2004 Yellow Book
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Overview of the Executive Budget

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Financial Plan & Disbursements Receipts Budget Bills
Public Hearings


The Court of Appeals has ruled that the current school aid system fails to provide New York City's children with the sound basic education that is guaranteed to them by the State Constitution and is the State's legal and moral obligation to deliver.

Ten years ago, the Campaign for Fiscal Equity, Inc., a coalition of advocacy groups, parent organizations and community school boards filed a lawsuit against the State on behalf of New York City schoolchildren charging that the State unconstitutionally underfunded the City's schools resulting in inadequate educational opportunities. On June 26, 2003, the Court of Appeals issued an historic decision in favor of the plaintiffs in Campaign for Fiscal Equity, Inc. v. the State of New York. The Court held that children attending schools in New York City are not receiving a sound basic education and found the current State education financing system to be inadequate. The Court set a deadline of July 30, 2004 for the State to implement remedies addressing these outstanding student needs and remitted the case to the Supreme Court for further proceedings.

Specifically, the Court of Appeals held that the threshold task for developing these reforms is a determination of the actual cost of providing a sound basic education in order to provide students with the skills necessary to allow for meaningful civic participation in contemporary society. The Court decision requires the State to implement funding reforms and to establish an accountability system to ensure that increased expenditures result in an improved opportunity for a sound basic education, and ultimately, improved student achievement.

The Campaign for Fiscal Equity (CFE) contracted for a costing out study with the American Institute for Research (AIR) and Management Analyses and Planning, Inc. (MAP), two organizations comprised of nationally renowned education economists and school finance experts. For over a year, these two groups have carried out substantial research, data analysis, regional cost comparisons and extensive meetings with education professionals from across the State. Currently, they are completing their analysis which will indicate the additional funding necessary to meet the Court's mandate. In mid-December, CFE stated that it was imperative for the Governor to take the lead and include $2 billion in his Executive Budget for School Year 2004-05 as a first step in coming into compliance with the CFE v. State ruling.

In mid-December the State Board of Regents came out with its 2004-05 school aid proposal which included a single year increase of $880 million. The Regents propose significant changes to the Operating Aid formula through a foundation formula approach, which would result in an increase of more than $5.9 billion over seven years. Expense based aids would continue to generate additional funding.

In addition, the Assembly initiated a series of statewide hearings in numerous localities in order to explore the impact of the decision. More than 150 people from the education community came to testify including parents, superintendents, teachers, school board members and other interested parties.

The CFE decision provides an opportunity to build a strong future for all of New York's children. The Assembly is committed to implementing reform provisions in time for the upcoming school year. We cannot put our children's education on hold.

It has been repeatedly and empirically demonstrated that the best way to improve public schools is to invest in small classes, the best teachers, high standards, and well equipped classrooms. The Assembly Majority has long advocated having smaller class sizes, Universal Prekindergarten, professional development and improved school facilities. The Assembly has also proposed focusing additional resources to high need school districts throughout the State.

The Executive budget only provides for an increase in General Support for Public Schools of $85.3 million, along with a reference to the establishment of a reserve account for revenues generated through a proposal to expand video lottery terminals. In fact, the Executive budget for SFY 2004-05 leaves New York City with a net reduction in aid from 2003-04 of $6 million.

The Governor's failure once again to address the unique needs of New York City and other high need communities is unacceptable. The State government has an obligation to provide a quality education to all of New York's children. The Assembly has proven its commitment to this goal, and again, the Governor refuses to make education a priority.

Continuing the Assembly LADDER Program: Learning, Achieving, Developing by Directing Education Resources

In 1997 the Assembly succeeded in enacting the historic LADDER agreement, a blueprint for education which focused on early childhood, technology and instructional materials, professional development and school facilities. LADDER specifically provided a statutory multi-year funding commitment for each of the following distinct initiatives: Universal Prekindergarten; Class Size Reduction; Full day Kindergarten; Extended Day/School Violence Prevention Programs; Minor Maintenance; Building Aid Enhancement; Instructional Technology; Professional Development; and Textbooks and Software.

As a result of the LADDER initiative, hundreds of thousands of children participated in programs giving them a strong educational foundation. Despite the success of the LADDER Program, there have been problems. Each year, the Governor has proposed cutting these programs and the Assembly has had to struggle to continue the promised expansion and often, even the continuation of these successful programs (see Figure 1).

Figure 1

As a result, the Governor has kept the LADDER program from reaching its full potential for preparing our children for a better future.

Seven years later, the CFE decision mirrors the priorities set forth in LADDER and specifically identifies these programs as issues to be addressed as part of the resolution of CFE. If the Governor had kept his negotiated, statutory agreement to fully fund these programs, thousands of additional children throughout New York State would have received a significant educational benefit which can never be recaptured. Although over 260,000 children have been served by the Universal Prekindergarten Programs since its inception, 71 percent of New York's four year olds remain without access to this successful program (see Figure 2).

Figure 2

In the 2004-05 Executive budget, the Governor recommends continued funding for the Universal Prekindergarten Program at $202 million, Class Size Reduction Program at $139 million, and the Minor Maintenance Programs at $50 million, the same levels provided in the 2003-04 School Year. The Extended Day/School Violence Prevention Program would receive a five percent reduction in aid, for an appropriation of $28.7 million. The original LADDER agreement included $500 million for Universal Prekindergarten, $225 million for Class Size Reduction, $80 million for the Minor Maintenance Program, $55.2 million for Extended Day/School Violence Prevention, $91 million for Educational Technology and $35 million for Professional Development. This amounts to $565 million in unfunded LADDER programs in the current school year. The Assembly will once again fight to ensure the continuation and enhancement of these critical initiatives.


Since 1996, under the leadership of the Regents, New York State has embarked on a course to raise performance benchmarks for all children in grades K- 12. New learning standards in seven subject areas were adopted and passage of Regents exams as a high school graduation requirement were phased in. These reforms were designed to make certain that all students in New York State have the knowledge and skills to access greater social and economic opportunities. Further, the Regents reforms for attaining higher standards were reinforced by the NCLB, which is focused on closing the achievement gap between all students, regardless of racial background or socioeconomic status.

While noticeable progress has been made in the past five years in New York State, more work clearly needs to be done. There is a significant achievement gap that exists between high need districts, particularly the large city districts, and average and low-need districts. For instance, while 94.6 percent of students in low-need districts met the Regents standard on the 2003 4th grade math exam, only 66.7 percent and 62.3 percent reached that level in New York City and the other large city districts respectively. The 4th grade English language arts exam yielded similar results, with students in average and low need districts performing considerably better than students in New York City and the large cities. Results of 8th grade students in both exams were also comparable. Thus, despite marked progress by districts statewide, the achievement gap remains sizable and there is still much room for further improvement (see Figure 3, Figure 4, and Figure 5).

Figure 3

Figure 4

Figure 5

Our children, particularly in large city school districts and high need districts, cannot be left behind as the demands of standards grow ever more stringent. The fact remains that students must meet numerous requirements in a satisfactory manner or risk not receiving a diploma or graduating from high school. The Assembly remains committed to providing the resources necessary for all students to succeed in meeting these standards.

Teacher Quality and Professional Development

The 21st century has changed the landscape of the workplace across the various sectors of our economy. Our teachers face a rapidly changing classroom that requires not only their highest quality teaching skills, but also their ability to learn and change as the nature of 21st century teaching changes. Teachers must be able to work collaboratively with their colleagues in setting goals to raise student achievement; teachers must be able to capitalize on the resources available such as advanced educational technology to enhance the curriculum and student learning experiences, and teachers must constantly expand their knowledge and skills.

The implementation of the Regents learning standards combined with the requirements of NCLB place professional development and high quality teaching as a priority for the State. Quality teaching was identified in the CFE decision as being one of the primary factors needing remedy in the upcoming session. It is widely known that the most effective way to improve student achievement is to have a high quality teacher in every classroom. Effective teaching is a life long learning process. The National Commission on Teaching & America's Future, (Rockefeller Foundation and the Carnegie Corporation) recommends that teachers experience professional development over their entire careers.

A recent study in Texas found that "teacher expertise accounts for about 40 percent of the variance in student test scores in both math and reading across grades 1 through 11." The study also found that when teacher expertise is coupled with small class size in elementary grades, the combination matches and exceeds the influence of the external home environment in predicting learning gains" (Ferguson, 1991). Similar results have been found in a review of over 60 studies which pinpointed teacher quality from the perspective of productive use of resources. "If the goal is to increase student learning the single most productive use of education dollars is to improve teacher education" (Greenwald Hedges & Laine, 1996).

