty thousand positions and reducing our welfare rolls by over one million.

We have clearly made tremendous progress – progress that is being noticed where it matters most.

In 1995, our credit rating was dead last in the nation – tied with Louisiana.

But because of our spending restraint, our reserves and our pro-growth policies, today Standard and Poors has recognized New York with its highest credit rating in over a generation.

And just a few weeks ago Moody’s gave us their highest credit rating in 30 years.

Clearly, our state’s turnaround has been dramatic.

Job growth is on the upswing.

Revenues are strong.

And, New York’s credit rating is the best it’s been in over a generation.

And yes, that’s why, instead of multi-billion-dollar budget deficits, we now have a budget surplus of over $2 billion as I stand before you today.


But let’s not get too excited about the $2 billion surplus we’ve achieved.

This surplus can and will evaporate if we forget the hard lessons of the past.

So this year, let us build on our budgetary accomplishments.

And let’s start by continuing to control the rate of government spending and reaffirm our commitment to providing tax relief to hardworking New Yorkers.

This year, after accounting for the costs of last year’s dramatic Medicaid takeover and the proposed expansion of the STAR program, the budget I will submit keeps General Fund spending and All Funds spending below the rate of inflation.

That’s my goal and I urge you to make it your goal as well.


As I said just a few weeks ago, the state of the state is indeed strong and getting stronger every day.

That strength allows us to continue to make the right investments in the priorities of New York’s working families.

Since 1995, we’ve provided record investments for K-through-12 education.

Our funding per student is now among the highest of any state in America.

This year, for the second year in a row, I am proposing the largest school-aid increase that any governor of this state has ever recommended – a record increase of $634 million.

Again, this year, as last, I will propose and urge that a significant part of that record increase be targeted to high-needs school districts, both in New York City and across the state.

As we continue to provide record levels of funding for education, let’s make sure we do it the right way, by targeting those districts that have the greatest need.

My budget provides an additional $375 million, for a total of $700 million, in sound basic education aid to help strengthen high need school districts in New York City and across the state.

But let’s also realize that money alone isn’t enough to ensure that our children receive the education they deserve.

Educational excellence depends not only on resources, but on empowering parents with choices which will allow them to become more involved in their children’s education.

By any measure, greater parental involvement in their children’s education is a strong predictor of student success.

Based on that realization, you and I authorized the creation of 100 charter schools across our State.

And the results are in.

Charter schools work.

The entire 100 charters have now been used.

So let’s increase their number.

The budget I propose would create 150 more charters to give more parents the options they clearly desire.

And let’s create new types of charter schools – schools that teach the skills students can turn into productive careers in the trades and industries in such high demand today.

And let’s also create charter schools that concentrate in science, math and engineering.

I’m committed to working with Mayor Bloomberg and educational advocates across New York to create new charter schools that equip the next generation for the challenges of this new century.

And while we’re empowering parents with greater control over their children’s education, let’s provide parents in under-performing school districts with a $500 per-child tax credit to pay for special tutoring, after-school programs, summer programs or alternatives to under-performing schools.

This will enhance children’s educational opportunities and give parents greater involvement in the decisions that shape their children’s education.

My executive budget also provides $5 million for Engineers of the Future, a new program that will encourage the creation of pre-engineering courses for high school students, and support training programs for pre-engineering teachers.

It also recommends another $2.5 million for new math and science Summer Institutes for seventh and eighth graders at community colleges throughout our state, so that these students can excel in tomorrow’s high-tech career fields.

And finally, let’s create a “Partnership for Prosperity” Task Force to develop region-by-region recommendations to strengthen math and science education, including the creation of math and science academies affiliated with our Centers of Excellence.

Children are the key to New York’s future.

Let us invest wisely in that future, by continuing to invest wisely in theirs.


Together, we have made dramatic investments in public education, yet despite these record investments, we still face the continued challenge of escalating property taxes.

You and I know that we must continue to confront this problem.

That’s why last year we took over the growth in the Medicaid program.

The budget I send you includes over $1.1 billion that the City of New York or our counties would have had to pay for Medicaid costs this year that instead will be paid by the State of New York.

Think about that.

