Date: January 22, 2008
CONTACT: Jeffrey Gordon


Tough Choices Allow Key Investments in Our State’s Future;
Builds on Key Reforms Enacted in Last Year’s Budget

Governor Eliot Spitzer today delivered his 2008-09 Executive Budget, which closes a projected $4.4 billion budget gap without raising taxes, while making key investments in education, health care, and economic development. The balanced budget fulfills the Governor’s budget goals of responsibly closing the budget gap, protecting core priorities and investing for economic growth.

“The recent downturn on Wall Street has caused significant declines in expected revenue growth across the country and in New York in particular,” said Governor Spitzer.  “These challenging economic times require us to make tough but necessary choices and set clear priorities for state spending. By reigning in spending we have produced a fiscally-responsible budget that focuses our limited resources on the critical investments we need for economic growth.”

To produce a balanced budget in the difficult economic climate created in large part by the subprime mortgage crisis, Governor Spitzer has proposed savings totaling $2.3 billion along with targeted actions to increase recurring revenues by $1.1 billion. Additionally, $1.1 billion of non-recurring revenue is contained in the budget, and $337 million of labor reserves is used to finance potential collective bargaining agreements.

This $4.8 billion plan has allowed the state to close its $4.4 billion gap and make $400 million in additional investments in education, health care and economic development while still maintaining a balanced budget.

The 2008-09 Executive Budget includes $81.8 billion in State Operating Funds spending, an increase of 5.0 percent compared to 2007-08. This is consistent with Governor Spitzer’s goal of limiting spending growth to below 5.3 percent, which is the average long-term rate of personal income growth in New York – and the best measure of affordability. If spending growth had been kept to 5.3 percent the last 5 years, we would have nearly $4 billion in extra reserves today – nearly the size of the current Budget gap

The $124.3 billion All Funds budget, which includes federal funds, increases spending by 5.1 percent. General Fund spending, which is a component of the broader State Operating Funds category, spending will total $56.7 billion, an increase of 5.9 percent. State Operating Funds is a preferable measure of State spending because it includes investments supported by fees and other dedicated revenues, as well as current expenses for long term capital investments.

This year’s budget was the first to be developed completely within the parameters of the Budget Reform Act enacted in January 2007. The new process included greater transparency in spending and appropriations, earlier consensus discussions on revenues, as well as the first-ever statewide public hearings to solicit input on budget priorities in advance of the Governor’s proposal.
Building on reforms enacted in the 2007-08 budget, Governor Spitzer’s proposal funds several high-priority initiatives. They include:

  • Education. Increasing the State’s investment in education by a record $1.46 billion, the largest-ever increase proposed by a Governor, while maintaining the key elements of the Foundation Aid Formula created last year to target State funding based on student and district need. Larger funding increases will continue to be tied to Contracts for Excellence, which have helped ensure these resources are spent on strategies proven to produce better academic achievement. Funding will also be tied to a second phase of accountability initiatives that will be implemented this year.
  • Health Care. Providing universal access to health care to all New York children by fully funding the federal share of the expansion of Child Health Plus, which was included in last year’s Enacted Budget, but blocked by the Bush administration. As a result, nearly all of New York’s 400,000 uninsured children will have access to health insurance.
  • Property Taxes. Establishing a commission to recommend proposals to develop a fair and effective property tax cap proposal. The commission also will produce a package of reforms to counteract the root causes of New York’s high property taxes and increase the fairness of the State’s current property tax relief system. The State will also continue last year’s Middle Class STAR rebates and provide $5 billion of total immediate property tax relief. In addition, funding for the Enhanced (“Senior”) STAR rebates will increase by $91 million, or 40 percent.
  • Economic Development. Creating a $1 billion Upstate Revitalization Fund to help create jobs and spur growth throughout Upstate.
  • Higher Education. Beginning the process of establishing a $4 billion dollar endowment for New York’s public colleges and universities, which will provide $200 million in operating funds annually. This permanent funding source will help transform our system of higher education and drive economic growth. Additionally, the budget includes the first year of a five-year, $9.3 billion capital plan for SUNY and CUNY to help rebuild those institutions’ infrastructure.

Notable measures taken to balance the budget and close the $4.4 billion budget gap facing the state include:

  • Government Efficiencies. $1.35 billion will be saved from a range of State government efficiencies, including a five percent reduction in non-personnel services, closing underutilized facilities, lowering energy costs and others.
  • Health Care. Identifying $980 million of savings initiatives in health care. By rationalizing outdated reimbursement methods and other measures, these reforms continue to shift New York to a patient first system that focuses on primary and preventive care. None of the reductions will directly impact access to necessary care or the quality of that care.
  • Education Aid. Slowing the projected growth of Foundation Aid by a net of $93 million. Increases in other aid categories have offset these reductions.
  • Property Tax Relief. Delaying the projected increase of the Middle Class STAR property tax relief program and other alterations to that program will save $354 million.
  • Revenue Actions. Closing unintended tax loopholes ($434 million) and increasing narrowly tailored fees ($305 million), the majority of which finance specific functions of government.
  • Local Governments. Requiring counties to pay more for both public assistance and locally-operated youth detention facilities, saving the state a total of $76 million. In total, however, counties will receive a net funding increase of $519 million and all local governments will receive a net funding increase of $2.7 billion compared to 2007-08.

The budget proposal maintains $2.2 billion in reserves, equal to 3.9 percent of General Fund spending. Debt is projected to grow by $3.3 billion (6.6 percent) to $53.3 billion, largely due to critical investments in economic development, transportation, and higher education, but still remains at affordable levels as a percentage of personal income, and is projected to actually decline over the next five years.
Details regarding the school aid, health care, property tax relief, economic development, higher education, housing, and other components of the budget are provided in the attached materials.