Attention must also be paid to the disparity that exists in teacher qualification across school districts. Researchers have found that teachers in the State's five largest urban areas are more likely to lack certification than teachers in other areas. These schools also have the highest rates of teacher turnover, clearly a detriment to the achievement that teacher continuity and experience can bring (see Figure 6). Furthermore, the teachers who choose to leave the State's urban classrooms – in New York City, Buffalo, Rochester, Yonkers and Syracuse – are often the most qualified (Lankford, Wyckoff, & Papa, 2000). Offering valuable professional development for teachers in these major urban areas is necessary if we are to attract and retain quality teachers.

Figure 6

Recognizing the importance of high quality, ongoing teacher education, the Assembly provided funding for professional development activities as a key element of LADDER. Just a few years after its passage, the Governor completely eliminated funding for these programs, to the detriment of the thousands of teachers who would benefit. Moreover, last year the Executive budget again made the wrong choice when it proposed a reduction in funding for teacher programs by over $70 million which was ultimately restored in the final, enacted budget. For the 2004-05 Executive budget, the Governor has once again proposed significant cuts to teaching programs including Teacher Support Aid ($45m), Teacher Centers ($10m) and the Teacher Mentor Intern Program ($2.67m).

The Assembly Majority continues its support of New York's teachers and understands that this sector of its workforce needs retraining and ongoing opportunities to learn and grow with the ever changing landscape of the 21st century. Investment in high quality professional development for our teachers will reap dividends in higher student achievement, a highly trained workforce and a business climate attractive to those jobs of the future.

Executive Proposal for Aid to Schools

Each year, the Assembly has initiated and achieved amendments to the Executive budget to provide schools with the resources they need to meet high academic standards. Unfortunately, the Governor refuses to join with us in this effort.

Last year the Governor tried to cut school aid by $1.4 billion, but fortunately the Legislature passed a bipartisan budget over his vetoes and was able to restore $1.1 billion in support for education. This year, the Executive budget proposes an increase of $85.3 million in General Support for Public Schools. However, once again, the budget provides no recognition of $304 million in aid that is owed to school districts, largely based on promised reimbursement formulas already set in law. The NYS School Boards Association and the Educational Conference Board estimate that state aid would need to increase by $650 million merely to sustain existing programs. The Governor's cuts were the wrong choice last year and they are the wrong choice now.

In his State of the State this year, the Governor re- stated that we are presented with an historic opportunity to reform school aid. Unfortunately, he does not propose any such reform.

One of the biggest issues facing the State this year is the Campaign for Fiscal Equity ruling which requires the State to find a fairer school funding formula for all students. While we are encouraged by the fact that the Governor's budget does not eliminate the Assembly's Universal Prekindergarten, Class Size Reduction, or other early education initiatives, as he did last year and in previous years, we are concerned that the Governor did not properly address the CFE decision in his current budget proposal and continues to delay critically needed funding (see Figure 7).

Figure 7

The Executive's budget proposal for SFY 2004-05 cuts or freezes the majority of school aid programs.

Teacher programs are slashed including $20 million for Teacher Centers, which help keep our teachers well trained and up-to-date, $45 million in Teacher Support Aid, and $2.67 million for the Teacher Mentor Intern Program.

Funding for BOCES and Transportation Aid are capped. Money that was promised to reimburse schools for projects they have already paid for is no longer available.

Funding for disabled children served in both private and public settings is capped at 2003-04 levels. This results in $89 million worth of funding being withheld from districts serving these special education students. A moratorium is placed on building aid and a priority based project selection system is proposed along with changes to the calculation of building aid allowable costs.

With adequate resources schools can begin to address the barriers to a quality education. School districts need our help to renovate and repair unsafe buildings and relieve overcrowded classrooms. They need support to offer Prekindergarten to each and every four year old that walks through the school door. They need funding that will allow them to reduce class sizes to manageable levels. And they need programming that will put a highly qualified teacher in every classroom in New York State.

We cannot gamble with our children's future.


Again this year, as he has done in nearly every Executive Budget since he first took office ten years ago, the Governor is proposing cuts to the State's Medicaid Program. For State Fiscal Year (SFY) 2004-05, the Governor proposes nearly $676.6 million (all payers - federal, State, and local shares) in direct cuts and assessments on Medicaid providers. When combined with $774.3 million (all payers) in actions which are targeted at poor, disabled, and elderly recipients, but which will indirectly affect the viability of these health care providers, the total direct fiscal impact on the health care industry is over $1.45 billion. As in the past, these cuts would inflict serious financial hardship on an industry already teetering on the brink of disaster, a situation that threatens the quality and accessibility of health care for not only the poor, elderly and disabled on Medicaid, but all New Yorkers.

The health care industry is the first or second largest employer in nearly every county in this State. Ways and Means Committee staff estimates that the Medicaid cuts proposed by the Governor could result in a total loss of over 34,600 jobs in New York at the same time the State is purportedly seeking ways of creating jobs and stemming the tide of rising unemployment. For the past few years, the health care industry has been suffering from a serious workforce shortage that has had a detrimental impact on the service delivery system. Further job loss will only exacerbate an already critical situation with the potential to affect adversely access to care and the quality of that care as providers are forced to lay off staff or to rely on less trained personnel to deliver services.

The Medical Assistance Program, or Medicaid, is the nation's "health insurer of last resort." New York's Medicaid Program provides needed health care coverage to approximately 2.8 million of the State's most vulnerable populations, including low-income children and adults, as well as elderly and disabled individuals. In State Fiscal Year (SFY) 2004-05, the Executive is projecting Medicaid expenditures to total approximately $42 billion dollars (all payers). While poor children and families constitute the largest component of Medicaid recipients, this group accounts for only 21 percent of Medicaid spending. On the other hand, the aged, blind, and disabled account for approximately 72 percent of Medicaid expenditures, although they comprise less than one-third of all Medicaid recipients. This anomaly is due to the fact that these recipients are the primary users of costly long-term care services, the largest component of the Medicaid Program, representing roughly 30 percent of total Medicaid expenditures (see Figure 8).

* The Medicaid Disproportionate Share Hospital (DSH) Program provides additional assistance to hospitals that serve large numbers of Medicaid and uninsured patients.

Figure 8

New York's Medicaid Spending and That of Other States

New York's Medicaid Program provides needed health care coverage to approximately 2.8 million of the State's most vulnerable populations, including low-income children and adults, as well as elderly and disabled individuals. In recent years, New York's Medicaid Program has been criticized because its expenditures exceed those of other large states, such as Texas, Florida, and California. Many factors contribute to New York's higher spending, including demographic differences, program characteristics, and the maximization of federal contributions.

Demographic Differences

In evaluating Medicaid spending, we must consider the uniqueness of each State's population. Elderly, blind and disabled individuals comprise 29 percent of New York's Medicaid enrollee population, while these groups comprise only 23 percent of California's enrollee population and only 25 percent of Texas's enrollee population.1 As these individuals have more complex conditions and extensive service needs, expenditures for the elderly and disabled are much higher than those for children and adults. New York State has a higher than average rate of children and adults under the age of 65 years who are living with disabilities, as well as the third highest number of elderly individuals in the United States.

New York also has the highest number of reported AIDS cases (155,755) in the country -- more than Florida and Texas combined and approximately 21 percent more than California.2 At the same time, the rate of infection continues to grow, particularly among New York's minorities, youth, and women. Many AIDS patients have high health care expenses, and even individuals with HIV/AIDS who are relatively healthy require a daily regime of expensive medications to maintain their health. Moreover, the development of new drug therapies are helping these individuals live longer, thereby creating a greater demand for services.

1 The Henry J. Kaiser Family Foundation, State Health Facts Online, Distribution of State Medicaid Enrollees by Enrollment Group, FFY 1998.
2 Center for Disease Control (CDC), Divisions of HIV/AIDS Prevention, Cumulative AIDS Cases, Areas Reporting Most Cases, December 2002.

Program Characteristics

The Federal Government requires each state to provide "core" services, in addition to providing Medicaid coverage to mandatory populations. The Federal Government also gives each state the flexibility to provide "optional" services, as well as serve optional populations. However, many services the Federal Government deems as "optional" are actually necessary and keep many elderly and disabled individuals from needing more expensive services.

The major services that the Federal Government considers "optional" are prescription drugs, home health, personal care, clinic services, eyeglasses, and hospice care. Although these services are considered to be optional, they provide needed health care to the State's most vulnerable populations, assist in keeping these individuals healthy, and provide cost-effective alternatives to other types of care, especially institutional care. Despite the important role "optional" services play in keeping poor elderly and disabled individuals healthy, the Governor proposes to eliminate funding for adult dental and other practitioner services in the proposed budget for SFY 2004-05.