We will relieve New York City and our counties of over $1.1 billion in Medicaid costs-- the largest single assumption of local costs by State government in New York State’s history.

This one change alone will save New York City over three quarters of a billion dollars this year, and more money each year into the future.

When this savings is combined with our record investments in school aid, I am confident that the city-state partnership for educational excellence will take another dramatic step forward this year.

And throughout the rest of New York State, counties will no longer have spiraling Medicaid costs that push county property taxes higher.

I’d like to thank you for your partnership in enacting the sound fiscal policies that made this historic Medicaid relief possible.


And as we’ve taken the lead in holding down county property taxes, so, too, have we led the fight against higher school property taxes.

That’s why we created the STAR program which has already provided $18 billion in relief for eligible homeowners across this State.

But we must do more.

My budget will provide New York seniors and families immediate relief from property tax escalation by addressing two significant challenges.

First, the STAR exemption for New York’s senior citizens is not indexed for inflation.

This year, let’s change that.

Let’s protect seniors from inflation by making indexing retroactive, so that every senior who gets STAR will see a significantly higher benefit than last year.

The second challenge is this: the STAR benefit we provided New Yorkers has been undercut by school districts, which, despite record State aid increases, continue to increase their spending and taxes at levels that far exceed the rate of inflation.

We’ve controlled our spending by making State operations more and more efficient, now let’s encourage our schools to do the same.

This year, we will respond with a three-step plan.

First, we will encourage school districts to limit their spending increases to levels that homeowners can better afford.

Second, in districts that achieve that aim, we will give homeowners a $400 “STAR Plus” rebate check this year.

And finally, starting next year, we will provide districts that control their spending with additional operating aid.

For fiscally prudent school districts and their homeowners, the benefits of this program are clear.

Property taxes will finally be controlled.

Property taxpayers will receive rebates.

And school districts will receive enhanced State aid.

STAR is an outstanding program that has helped millions of New Yorkers – this year let’s make it even better.


This budget helps control county property taxes through a State Medicaid takeover.

It helps control school property taxes with an enhanced STAR program.

But we know that we also need to help control the third segment of New Yorkers’ property tax burden – local property taxes.

That’s why last year we created AIM, Aid and Incentives for Municipalities – the largest increase in state aid to local governments ever. This year, we’ll renew our commitment by doubling AIM, ensuring that local governments get even more state aid to keep down their property taxes as well.

Property tax relief is a good start and an important part of the pro-family tax reduction plan I am advancing this year.

But we can do even more for New York’s working families – we can reduce their State tax burden once again, granting greater financial freedom to New Yorkers and helping their employers create even more jobs.

As I discussed earlier, one these pro-family initiatives would empower parents in under-performing school districts with a $500 tax credit to help boost their children’s education.

But that’s only the beginning of the State tax relief granted to New York’s working families in the budget I propose today.

Let’s abolish one of the worst inequities in our tax code.

This year, let’s completely eliminate the notorious marriage penalty.

Let’s cut income taxes for millions of hardworking taxpayers by reducing the tax rate that most New Yorkers pay.

Let’s help thousands of seniors pay for rising energy costs and provide them with a $500 heating fuel tax credit.

And once and for all, let’s eliminate New York’s estate tax.

We did it before, now let’s do it again ….

All of these tax cuts are included in the budget I submit to you today.

Each of them will make our families and our state even stronger.

You’ve heard me say it before – over the past 11 years, we’ve cut 19 different State taxes 81 times, injecting more than $140 billion back into New York’s economy, and spurring the creation of over 620,000 new private-sector jobs.

But if we are going to continue to create jobs and opportunity for New York’s families, we must cut taxes on New York’s job-creating businesses even more.

I am advancing a new $1.1 billion pro-jobs, tax reduction plan that will give New York’s employers greater freedom to grow, expand and create more jobs and opportunity for our citizens.

Formulated with the help of the Kudlow Commission, this pro-jobs tax reform package abolishes two harmful provisions of our tax code that actually penalize rather than encourage companies from growing and creating jobs here in New York – the AMT and the basing of taxes on capital investments.

And next, let’s address another job-killing inequity of our tax code.

Today, a business that builds a plant here may pay for it up front, yet is forced by our tax code to deduct it against taxes over a 20-year period.

