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STATE OF NEW YORK
DIVISION OF THE BUDGET
DAVID A. PATERSON, GOVERNOR
FOR IMMEDIATE RELEASE:
August 20, 2010
CONTACT: Erik Kriss
Erik.Kriss@budget.state.ny.us
518.473.3885

DIVISION OF THE BUDGET RELEASES ENACTED BUDGET FINANCIAL PLAN

Budget Closes $9.2 Billion Gap without Deficit Borrowing or Depleting Rainy-Day Fund
Reduces Multi-year Budget Deficit by 44 Percent

The Division of the Budget today released the State’s official 2010-11 Enacted Budget Financial Plan.

The 2010-11 Enacted Budget closed a $9.2 billion deficit and included vetoes by Governor David A. Paterson of $533 million in legislative spending additions to keep the plan in balance. Because recurring actions accounted for more than 90 percent of the gap-closing plan, the Enacted Budget also helped reduce the State’s projected four-year gap, through 2013-14, by $29 billion (44 percent). The 2010-11 Enacted Budget achieved these results without any deficit borrowing and without depleting the State’s rainy day reserves, which remain at $1.2 billion.

Adjusted State Operating Funds spending, which reflects all non-capital spending financed by State taxpayer dollars and fees paid by users of State services, is estimated at $79 billion, an increase of 0.1 percent – the smallest increase in 15 years and well below the projected 1.1 percent rate of inflation. This nominal increase includes certain fixed, legally-required costs, such as debt service. The Enacted Budget reduces spending from the current-services forecast by over $6.4 billion in 2010-11 in both State Operating Funds and the General Fund. The adjusted General Fund declines by 1.3 percent to $53.5 billion. Annual spending is also held below the level permitted under the Governor’s proposed spending cap.

“This budget has made tremendous progress toward righting New York’s finances during one of the most difficult fiscal periods this State has ever faced,” Governor Paterson said. “I am especially pleased that we were able to achieve major, recurring savings on behalf of New York’s taxpayers without resorting to deficit borrowing and without any permanent, broad-based tax increases. Our actions should not only help keep New York competitive as we continue to ride out this economic storm but should place the State on a much sounder financial footing in the future.”

Adjusted All Funds spending for 2010-11 is estimated at $133.8 billion. Adjustments to All Funds, State Operating Funds and the General Fund reflect a $2.1 billion school aid payment that had been scheduled to be made at the end of 2009-10 but that had to be delayed into 2010-11 for cash flow reasons. The Division of Budget allocated that spending to 2009-10 rather than 2010-11 and also allocated $2.1 billion in certain federal American Recovery and Reinvestment Act (ARRA) moneys to 2009-10 because that is when the State had been scheduled to receive those funds, over which the State has little or no control. After these adjustments, all funds spending will increase by 2.2 percent in 2010-11.

During the uncertain economic environment of the last few years, every state has faced significant and persistent revenue shortfalls. Since assuming office, Governor Paterson has taken the steps necessary to deal with these shortfalls, mainly through reducing spending and controlling costs without deficit borrowing.

Spending Reductions

The enacted budget achieved the following major, recurring spending reductions, with significant cuts in State agency operating expenditures:

  • Health Care ($779 million) through cost-containment measures in Medicaid, including eliminating inflation-based adjustments to rates and decreasing managed care premiums to encourage efficiencies by providers; heightening anti-fraud and audit efforts; allowing for closer regulatory scrutiny of major proposed premium rate increases for certain health insurance policies; realigning programs to take advantage of cost-savings such as rebates for prescription drugs; requiring exhaustion of Medicare benefits for prescription drugs; and financing a greater share of Medicaid spending through the Health Care Reform Act (HCRA).
  • Higher Education ($224 million) by reducing State support for State University of New York (SUNY) and City University of New York (CUNY) senior and community colleges (which will be partially mitigated by the use of federal ARRA funding) and reducing Tuition Assistance Program (TAP) spending by changing eligibility standards and reducing overall grant awards.
  • Local Government Aid ($325 million) by eliminating Aid and Incentives for Municipalities (AIM) funding for New York City (2010-11 only) and Erie County; reducing AIM funding to other municipalities by 2 or 5 percent, depending on local reliance on this revenue; and providing localities more procurement flexibilities, allowing localities to share court facilities and promoting other local administrative services sharing such as joint tax collection as a way to reduce State mandates on local governments and save localities money.
  • STAR ($121 million) by reducing the benefit for New York City taxpayers with incomes above $500,000.
  • Human Services ($214 million) by reducing State reimbursement to counties from 63.7 percent to 62 percent for Child Welfare services; reducing or eliminating spending in non-core mission programs; and rightsizing youth facilities.
  • Education/Special Education/Arts ($142 million) by managing payments for summer school special education costs; using available ARRA funding to help support preschool special education; reducing funding for grants provided by the Council on the Arts; and other measures.
  • Mental Hygiene ($61 million) by reducing Medicaid rates; improving audit and recovery efforts; restructuring service coordination; delaying community bed development for certain programs; closing eight psychiatric center wards; and shifting some State-delivered services to less costly not-for-profit providers.
  • Transportation, Economic Development and Environmental Conservation ($370 million) through elimination of low-priority and duplicative programs; reduction in State road and bridge contracts but maintenance of funding for local road and bridge projects; and reduction in the Environmental Protection Fund.
  • Public Protection and General Government ($193 million) by closing two correctional facilities and additional consolidation of the prison system; merging of criminal justice agencies; certain revenue collections by law enforcement agencies that will result in a one-time increase in revenue; eliminating subsidies to businesses that provide mental health coverage under Timothy’s Law; and reducing a planned deposit to the member items fund by $60 million.

Revenue Actions

The 2010-11 Enacted Budget includes $1 billion in new revenue, including $925 million from tax and fee increases, including:

  • The temporary suspension of the State sales tax exemption on clothing and footwear priced at less than $110 ($330 million) from October 1, 2010 through March 31, 2011 (followed by suspension of the exemption for items priced at less than $55 for 2011-12 and a full return of the exemption April 1, 2012);
  • A $1.60 per pack increase effective July 1, 2010 in the cigarette tax, the proceeds of which are earmarked to help pay for existing health care expenses ($290 million);
  • A temporary cap on the aggregate tax credit claims for business-related tax credits at $2 million per taxpayer annually ($100 million);
  • A decrease in the percentage of allowable remaining itemized deductions from 50 percent to 25 percent for taxpayers with New York adjusted gross income above $10 million ($100 million).

In addition, audit, compliance and enforcement activities are expected to increase the tax base by approximately $371 million annually. This includes $150 million in cigarette enforcement activities on Indian vendors.

Non-recurring resources, which comprise 7 percent of the actions approved in the Enacted Budget, total $660 million.

Debt

State-related debt outstanding is projected to total $56.9 billion in 2010-11, an increase of $2.2 billion (or 4 percent) from 2009-10. Debt issuances of $5.4 billion are planned to finance new capital projects in 2010-11, a decrease of $717 million (or 11.8 percent) from 2009-10. The State expects to retire $3.2 billion in debt in 2010-11, approximately $100 million (3.2 percent) more than in 2009-10. Debt retirements are projected to increase to $4.2 billion in 2014-15. State-related debt outstanding as a percentage of personal income is expected to decrease from 6 percent in 2009-10 to 5 percent in 2014-15.

2010-11 Financial Plan Documents

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