Maximizing Federal Contributions

States have a choice of how to fund health care for the elderly, disabled, and poor. They may pay for it with state funds, share responsibility with the local governments, or ask the Federal Government to share in the costs through the Medicaid Program. New York has chosen to provide better services with federal help under the Medicaid Program, thereby saving the State and localities money.

New York State has attracted additional federal funds by using the Medicaid Program to provide both institutional and non- institutional care for the mentally ill and mentally retarded populations. New York also maximizes federal funds through a home and community-based waiver from the Federal Government to allow individuals to receive less expensive home and community-based care rather than institutional care.

New York also uses other strategies, such as Intergovernmental Transfers (IGTs) and Disproportionate Share Hospital (DSH) payments, to generate additional federal funds. Although these complicated funding mechanisms give New York the appearance of higher spending in the Medicaid Program, in actuality they reduce State spending that would have to be made in other health programs.

Local Medicaid Relief

The Assembly has long recognized that rising Medicaid costs strain county budgets. At the same time, providing quality health care to New York's most vulnerable populations cannot be compromised. That is why the Assembly has a history of proposing new Medicaid expansions to improve quality care for New Yorkers, while at the same time fighting to make sure that local governments do not pay the price. The Governor, however, has consistently stood in the way of numerous Assembly proposals that would have protected local Medicaid budgets. Consequently, the Governor's actions have cost counties and the City of New York approximately $750 million over the past ten years.

In 1994, the Assembly supported a two-year plan for the State to assume a larger percentage of the non- federal share of Medicaid managed care and long- term care expenditures. But in 1995, the Governor, as one of his first Medicaid actions, eliminated the second phase of the plan. Then in 1999, the Governor succeeded in repealing the first phase of the plan related to managed care. As a result, counties and New York City have lost over $505 million in Medicaid savings.

In 1999, the Assembly proposed the Family Health Plus (FHP) Program without a local share. Again, the Governor insisted on implementing the Program with a local share, imposing on localities responsibility for 25 percent of Program expenditures. If the Governor would have accepted to the Assembly's original proposal, local governments could have saved more than $250 million to date.

Similarly, the Assembly proposed both the Medicaid Buy-In Program for the working disabled and the Breast and Cervical Cancer expansion for uninsured and underinsured individuals without a local share. Once again, the Governor ignored the Assembly's request and implemented both Programs with a local share. Had the Governor agreed to have the State pay the entirety of the non-federal share of these two programs, counties would have saved nearly $4 million to date.

Ten years after he repealed the planned State takeover of a larger share of long-term care costs, the Governor is proposing that over the next ten years, the State assume full responsibility for the entire local share of long-term care expenditures. The Governor's proposal would only provide $24 million in savings to counties and the City of New York in SFY 2004-05, which is less than two percent of costs that counties incur.

The Elderly

The Executive Budget for SFY 2004-05 demonstrates little compassion for the plight of New York's senior citizens who struggle daily to make ends meet on fixed incomes. In fact, the Governor's proposed budget contains a number of cuts that specifically target poor, disabled and elderly recipients, including service and eligibility reductions and increased out-of-pocket costs. This Governor balances his budget by depriving a vulnerable population of the services they deserve while charging them for this service loss.

Long Term Care

Access to quality health care is critically important for the 2.45 million New Yorkers who are 65 years of age or older. Many of these seniors have no other recourse and must rely on Medicaid for needed medical care. Because the elderly use a disproportionate share of long-term care services, benefit and reimbursement cuts to this sector adversely impact the health care services needed by this vulnerable population.

In the SFY 2004-05 proposed budget, the Governor proposes to "reform" the long-term care system "so that it is efficient, affordable and better meets the needs of the elderly and disabled." Under the guise of reform, the Governor proposes cuts and taxes that will place greater financial strain on already stressed nursing homes and home care providers with the potential for compromising the quality of care and access to the care relied upon and needed by our elderly citizens.

Prescription Drugs

Most elderly individuals take multiple drugs on a daily basis to maintain good health. The escalating out-of-pocket costs of these drugs have become a serious cause of concern for those living on a fixed income, forcing many elderly to choose between essential medications and the necessities of life like food or rent. Even though out-of-pocket costs for prescription drugs continue to rise for the elderly population, the Governor does nothing to address this dilemma. In fact, the Governor's budget recommends various changes to Medicaid and Medicaid Managed Care that would increase out of pocket costs for seniors by increasing pharmacy co-payments for Medicaid and implementing similar co- payments for Medicaid recipients who are enrolled in managed care programs.

The Governor also proposes changes to the Elderly Pharmaceutical Insurance Coverage (EPIC) Program. His proposal to reduce reimbursement to pharmacies for filling prescriptions for EPIC participants has the potential to cause seniors to lose access to needed medications as pharmacists choose to discontinue participation in the program. Given the Governor's rhetoric that recognizes the hardship ever-increasing drug costs have placed on seniors, this is the wrong solution to a pressing problem, a solution that could ultimately jeopardize the viability of what has been a very successful program.

Federal Medicare Prescription Drug, Improvement and Modernization Act of 2003

On December 8, 2003, President Bush signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (H.R. 1). Many provisions of the bill will directly impact New York State. While many aspects of the bill are still not clear, the Governor has chosen to take advantage of one of the more discernible provisions which is effective in 2004.

Prescription Drug Benefit

The new Federal bill provides prescription drug coverage for Medicare beneficiaries; however, the Program will not take effect until 2006. Under this new Program, Medicare beneficiaries will be allowed to voluntarily enroll in the new prescription drug benefit. Medicare beneficiaries would pay an average premium of $35 per month and an annual deductible of $250 for prescription drug coverage in the first year. On average, beneficiaries would be required to pay for 25 percent of their annual prescription costs under $2,250, and 100 percent of their costs from $2,250 to $5,100 per year (known as the "donut hole"). Medicare will cover 95 percent of costs over $5,100 annually. Drug benefits will be provided through approved private plans and each plan can offer multiple benefit packages. It is unclear at this time how the full Medicare prescription drug program will interface with the State's Elderly Pharmaceutical Insurance Coverage (EPIC) Program. The Executive has not proposed any changes to the State's EPIC program in SFY 2004-05 that would address the potential interaction or conflicts between the new Medicare prescription drug program and EPIC.

In his SFY 2004-05 Budget, the Executive does, however, propose to take advantage of a specific provision of the new Federal law that will be effective in 2004 in order to capture savings for the EPIC Program. Under the new Federal provision, Medicare beneficiaries can optionally receive drug discount cards, which are expected to save beneficiaries between 15 to 20 percent of out-of pocket costs per prescription. The Governor proposes to waive existing participant fees for low-income EPIC enrollees under 135 percent of the Federal Poverty Level ($12,123 annual income for a single individual; $16,362 annual income for a couple) to encourage such individuals to obtain a Medicare Interim Discount Drug Card, which will offer up to $600 annually in drug coverage. The Governor estimates that 80,000 will take advantage of the new Medicare Discount Drug Card. This proposal is expected to reduce costs to EPIC enrollees, while at the same time producing savings for the EPIC Program.

Community Services

When elderly individuals are unable to access needed community-based services, they are often forced to utilize more costly services in institutional settings, such as nursing homes. In his State of the State Address, the Governor stated that he would "enhance long term care for our seniors." Despite this rhetoric, the Governor's proposed SFY 2004-05 budget reduces funding for the Long Term Care Ombudsman Program, a program that safeguards the rights of nursing home residents.

The Governor also stated in his State of the State Address that his long-term care proposals would "provide the services that help the elderly stay in their own homes -- where they've lived their lives, raised their children and built their memories." Despite this fact, the Governor's proposed budget would cut funding in the State Office for the Aging for both the Community Services for the Elderly (CSE) Program and the Expanded In-Home Services for the Elderly Program (EISEP). Both programs assist low-income elderly to remain as independent as possible for as long as possible, thereby avoiding costly institutional care.

The Governor's proposed cuts to these worthy senior programs is a shortsighted solution that could ultimately cost the State even more when seniors deprived of community supports are left with no alternative but to utilize more costly institutional settings.

Accessible quality education is a cornerstone of State economic growth by providing workers with the skills necessary to compete in the global economy. A successful public higher education system is measured equally by two major characterizations, the quality of the education delivered and ability of all citizens to access it. The quality of a public higher education system is ensured by providing resources to engage in chosen academic fields of pursuit, but also by maintaining a dedicated leadership committed to preserving the economic and social well-being of its people.

The Assembly strives to ensure quality in our higher education system by providing adequate base resources for schools to both maintain and expand their programs responsibly. It is imperative that New York State guarantee access to a higher education for all working families by holding down tuition and fees, continuing to make investments in programs such as the Tuition Assistance Program (TAP), and by protecting resources directed toward the higher education opportunity programs.