If you build it today, invest in it today, and create jobs today, you should be able to expense it today.

The budget I send you will give businesses this option.

And since it is small businesses that create the bulk of the new jobs, I am advancing three new initiatives to encourage and enable them to do so.

First, we lower the personal income tax rate that most small business owners pay.

Second, let’s streamline and reduce the S-Corp taxes that many small businesses pay.

And finally, let’s increase the credit vendors get for collecting our sales tax by almost half.

Together, these measures will make the entire state of New York a better place to invest and create jobs.


And as we work to make our whole State friendlier for job creation, let’s make sure every New York State county has an Empire Zone.

This budget proposes that every county without one – Delaware, Greene, Hamilton, Putnam, Rockland, Schoharie, Tompkins, Yates and Wyoming – gets one by the end of this year.

Let’s do all we can to help bring jobs to every corner of our state.

And finally, as we fight for jobs, let’s not only cut taxes, let’s reduce Workers’ Compensation costs again.

This budget has a comprehensive plan that would build on the success of our 1996 reforms, which reduced Workers’ Comp costs by 25%.

This year’s proposal would cut costs by over 15% more for businesses while increasing benefits for injured workers by 25%.

And while we continue to reform our workers’ compensation system for the private sector, we need to recognize the changes in our public sector workforce.

That’s why our budget will create a new Pension Reform Task Force comprised of representatives from state and local governments, public employee unions and retirees.

The task force will propose reforms to strengthen and improve our public pension system while maintaining current benefits, and at the same time provide the framework for real relief to state taxpayers.

And because a modern, well-maintained transportation system is vital to a strong economy, my budget will provide record levels of funding to improve mass transit and our highways, roads and bridges.

Our State Department of Transportation will have the highest letting levels in state history — a total of $9.6 billion over the next five years for key projects like the conversion of Route 17 into I-86 across the Southern Tier, and the construction of Route 219 in Western New York

Transit operating aid will increase by 18% statewide, $380 million more than last year. The MTA will receive a total of $2.5 billion for critical new projects in New York City like the JFK rail link, which will keep our Lower Manhattan economy growing and moving forward.


If we wish to remain competitive in the emerging high-tech, global economy of tomorrow, it’s imperative that we continue to invest in higher education today.

That’s why we’ve dramatically expanded access to financial aid, instituted historic reforms at our public universities, invested more than $9 billion in new capital facilities on their campuses, and created a $150 million matching capital program just last year for our private colleges.

These critical investments are producing dramatic results.

Our colleges and universities have the highest enrollment and standards ever and have become national leaders in sponsored research and private-sector partnerships.

This year’s budget seeks to build on that record of accomplishment.

My budget provides a record level of operating support for SUNY and CUNY.

It adds $125 million in funding to our current Capital Program to ensure that these two great institutions have the best state-of-the-art facilities.

It increases community college operating aid.

It provides $11 million for new SUNY/CUNY Empire Innovation programs to help attract and retain world-class researchers from across the globe.

And perhaps most importantly, my budget addresses the need to prepare our students for math, science and engineering careers.

It creates a new college scholarship program – equivalent to full tuition reimbursement at SUNY or CUNY schools – for students who make a five-year commitment to teach math and science in New York’s middle schools or high schools.

It allocates $5 million in additional support for our Teachers of Tomorrow program to help expand the pool of math and science teachers.

And it continues to encourage minority students to pursue math and science degrees, by doubling funding for our STEP and C-STEP programs.

These investments in higher education will help to secure a brighter future for young New Yorkers and ensure that our state is well positioned to succeed in today’s high-tech global economy.

We all know that the worldwide competition for jobs and economic strength will be won by the states and nations best prepared to produce the high-tech workforce and technological advancements of tomorrow.

Innovation is the engine that will drive the global economy of the future.

That’s why this budget commits millions more to accelerate our efforts to propel our state and its people to the forefront of the high-tech revolution.

Our Centers of Excellence have already attracted over $8.5 billion in new investments and established New York State as a force in high-tech business development.

This budget builds on that success with even greater capital investments in our Centers of Excellence and a new job creation program — Tech Zones — that will provide Empire Zone benefits to firms affiliated with our centers in Albany, Buffalo, Long Island, Rochester, and Syracuse.