It remains imperative that the commitment to our public higher education system not be compromised. New York State draws students from around the nation and world, and higher education, directly and indirectly, is a powerful economic force. During present times of economic uncertainty, increasing numbers of New Yorkers rely on the public universities to provide them with educational tools vital to success in the workplace. As the demand for public universities swells, the need to maintain the quality and value of the public university system of New York has never been more critical (see Figure 9).

Figure 9

Over the last decade, New York State has fallen behind the rest of the nation in support for higher education. According to a recent survey issued by the Center for the Study of Educational Policy, New York currently ranks 41st in state support for higher education per $1,000 of personal income. In fact, New York performs poorly in both the long run and short run of the Pataki administration. The State ranks 41st in the country for percent change in State support for higher education over a one-year period (-4.5 percent) and 41st in the country over the ten-year period (21.6 percent).

Throughout his time in office, Governor Pataki has targeted higher education for a cumulative total of approximately $2.7 billion in cuts, undercutting what critics consider a mandatory investment required for a quality higher education. The Assembly however has stood firm in its commitment to working families from across the State and restored funding to our public education system year after year. Even though the Governor finds the research and discoveries of New York's colleges and universities an irresistible talking point, over the last ten years he has failed to provide a significant commitment of financial resources to the State's network of higher education.

Cost of Pursuing a College Degree is Steadily Increasing for New York State

The 2004-05 Executive budget proposal diminishes the needed investment by the State of New York in higher education. While he continues to tout the achievements of our public education system, the Governor unfailingly manages to slice the budget of higher education year after year. The Governor proposed over $336 million in cuts to higher education programs in the proposed budget for State Fiscal Year (SFY) 2004-05.

In addition, the Governor's 2004-05 budget proposal would provide a total of $1.5 billion in General Fund support for the four-year colleges of the State's two public university systems. This includes $889.7 million in support of the general operating budget of the state-operated campuses of SUNY and $608.5 million in General Fund support for CUNY senior colleges.

The Governor's proposal also provides $358.7 million for SUNY-operated community colleges and $144.9 million for CUNY community colleges. This reflects virtually no change in State support for community colleges from SFY 2003-04 levels. However, the Executive proposes a reduction of $25.76 million resulting from the lowering of State Base Aid support for community colleges by $115 per full time equivalent (fte) student, lowering State support from $2,300 per fte to $2,185 per fte. There is a $20.9 million increase in State support due to enrollment growth and a $2.9 million increase in support of rental costs at CUNY community colleges reflecting additional costs associated with the relocation of academic facilities lost as a result of the attacks of September 11, 2001. Unfortunately, the Governor has chosen to reduce Base Aid State support for these campuses at a crucial point when increased demands are being placed on the educational services that they provide.

It should be noted that while the Executive proposal places increased burdens on students, the SUNY Board of Trustees remains unconcerned with the impact of its action on students. For the third consecutive year that SUNY's senior leadership has failed to even request an increase in state support for its operations. Nonetheless, they historically have supported tuition increases and recommend a plan to annually raise tuition year after year. Although SUNY's senior leadership has asked more from students, it has failed to make the same request of itself. In an era of an Executive instituted hiring freeze on state agencies, SUNY continues to create new management positions at high paying senior levels. Already, 49 senior managers receive annual salaries in excess of $100,000, these salaries comprise over $6.5 million for central administration provided to SUNY for SFY 2003-2004. Recently, the Comptroller of the State of New York released an audit of SUNY Central Administration highlighting major criticisms; SUNY officials have abused travel compensation guidelines, hiring is carried out without set criteria, promotions are made without proper performance assessments, inventory records are not up to date and, as a result, roughly 22 percent of the inventory could not be located. The time has come for SUNY Central Administration to document its efforts at improving its administrative efficiency.

Under the Executive's budget proposal, tuition revenues overall will account for a greater share of the budgets of the two public university systems of the State. The impact of reductions of State support over the past ten years has resulted in students attending SUNY and CUNY being required to shoulder an ever- increasing burden in the cost of pursuing a higher education. Before Governor Pataki's tenure in 1994-1995, tuition from students attending SUNY and CUNY four-year colleges accounted for 37 percent of total operational expenditures. Under the Executive's proposed budget for 2004-05, tuition will account for roughly 50 percent of total operational expenditures (see Figure 10).

Figure 10

Due to the lack of adequate State support for New York's public universities, the costs incurred by college students has increased in recent years. In 1995, the average cost of tuition and fees for students attending public four-year institutions in New York State was approximately $2,921. Since 1995 this figure has increased by approximately $1,141 or 39 percent to $4,062 (1995-96 and 2002-03 Almanac of Higher Education). In addition, resident undergraduate students in New York State were required to bear the burden of the 4th highest average tuition and fee increase in the nation in 2003-04 (College Board, 2003-04 Annual Survey of Colleges).

Access to Student Aid and Student Support Programs

For the third consecutive year, the 2004-05 Executive budget proposal would also reduce the Tuition Assistance Program (TAP) awards for all eligible students by one-third. The proposed 2004-05 Executive budget includes $604.23 million for the Tuition Assistance Program (TAP). This represents a $259.24 million reduction from the 2003-04 Academic Year, which would translate into an overall reduction of $302 million in estimated TAP expenditures in the 2004-05 Academic Year. In fact, since 1995-96, the Governor has proposed cutting the TAP Program on seven different occasions.

Impact of the Executive's Proposed 33 Percent TAP Reduction
On a Family of Four With One Student Attending SUNY


20,000 4,350 2,900 (1,450)
30,000 3,830 2,553 (1,277)
40,000 2,722 1,814 (908)
50,000 1,522 1,015 (507)
60,000 500 215 (285)
70,000 500 333 (167)
80,000 500 333 (167)
90,000 500 333 (167)
100,000 - - -

The Executive Proposal is regressive in nature. Students coming from the lowest income categories would see the biggest cuts to their TAP award. In fact, a second component of the Governor's TAP proposal is the provision of incentives that directly encourage students to fall further into debt in order to fund their educational costs. Governor Pataki proposes the creation of a new so-called "TAP Performance Award" that would require students to self-finance their college education via additional student loans. Upon the completion of a degree, students would be eligible to receive a "TAP Performance Award" equal to the amount that their TAP award has been reduced, plus accrued interest. Finally, the Governor also proposes the creation of a new $11.5 million TAP Loan Program to support the additional student loan borrowing for students who have exhausted their Federal student loan eligibility. In 2003-04, the Executive proposed an overall reduction of $279 million in estimated TAP expenditures and advanced similar dramatic modifications that would have threatened the long-term viability of the Program. However, the Assembly fought to restore the proposed cuts to the Tuition Assistance Program.

Figure 11

TAP is one of the most significant investments that New York State provides to students seeking access to a higher education. Beginning in 1974, TAP has served a generation of college-bound New Yorkers, serving as a national model for how to ensure that a higher education is beyond the grasp of no child. As the cost of receiving a higher education has steadily risen, the need for additional tuition assistance has never been more imperative (see Figure 11). The Assembly has consistently rejected the Executive's proposed TAP reductions and is committed to ensuring that vital support for student financial aid is maintained. These efforts were culminated in historic enhancements to the Program in 2000-01. This multi-year commitment has raised the maximum award to $5,000, has eliminated the tuition cap on awards, has raised the minimum award to $500, has expanded the income eligibility for TAP recipients by roughly $30,000, from $50,500 to $80,000, and has reduced the downward adjustment of awards for college juniors and seniors by 50 percent.

In addition to recommending the one-third reduction of TAP, the Executive Proposal targets programs focused on improving the access and affordability of a college education in New York State. This includes a proposal to reduce funding for college opportunity programs by $2.7 million, or five percent. In addition, the Executive recommends reducing support for Aid to Independent Colleges and Universities (Bundy Aid) by $2.2 million or five percent.

Capital Plans

The Executive proposal includes a request to provide authorization for $2.9 billion to support a multi- year plan for SUNY and CUNY capital projects. This includes $1.787 billion in authorization to support a second multi-year plan for SUNY capital projects. In addition, the Executive includes $1.1 billion in authorization to support a second multi-year plan for CUNY capital projects. Funded projects encompass critical health and safety, preservation and handicapped access projects as well as the completion of on-going projects at John Jay College and the construction of a new academic building at Medgar Evers College. Finally, the Executive proposal would provide CUNY with authorization necessary to begin planning efforts for the development of Governor's Island and would allow for the creation of a new Science Research Center at City College.

The 2003-04 Executive budget proposal included new, five-year capital plans for SUNY ($2.5 billion) and CUNY ($1.1 billion). During SFY 2003-04 budget negotiations, the Legislature repeatedly requested information necessary to analyze the Executive's SUNY and CUNY capital proposals. Unfortunately, the Executive refused to provide that information or to include any project details in the capital appropriations, resulting in the deferral of significant portions of the capital plans. The Assembly held public hearings on this issue to bring to light the need for comprehensive, detailed capital plans for SUNY and CUNY. It is apparent that the call for the Executive to submit detailed capital plans was heard. The Executive's proposed SFY 2004-05 budget includes five- year capital plans for both SUNY and CUNY that to a certain extent provide project details.

Unfortunately, the Executive proposal fails to provide any capital funding for the 11 Educational Opportunity Centers located across the State. These centers serve as a pipeline for receiving educational and career services to roughly 20,000 students statewide. Many of these facilities have significant capital upgrade needs that fail to be addressed under the Executive's budget proposal.

The Executive's budget proposal would provide $350 million to support the creation of a new Higher Education Facilities Matching Grant Program. Eligible projects would include academic facilities, high technology/ economic development projects, wet labs, and urban renewal/historic preservation projects. Participation in this program would be authorized for SUNY and CUNY campuses as well as independent colleges and universities in the State. Potential projects would be required to establish a three to one match between outside sources of funds and state funds supporting the project. Funds would be allocated based on decision made by a newly created Higher Education Capital Investment Review Board.

New York is a State gifted with the resources to allow it to overcome any obstacle. From the generators at Niagara Falls to the harbors and bays of Long Island, and from the high tech centers at the former Griffiss Air Base to the farms of the North Country, our State has everything it needs to not just succeed, but to thrive.

More than natural resources, however, New York has another resource that places it at the head of the pack: its people. Nowhere else can one find the kind of innovation, creativity, work ethic or drive that one sees every day in factories, offices and universities across our State. And it's because of all those reasons that New York earned the title "The Empire State".

Thousands of New Yorkers find themselves out of work. Main streets in cities and towns across the State sit abandoned, their stores and businesses having left years ago. Parents watch their children leave for college and never come back because the opportunities are simply no longer there.

New York: A State In Need of a Comprehensive Economic Development Plan

The kind of strategic planning the State needs has not been forthcoming from this administration. The last time the Pataki Administration released a comprehensive strategic economic plan – something they're required by law to do annually – was 1996, and that plan was never implemented.

The results of this lack of foresight are startling. Despite the fact that much of the Governor's tenure coincided with the largest economic expansion in the nation's history, New York was unable to harness the prevailing economic winds that allowed state after state to grow and expand. In fact, while the nation's employment grew by 11.8 percent between 1995 and 2003, New York's only grew by 6.3 percent. Had New York created jobs at the same rate as the rest of the nation during the height of the economic boom, we would have created almost 432,900 more jobs. New York's job growth continues to lag, with our State now ranking 38th in employment growth when compared to other states. In 2002, the number of jobs actually fell by 1.8 percent.

Upstate New York has experienced negative job growth of -0.7 percent in 2001 and –1.1 percent growth in 2002. Furthermore, since the mid-1990s, most of the regions in Upstate New York lagged the State in annual employment growth, with four of the regions growing at less than one-half the rate of the State as a whole. Upstate also lagged the State as a whole for wage growth since the mid-1990s. New York City fueled by Manhattan, was the only region in the State to outpace the State as a whole (see Figure 12 and Figure 13).

Figure 12

Figure 13

Developing a Strategic Approach to Economic Development

The Assembly has long recognized that New York's economy is a collection of diverse regional economies and industry clusters. The Executive's cumbersome, top-down, project-by- project approach to economic development is the wrong choice. It has been slow to respond to differing needs across the State. The administration has not provided coordinated guidance to help different sectors benefit from synergistic growth, thus preventing the State's economy from reaching its full potential. New York has added new programs and organizations for economic development, but without an apparent overall economic development strategy. The development of a rapidly changing, technology-based "new economy" only further highlights the need for flexibility, creativity and responsiveness to increase the State's competitiveness in national and global markets.

New York State needs to adopt a more comprehensive strategic policy for economic growth beyond the requirements of individual projects and companies. The Assembly has put forward this strategy to capitalize on industries in which the State has a competitive advantage and recognize the economic diversity of the State's regions. This strategic approach should emphasize programs that link research and development funding to jobs for New Yorkers in new industries as well as modernize traditional industries to increase their competitiveness. It should identify the needs of regional economies and make available assistance to revitalize urban centers and main streets, assist small business, promote tourism and maintain a state of the art workforce.

New Jersey, Michigan and Florida have adopted more corporate-like structures for economic development program governance that emulate good business practices, inject private sector perspective, and provide insulation from the political process. These new public/private approaches also assure representation from different parts of the State and different sectors of the economy.

Empire Zones: A Successful Program Undermined

In 2000, the Assembly was successful in modifying the Economic Development Zones Program, creating the Empire Zones Program, and instilling in the new zones even greater array of tax benefits. In fact, if enough jobs were created, a company could operate virtually tax-free. The immediate impact on the economy was dramatic. Local governments, business leaders and economic developers lauded the Program.

Since their inception, Empire Zones have been an important tool in spurring economic activity in our aging inner cities and run-down commercial strips. Abandoned factories have been reclaimed, blighted communities have been improved and jobs have been created.

Despite the considerable successes of the Program, serious problems have also come to light. In one case, a business simply changed its name in order to get a full refund on its real property taxes. In another, a developer hired a single janitor and got a complete exemption from State and local taxes. In fact, some of the abuses may have been the result of administrative actions taken by the Empire State Development Corporation (ESDC), the agency changed with oversight of the Program. In fact, abuses started to arise in 2000 with a series of new rules and regulations from ESDC, which among other things, created the concept of "multiple sub-zones."

This seemingly harmless change, along with a boundary amendment process lacking adequate controls, diverged from the spirit and letter of the law by allowing zones to be broken apart. As a result, businesses no longer had to reside in a distressed community to receive the tax benefits. Instead, they were allowed to move to the suburbs with their zone status intact or stay in the suburbs and get annexed by the zone, in some instances without creating any new jobs.

ESDC has failed to exercise appropriate oversight and management of the Program. For example, ESDC is required to submit an annual Empire Zone Program report but has not complied with this requirement. Only after repeated requests from the Assembly has ESDC released any detailed information regarding the way in which the Empire Zone Program has been administered, Program accomplishments, and the costs associated with the Program.

Making Empire Zones Accountable

In an effort to address some of the concerns that have surfaced, the Assembly passed legislation in June of 2003 seeking to reform the State's Empire Zones Program and refocus the Program on one of its original goals of job creation in economically distressed areas. Specifically, the Assembly proposal would replace the current Empire Zone Development Board with a new, three member Economic Development Control Board - providing one appointment each to the Governor, the Assembly Speaker and the Senate Majority Leader. In addition, this plan would require zones to reconfigure themselves into three, distinct, contiguous areas; would de-certify businesses that simply reincorporated, without adding new jobs, in order to obtain benefits; would enhance the role of the State Department of Taxation and Finance to include the certification and, when appropriate, the decertification of businesses; and would require comprehensive reports by both ESDC and the State Department of Taxation and Finance to make public the number of jobs created and the true cost of the Program.

In anticipation of convening oversight hearings, the Assembly Majority formally requested information from ESDC regarding the process by which Empire Zones are selected or modified, Empire Zone Program costs, and the actual number and types of jobs being created in the State's 72 Empire Zones. In addition, the Assembly called for the Office of the State Comptroller to conduct an audit of the Empire Zone Program. This audit has been commenced. If the Empire Zone Program is to continue to offer its current level of tax benefits, it must be reformed so that each zone is able to realize its maximum economic potential and so that taxpayers realize a good return on their investment.

Executive Proposal for Empire Zones

The 2004-05 Executive budget proposal includes provisions that would extend the Empire Zone Program for five years to July 31, 2009. The Program is currently set to expire on July 31, 2004. In addition, the Executive Proposal would make amendments to alter the purpose and administration, as well as the benefits offered under the Program. As part of his Empire Zone proposal, the Governor would vest ESDC, the very agency responsible for administering the currently troubled Program, with increased oversight responsibility.

Specifically, the Executive proposal would require that zones designated pursuant to eligible census tracts designate acreage within up to three non-contiguous areas within a four square mile "superboundary". Countywide Empire Zones would be required to place at least 60 percent of its total Empire Zone acreage in up to six "targeted areas", which must be located within census tracts that have rates of unemployment and poverty that exceed the countywide unemployment and poverty rates according to the most recent census data available. The Executive proposal would also allow for the annual designation of up to one square- mile of non-contiguous areas as "flex-zones" focusing on large projects involving significant job creation potential. This designation would be made at the sole discretion of the Commissioner of Economic Development.