These Tech Zones will make our Centers of Excellence even stronger catalysts for high-tech job development by attracting the firms that will turn research and ideas into opportunity and jobs.

And tomorrow’s bio-tech and bio-med breakthroughs will not only produce life-saving cures and treatments, they too, will generate massive new investments and create thousands of new jobs.

Let’s move forward with a new $150 million challenge grant initiative that will generate an additional $450 million in federal, not-for-profit, and private-sector matching funds to expand bio-tech and bio-med R&D at places like Columbia, Cornell, Mt. Sinai, NYU, and Sloan Kettering.

Let’s leverage New York City’s unparalleled array of world-class research hospitals to make New York the world epicenter of bio-tech research, development and job creation.


If we are to prepare New York for tomorrow’s high-tech economy, it is essential that we embrace credible domestic energy alternatives to today’s expensive foreign oil.

This year, our country will spend about one-quarter of a trillion dollars on imported oil, money that leaves our economy and ends up in countries that often are on the wrong side of freedom.

And what do we get for that quarter-of-a-trillion-dollar “investment”?

Economic vulnerability and air pollution today – and the need to buy more oil again tomorrow.

Yes, oil dependency represents a great challenge, but more importantly, it’s a great opportunity.

An opportunity to build on our efforts to tackle tomorrow’s energy challenges today, right here in New York State.

An opportunity to keep that quarter of a trillion dollars right here in America and create jobs and protect the environment of our state.

An opportunity to make New York the clean, renewable energy capital of America.

This budget provides the necessary investments to begin turning this worthy goal into a reality.

It provides Empire Zone benefits to companies anywhere in the state that are developing clean, renewable energy solutions.

It directs the Thruway to install renewable fuel pumps at all Travel Plazas and provides grants for these pumps at gas stations across the state.

It strengthens demand for these fuels by making them tax-free throughout New York.

It provides tax credits for the purchase of fuel-efficient hybrid and alternative fuel-powered vehicles.

It returns more of our energy dollars to our own state economy with a tax credit to promote construction of more ethanol and bio-diesel refineries right here in New York.

It creates incentives and financing assistance for advanced bio-refineries and next-generation clean coal plants.

It promotes energy conservation with two tax-free weeks for Energy Star products and a tax credit for home owners who replace their older, inefficient heating systems with new Energy Star systems.

From research to retail, from farms to fuel tanks, this comprehensive energy strategy will not only strengthen our economy, it will create a cleaner, better protected natural environment for this generation of New Yorkers and the next.


Since 1995, when I first took office no state has done more to preserve and protect our environment.

This budget continues New York’s standing as a national leader in environmental protection.

It provides a record $1.4 billion for statewide environmental cleanup, improvement and preservation projects.

It makes the strongest commitment ever to the Environmental Protection Fund with an investment of $180 million – a 20 percent increase from last year and over 700 percent more than in 1995.

It helps ensure the preservation and protection of sensitive wetlands and our new state lands by providing for new funding and staff dedicated to these pursuits.

It is our responsibility to leave our children a natural environment that is cleaner and better protected than when we found it.

This budget continues our commitment to that goal.


As we invest in a clean and healthy environment, we also must continue to invest in a health care system that is second to none.

And as part of that endeavor, we have to redouble our efforts to control the growth of Medicaid spending.

Last year we took an enormous step forward by deciding to cap local Medicaid costs and pay the full cost of the Family Health Plus program.

Consequently, as I mentioned earlier, $1.1 billion in Medicaid costs that would have been paid by New York City and our counties will be paid by the State of New York this year.

And over the next five years, as a result of our actions, localities will enjoy a total of $9 billion in fiscal relief from Medicaid burdens.

But a Medicaid cap and partial takeover wasn’t all we did last year to control runaway health care costs.

We also created the Berger Commission to help us determine the best ways of right-sizing our health care system.

And with your assistance, we enacted the $1 billion HEAL NY program to modernize our health care system with facility and technology upgrades to make it more efficient.

The budget I’m sending you includes the second phase of this vital program, a $250 million installment to help our health care system meet the challenges of our new century.

It also proposes a series of cost containment measures that will save taxpayers over $1 billion.