In addition, the Executive proposal would establish increased reporting requirements and performance measures for the Program and would require the submission of a local zone development plan to the Commissioner of Economic Development.

Finally, the Executive proposal includes significant amendments to the Tax Law to alter the manner in which benefits are calculated under the Program. Highlights of the proposed Tax Law revisions include: the lowering of the tax benefit period for certain business tax credits from 15 years to 10 years; the altering of the employment test used to determine eligibility for certain tax credits, and; the expansion of the definition of real property taxes for the Program to provide eligibility to certain businesses that make direct payments of certified eligible Real Property Taxes or PILOTs as part of a lease agreement.

Increasing Industry-University Collaboration

It is imperative that the unsurpassed research and development efforts of the many universities of the Empire State are supported and allowed to prosper. New York maintains a tremendous system of public and private institutions of higher education that provide a unique and comprehensive knowledge base that will continue to serve as an engine of future economic growth.

As we continue to invest in academic research and development at our universities and other research institutions, we must be mindful to ensure accountability. The State must develop a comprehensive strategy that will articulate how our investments in academic research and development will benefit all of New Yorkers and how to best prepare the next generation of workers who will be employed in the high tech industries that are spurred from these investments.

The Assembly also recognizes the need to formulate a strategic commercialization policy to translate the innovations created at our universities into jobs for New Yorkers. A critical element of a successful commercialization policy is establishing linkages between private sector investment capital and the innovations discovered in the labs of New York's research institutions or by individual companies. Additionally, the State should continue its support of incubators and accelerators that provide low-cost, flexible, state-of-the-art space where young and expanding technology firms can thrive.

The Empire State's colleges and universities have become powerhouses in the State's economy. Not only are these colleges and universities home to cutting edge research and development, but one of the growing employers of New Yorkers. According to a recent report by the State Department of Labor, the employment at New York's public and private colleges and universities grew at 27 percent from 1995 through 2002. In fact, the State's colleges and universities are providing quality jobs to New Yorker's when many industries are downsizing. In addition, many Upstate rural comminutes have a high proportion of their employment concentrated in colleges and universities.

The Assembly has historically supported increased collaboration between industry and universities. The Assembly successfully fought for the creation of the RESTORE New York Program as part of the 2002-03 enacted State budget, which, in part, focuses on the development and improvement of facilities promoting the growth and advancement of high technology research and commercialization efforts in New York State.

Providing A Skilled Workforce

The skills of the New York workforce are a key resource to the economic growth of the State. The Public Policy Institute of New York State, an affiliate of the Business Council, noted in its study "New Yorkers at the Millennium" that employment can be maintained and job losses mitigated by ensuring that worker skills needed to perform tasks are available in the State, particularly if the skills are specialized ("New Yorkers at the Millennium", March 2003, p.26). Although improving the skills of the State's workforce must be a critical component of any development strategy, uncertainty over Federal funding and a lack of leadership by the Executive has led to significantly less funding for training than the State has had in the past. At the federal level, the Workforce Investment Act (WIA) of 1998 is subject to reauthorization. The House and Senate have passed similar bills (H.R. 1261 and S.1627) and are currently working with the Administration to pass reauthorization legislation. Each of the proposals under consideration would result in some level of decrease in WIA funding and grants for adult job training programs, dislocated worker services, and youth employment would be affected. Federal WIA funds allocated to New York, however, have not been fully spent even though the skill training needs of workers is significant and skill requirements of jobs in the State's economy are higher than ever. If these funds are not fully obligated by the State, the Federal Government can require the State to return unused monies.

Congress is also ready to act on legislation that would rescind Welfare-to-Work grants first appropriated to the States in Federal Fiscal Year 1999. The Welfare-to-Work grants, intended to provide skills training and education for low-income workers coming off of public assistance, have also been underutilized by the Executive in New York. The State may lose as much as $50 million in federal funds as a result of rescission. If rescinded, these monies, included as reappropriations in the Executive's proposed budget, would be unavailable to assist the State's low wage earners to improve their skills and take on new, higher wage employment.

Executive support for State funded programs has decreased at the same time. Programs such as the Assembly initiative, the Strategic Training Alliance Program, has not received any new funding since 2000 and funds have not been utilized to their potential. Other programs such as the Youth Employment, Education and Training Program (YEETP) and the Displaced Homemaker Program have also been consistently reduced by the Executive's actions. Training programs for workers needing skills upgrading or retraining are not available even though continuous upgrading of the workforce is necessary if the State is to become economically competitive. The Assembly Majority has taken the initiative, advocating increased funding for technology training programs and for creative programming at community colleges and other institutions, in an effort to restore the level of investment in the skills of New York workers.

Low income workers, depending on family size and other characteristics, can earn below the Federal Poverty Level. Without the opportunity to improve their skills, they cannot access the resources necessary to help them improve their earnings capability. According to a recent Fiscal Policy Institute study, real wages for New York State's lowest income workers have decreased in the last two decades. The disparity between the State average wage and the minimum wage is greater in New York than in any other state. Programs that the Executive has reduced or eliminated are all successful programs that have assisted low skill workers in New York achieve self-sufficiency through job training and career advancement. The Assembly has fought hard to increase workforce training and employee skills upgrading throughout the State. Without a highly trained workforce, New York's present and future prosperity is put at risk.

A successful workforce development policy must also reach individuals who do not presently have jobs. Even though training and education are recognized as the way to assist people trying to find employment, the Executive proposes the elimination of several employment and training programs funded through the TANF surplus that were specifically designed to assist individuals with the most significant barriers to employment. Denied access to programs that might help them get off public assistance, these unskilled job seekers are penalized for failing to free themselves from public assistance through grant reductions. Skills development is the key to helping individuals attain self- sufficiency.

Revitalizing New York's Manufacturing Sector

Manufacturing remains an essential foundation of the State's economy, especially Upstate, where half of all jobs depend on manufacturing. However, the Executive has failed to develop a comprehensive strategy needed to stabilize and grow the manufacturing sector. As a result, New York's manufacturing industry has been steadily losing jobs. From 1995 through 2002, the manufacturing sector lost over 157,618 jobs statewide. Even more startling is that fact that New York lost 51,518 between 2001 and 2002. (source: New York State Department of Labor).

Major components to sustaining a viable manufacturing economy in this country include research and development, innovation, education, and flexibility. In the 21st century environment for manufacturing, those industries that apply new technologies, generate new products, have access to educated workers will succeed. Future success in manufacturing in the U.S. will depend on the production of high-margin, high-value goods by skilled and well-paid workers.

New York State is particularly well-suited to capitalize on these keys to growth, possessing a skilled and educated workforce, strong educational institutions, and an exceptionally powerful research and development capacity. Small, high-technology firms, especially, provide positive opportunities for renewed growth. Moreover, among older, more traditional firms, increased productivity, the application of new technologies, and creative partnerships among firms can also create synergies leading to renewed vitality. Finally, existing clusters of viable manufacturing industries continue to operate in the State and must be identified and encouraged.

New York has the opportunity to stabilize and even grow its still significant manufacturing sector by establishing a comprehensive strategy to address the issues confronting the manufacturing base which often provide relatively high quality jobs for people with fewer educational and employment opportunities and which supports a more stable and diverse economy.

Capitalizing On Regional, Community Strengths

Community-based economic development is an important factor in economic empowerment. It is a process by which urban, suburban and rural communities seek to enhance their competitiveness by recognizing regional strengths, identifying barriers to development, developing a plan to overcome the barriers, and implementing the plan throughout the community. With the active involvement of key public, private and community- based leaders, such a process leads to a consensus for a community-based economic development strategy that both complements and facilitates a broader regional strategy.

Because of that, the Assembly has long supported regional development programs. In the 2003-04 enacted budget, the Assembly was able to secure continued support for the Minority and Women-Owned Business Development Lending Program, which works in cooperation with community-based groups to decentralize lending for small and micro-loans and loans to start up minority- or women-owned businesses.

Another Assembly initiative, the Urban and Community Development Program, works within challenged communities to help build and improve distressed areas. In essence, the program provides funding for commercial revitalization in central business districts or commercial strips, and for the acquisition, renovation, or construction of commercial, industrial and mixed-use facilities.