Let me make two key points about these initiatives.

First, our aim is not only to control runaway costs, but also to make sure our citizens have access to the best health care system in the world.

Reducing unnecessary costs gives us more resources to invest in such programs as Child Health Plus and EPIC, which have benefited hundreds of thousands of New Yorkers and remain models for our nation.

And second, we must do more than rid ourselves of unnecessary spending.

We must also make sure every nickel we do spend goes into the right hands, not into the wrong pockets.

That’s why this year, my budget calls for a comprehensive Medicaid Integrity Plan.

This plan would not only toughen criminal penalties for Medicaid fraud, but would consolidate all of our State’s current efforts to protect the integrity of the system, by creating one of biggest and most aggressive Medicaid fraud fighting units in America.

Under the umbrella of a permanent, independent Office of the Medicaid Inspector General, we will bring together a team of fraud fighters from across our government.

Over 600 people will be focused each day on one single task – combating those who would enrich themselves illegally with taxpayer dollars.

And finally my budget provides the necessary resources to fully fund the Health Care Reform Act programs, through its current sunset date in June 2007, and places it on a sound fiscal footing until the year 2014.


And as we seek to improve the quality of health care for New Yorkers, let’s continue to protect their lives and security as well.

Since 1995, together we have taken dramatic steps to help make New York the safest large state in America.

And we are still building on this record of success.

Just over a month ago, we enacted two new laws to remove illegal gun traffickers from our streets and provide better protection to our brave men and women of law enforcement.

And because we had dramatically increased our Trooper strength over the years, I was able to announce the very next day the deployment of 100 new State police investigators to pursue and apprehend gun traffickers.

This year’s budget provides $22 million to support this vital initiative, and will also include funding to make our State Police force stronger than ever by adding 100 new Troopers to the best State police force in the nation.

Our budget also provides increased funding to expand Operation IMPACT beyond the 17 counties it now targets, allowing us to continue to take the fight against crime directly to the criminals who are responsible for it.

It allocates millions more for enhanced DNA crime-fighting technology, allowing us to quickly match DNA samples from crime scenes to any convicted criminal in New York State.

It adds funding for an expanded cyber crimes unit, equipping our State to respond better to cyber attacks and computer-related crimes.

And finally, our budget will provide the funds that will keep the most dangerous sexually violent predators away from society, away from our neighborhoods, and away from our children.

As part of this initiative, I am proposing funding to convert the Camp Pharsalia correctional facility into the most secure facility specifically designed to civilly confine sexual predators in America.

This proposed budget will ensure that our law enforcement officials have the resources they need to fight crime.

But resources alone are not enough.

Along with our budget, you have critically important criminal justice legislation to consider.

Legislation that strengthens Megan’s Law, abolishes the statute of limitations for rape and other sexual assaults, requires all convicted criminals to submit DNA samples, lengthens sentences for convicted sexually violent predators, and yes, keeps the most dangerous of those predators off our streets and away from our children.

Let’s get these bills enacted so we can save more lives and protect more New Yorkers.


Today, New Yorkers are safer, more secure and more prosperous than they were when we began our course of progress in 1995.

With budget reserves 30 times greater than when I took office and with the highest credit rating in over a generation, we have journeyed far indeed.

But as I said when I spoke before you two weeks ago, our work is not done, there’s much more to do.

Our journey continues.

The path to progress is not always an easy one.

But it is the right one for New York and its people.

The budget I’m sending you not only sustains our progress, but builds toward a future of unlimited potential and opportunity.

It allows us to make record investments in the health of our seniors, the teaching of our children, the protection of air, land and water, and the exhilarating high-tech world that stands at our doorstep, ready to transform our lives.

Most of all, it exemplifies the indomitable spirit of New York – a steadfast spirit of unity and purpose, pride and dedication, optimism and confidence.

A spirit that binds New Yorkers together as one, calling us to embrace our dreams, rise to our challenges, reach for and achieve the impossible, and continue our journey of progress in this new century and millennium.

For the sake of this generation, and generations to come, let us embrace that spirit again this year.

Let us continue our journey of progress.

Let us lead our Empire State to even better, brighter days.

Thank you, God bless you, and God bless the people of this State.