Tourism is another critical area economically for our State, and the Assembly has been fighting to promote it as well. The State must focus its efforts on attracting more visitors, thereby bringing new money into New York's economy. Finding ways to stimulate international travel as well as developing a tourism strategy that allows localities to share in the State's successes remain important. The Assembly has long supported partnerships between local governments and tourism promotion agencies to market their tourist destinations throughout the State. Further, local investment in tourism catalyzes regional job growth sustained by traveler demand.

The Assembly remains committed to promoting the Rural Revitalization Program as well, created in recognition of New York's rural communities' need for immediate help in developing the capacity to plan and organize economic development strategies to provide rural residents with economic opportunities. It's designed to catalyze rural economic development initiatives by providing financial and technical assistance for growth of agribusinesses, expansion of farmers' markets, establishment of business incubators, and support of agricultural industry job training programs.

The Executive Proposal includes a new capital appropriation of $250 million to establish a new Regional Economic Growth Program. This Program will support major high technology or economic development projects that could potentially have significant regional economic impacts or create jobs. Program guidelines would be established by the Urban Development Corporation and would give priority to projects that are likely to produce long-term employment growth or increased business activity within a municipality or region of the State. Ultimately, project selection will be at the discretion of the Urban Development Corporation.


New York electric utility rates remain the highest in the nation, significantly higher than the national average. The Governor's poorly executed electricity deregulation strategy has delivered neither significant rate benefits nor the promised competition in the retail electric markets. State energy consumers face the prospect of higher prices that may undermine attempts to attract business to New York. No issue is more critical for business than the uninterrupted supply of power at competitive prices. Unfortunately postmortems of the August 14th blackouts have suggested that the State may require substantial investments in its energy infrastructure. The continued poor overall condition of the power industry and the Governor's deregulation policies have combined to create serious concerns over whether that investment will be forthcoming and what it will cost consumers.

For the past several years, the Assembly has demonstrated leadership in the energy policy area. In 2001, to assist families and businesses, the Assembly approved the New York State Transitional Energy Plan (NYSTEP), a plan to help relieve consumer burdens and protect them from extreme price fluctuations and unfair selling practices. One component of this plan was signed into law in 2002 under the Consumer Protection Act. In 2003, to protect consumers, the Assembly passed legislation that prohibited automatic rate increases and required the Public Service Commission (PSC) to review rate increases. The Assembly also passed legislation last year that would increase the transparency and accountability of the Long Island Power Authority's (LIPA) finances and require public hearings on proposals to increase rates.

The Assembly originated concepts that led to the establishment of the "Power for Jobs Program," which makes available low-cost electricity to New York businesses and non- profit institutions that commit to job retention and creation. The Assembly fought for the continuation of this Program and was responsible for its expansion in both 1998 and 2000. The Program was again expanded in 2002 in order to extend contracts that were set to expire. This year, the Executive has proposed $10 million worth of rebates for contracts that expire before March 31, 2005. For purposes of this extension, the Program would be changed from one of tax credits granted to the utility to a rebate system administered through the Empire State Development Corporation (ESDC).

The centerpiece of recent Assembly energy efforts is legislation that reestablishes an expedited power plant siting process while correcting problems in the expired law that led to abuses of the process. The legislation also renews and attempts to reinvigorate the State's energy planning process to help deal with concerns such as the reliability of the State's electric system as well as high unstable fuel prices.

The Assembly will continue to promote policies that provide rate relief and price stability, balance economic and environmental concerns, and provide mechanisms to guarantee market development that offers true customer choice for all New York State energy consumers. Over the past eight years, the Assembly has introduced comprehensive legislation that provided a cautious approach toward restructuring the energy industry. Unless the Governor abandons his ad hoc energy strategy and attempts to address the link between energy costs, economic development, and job creation, New York State will not be able to reach its full economic potential.

Highways and Bridges

For the second year in a row, the Executive proposes to decrease the road and bridge construction and rehabilitation letting level by $100 million, to $1.65 billion in State Fiscal Year (SFY) 2004-05. Approximately 30 percent of the roads in New York have pavement conditions that were rated poor or fair in 2003. Nearly 30 percent of state and local bridges were also rated deficient. Poor pavement conditions and deficient bridges are a threat to the safety of motorists and a tax on the State's economy. Improving the transportation infrastructure in the State is critical to ensuring the safety of motorists as well as keeping New York competitive in attracting businesses and jobs, and promoting tourism in the State.

Transportation Equity Act of the 21st Century

The Transportation Equity Act of the 21st Century (TEA- 21) is federal legislation (Public Law 105-178) that was enacted in 1998 and expired September 30, 2003. Congress has authorized a five month extension only through February 2004. The current program allocated $8.1 billion in highway funding and $6.7 billion in transit funding to New York during the 1998-2003 period. TEA-21 requires the Federal Government to prioritize highway funding for the states and to provide guaranteed minimum funding levels to the states based on formulas and state contribution levels. States contribute to the funding in the form of highway user fees, fuel taxes and similar revenue. TEA-21 monies support transportation infrastructure construction and reconstruction, transit system investments, and smart technology initiatives for transportation management and traffic congestion relief.

Despite the fact that the amount of federal highway funding New York will receive is unknown and could, in fact, decrease from current levels, the Executive's proposed budget assumes a $200 million increase in federal highway funding.

Reauthorization is critical; New York cannot afford to lose any of the nearly $15 billion in federal transportation aid it received under the 1998-2003 TEA-21 program. If the reauthorization fails or if the current level of funding decreases, it will greatly affect highway and transit funding in the State. New York must be active in securing its fair share of federal transportation funding by sending a clear message to the Administration and Congress about the importance of TEA-21 to the State.

Mass Transit

Mass transit ridership in New York State accounts for approximately one-third of total public transportation ridership in the nation. New York's transit systems transport more than 2.3 billion riders over 600 million miles every year. Mass transit is essential to bolstering the economic well being of the State, cutting pollution, increasing energy conservation, and relieving road congestion.

The Executive proposes $1.78 billion in transit operating aid for transit systems statewide. Upstate transit systems would receive $111 million. Downstate transit systems, excluding the Metropolitan Transportation Authority (MTA), would receive $163 million. The MTA, which serves the New York City metropolitan area, would receive $1.5 billion, a $46.2 million increase over SFY 2003-04 levels.

State mass transit funding supports suburban, urban and rural mobility; accessibility and opportunity for welfare-to-work program participants; transportation for school children; and accessibility for the elderly and people with disabilities. Additionally, economical and efficient transit systems support businesses by providing affordable transportation for workers and consumers. State investments in mass transit benefit all New Yorkers. New York's safe, efficient and sound transit systems help save billions of dollars by reducing traffic congestion, increasing productivity, and improving environmental health.

Metropolitan Transportation Authority

More than 2.3 billion New Yorkers rely on the MTA every day for reliable, affordable and safe travel in the metropolitan New York area. Consequently, it is essential that the MTA handles its financial affairs in an accurate, efficient and responsible manner. In 2002, the MTA came under scrutiny from the State Legislature, the State Comptroller, and many others regarding its budgeting process and questionable financial accounting practices. More stringent financial and operational oversight is prerequisite to ensuring a safe and efficient transit system. The Assembly has proposed various measures to make the MTA's budget process more transparent as well as provide necessary oversight in its operational and financial accounting practices. These measures include creating a review board and an independent budget office to oversee the MTA's operating budget and programs.

Despite the questions and controversy surrounding the MTA's ability to fully and accurately substantiate the financial need for an increase, in 2003, the MTA raised fares and tolls in an effort to close a purported $1 billion budget gap in 2003 and 2004. The increase in fares and tolls is essentially a tax on the working families in this State.

The MTA's 2004 budget projects a $36 million surplus at year's end. However, in its 2004-2007 Financial Plan, the MTA reports that operating deficits would reach $840 million in 2005, $1.340 billion in 2006 and $1.450 billion in 2007. Debt service costs are projected to increase from $797 million in 2003 to $1.405 billion in 2005 and $1.707 billion in 2007. Despite these looming billion dollar deficits and sky-rocketing cost increases, the Executive makes no proposal to address the problems of the MTA.

The MTA's Capital Plan includes critical network expansion projects like the 2nd Avenue Subway project. The full- length 2nd Avenue Subway line will extend from 125th Street in East Harlem to Lower Manhattan. The 2nd Avenue Subway project is exceedingly important because it will relieve over-crowding on the Lexington Avenue line; serve as a new transit line for residents on Manhattan's East Side, who, currently, are under-served; foster improved environmental conditions and provide better access to Lower Manhattan.

Benefits of a fully-built 2nd Avenue Subway extend beyond basic transportation infrastructure needs. A fully-built 2nd Avenue Subway will be a boon for the New York City economy, the engine that drives the economy of New York State. It has been estimated that, in general, for every $1 spent on mass transit, at least $6 in economic benefits is realized. The 2nd Avenue Subway will bring workers and consumers into Lower Manhattan, revitalizing businesses and helping to create jobs. It is expected that over a hundred thousand people will ride the 2nd Avenue subway each day. Moreover, this and other network expansion projects help reduce pollution and traffic congestion by providing additional mass transit options. Construction of the 2nd Avenue subway will begin in the end of 2004.

Other major network expansion projects in the Capital Plan are the East Side Access Project and the LaGuardia Access Project. The East Side Access Project will provide a transit link for residents in Queens and Long Island to the Grand Central Terminal in Manhattan and bring tens of thousands of new commuters to the Grand Central Terminal daily. With the Lexington Avenue line already operating significantly above its capacity, it is imperative that the 2nd Avenue subway be completed to alleviate the overcrowding and realize any benefits associated with the East Side Access Project. The LaGuardia Access Project will result in a one-seat-ride transit option connecting LaGuardia Airport and the Manhattan Business District. Other benefits of the LaGuardia Access Project include reduced highway congestion and improved air quality.

The MTA is in the final year of its $19 billion five-year 2000-04 Capital Plan. The Capital Plan provides funding to construct, maintain, purchase and rehabilitate the MTA's facilities, infrastructure and rolling stock. The Assembly has been instrumental in strengthening the State's commitment to addressing environmental issues by requiring the MTA to increase the number of clean fuel vehicles in its fleet. In the current 2000- 2004 Capital Plan, 550 new clean fuel buses were added to the fleet, phasing out old diesel vehicles by the end of the 2000-2004 Capital Plan. New York City has one of the highest incidences of asthma and respiratory diseases in the nation and remains on the Environmental Protection Agency's (EPA) list of non-attainment areas. Diesel emissions are a major source of air pollution in New York City and have been linked to cancer and asthma. This situation has contributed to countless unnecessary emergency room visits, missed days of work and school, increased health care costs and even decreased life expectancies. All of this results in an undue financial burden upon the local economy and a depressed quality of life. The proliferation of clean fuel vehicles is essential to improving environmental conditions and protecting the health of residents in and around the MTA commuter district.

The Capital Plan also provides for continued improvement of the existing system through the acquisition of new rolling stock, station renovations, new technology and security enhancements.

Looking forward, the MTA must seek to develop innovative approaches to providing safe, efficient, and affordable mass transit options while encouraging public participation and fostering public support for the manner in which these goals are achieved.

Following the terrorist attacks of September 11, 2001, the Assembly worked with the Governor and Senate to pass a strong anti-terrorism law. The Assembly has worked diligently since to provide the necessary resources to protect the citizens of our State. The Assembly is prepared to build upon these efforts, which, first and foremost, should focus on measures to prevent another terrorist attack. The Assembly will continue its work in enacting tough anti-crime laws that have helped to reduce crime throughout our State.

The attacks on our State have created a new demand for coordinated homeland security strategies in every community. These strategies rightly call for law enforcement agencies to have access to innovative tools and technologies to prevent, respond, and deter any future acts of domestic terrorism. Increases in the Federal Homeland Security Advisory System have placed a high demand on these same law enforcement personnel to protect the vast critical infrastructures of the State while continuing their duties of protecting the citizenry.

These factors, among others, have placed new burdens on the budgets of the State and its localities. The Assembly urges the Governor to work with the Federal Government to obtain grant funding that truly reflects New York's unique status in the Nation and its inherent risk of future terrorist attacks. The Governor is also urged to allocate available funding, equipment and training resources to localities as swiftly as possible to facilitate the implementation of preparedness and response capabilities of first responders.

Coordinated homeland security strategies are only effective when the persons of initial contact charged with answering the call are adequately prepared to do so. The Assembly will continue to consider the interests of first responders—our State's first line of defense—in all homeland security deliberations.

In the 28 months that have passed since September 11, 2001, the Legislature has enacted a variety of appropriations aimed at disaster response, rebuilding and recovery, as well as domestic terrorism prevention and homeland security. To date, billions of dollars have been appropriated and hundreds of millions have been spent on these collective efforts.

The Legislature established the Temporary Joint Legislative Committee on Disaster Response and Preparedness through legislation enacted as part of the SFY 2003-04 Budget to ensure that the various State agencies charged with responsibility for homeland security and disaster response are working in a coordinated manner with other agencies at all levels of government and are using resources in a prudent manner, with proper oversight and accountability mechanisms in place. The Assembly will continue to support homeland security and disaster preparedness and response efforts while working to ensure that resources are used to achieve the highest level of quality in reconstruction and the greatest level of security in return for every dollar invested.

New York's Wireless Communications Infrastructure

The Assembly remains committed to enhancing the emergency communications capabilities afforded to individuals, emergency service personnel and law enforcement professionals alike. The ability to effectively communicate in times of crisis may be the principal factor in determining the success or failure in resolving or responding to precarious situations.

Enhanced Wireless 911 Funding

In State Fiscal Year 2002-03, at the urging of the Legislature, a Local Enhanced Wireless 911 Program was established to provide local reimbursement for eligible costs associated with the provision of wireless 911 service. In SFY 2002-03, the Board created to administer this Program was empowered to disburse $20 million to localities, and was also given the authority to award an additional $10 million to localities each year thereafter.

In SFY 2003-04, following the override of an Executive veto, the Legislature took an innovative step to create a $100 million capital financing plan that would provide grants exclusively to local public safety answering points to fund certain prospective costs associated with the provision of enhanced wireless 911 (E-911) service. E-911 technology allows for cellular callers to be physically located when placing an emergency 911 call, and its implementation is necessary to come into compliance with regulations promulgated by the Federal Communication Commission (FCC). A portion of the existing cellular surcharge is utilized to finance this new Program.

This capital financing initiative can only reach its full potential when the Executive fully embraces the importance of E- 911 service. Following a sustained effort by the Legislature to bring this issue to the forefront of the public protection debate, the Governor appears to have begun to accept the necessity of this technology. The E-911 Board has taken action recently to facilitate the implementation of this capital program. The Assembly encourages the expeditious distribution of grant awards to localities.

In his State of the State address, the Governor emphasized his commitment to public safety by making mention of several "common sense" measures that "will save lives". The Assembly believes that enhanced wireless 911 service fits squarely within these parameters. It makes common sense to dedicate a portion of cellular surcharge revenue to fund an emergency service that New York's cellular customers have come to expect, and the life saving ability of this technology cannot be overstated. The Assembly implores the Governor to become increasingly engaged in the process of implementing this technology, and include enhanced 911 emergency communications as part of a comprehensive public protection strategy.

Statewide Wireless Network

The Statewide Wireless Network (SWN) initiative was created to allow for emergency services personnel to communicate with one another under one seamless network in times of emergency or distress. An interoperable communications network will prove to be a powerful tool in policing our communities and will also serve our State's interest in preventing and responding to future catastrophic events. The Assembly urges the Governor to support this initiative, and to carefully consider how pre-existing or emerging communications improvements might be enhanced or rendered obsolete with the creation of SWN. The Executive must also ensure that any Federal funds made available for this purpose are used to support measures that will coincide with the SWN proposal, and make certain that local first responders have unimpeded and affordable access to the finished product.

The SFY 2004-05 Executive Budget includes a proposal to impose a State-only sales tax surcharge on protective and detective services and admissions into certain sporting events and amusement parks at rates of three and four percent, respectively. The Executive proposal would direct revenues collected pursuant to these two surcharges to the "Public Safety and Security Account" to fund wireless 911 local assistance programs, the build-out of the Statewide Wireless Network, and other homeland security initiatives. While adequate funding for these initiatives is paramount, it may not have been necessary for the Executive to propose these new surcharges if revenues from the existing cellular telephone surcharge had not been misdirected to pay for extraneous expenses.

While policymakers often consider child care as a human service issue, it is also necessary to view child care in New York State as a workforce issue. The availability of quality, accessible child care benefits not only working parents for whom it is essential, but also the businesses for whom they work. Companies benefit from accessible and reliable child care through lower absenteeism and increased productivity. For working families, child care that is affordable, of good quality and available may mean the difference between employment and public assistance.

Job supports, such as employment training and child care assistance enable thousands of working families to seek and to retain employment. In New York State, child care assistance is provided for eligible working families through the Child Care Block Grant. In the Executive Budget for State Fiscal Year (SFY) 2004-05, the Governor proposes the continuation of appropriations to the Child Care Block Grant at current year levels of $929 million. Without an overall year to year increase, this appropriation is tantamount to a reduction in child care support. The Governor contends that this appropriation level will support 186,900 subsidized child care placements, an increase of 3,500 over the current year's subsidy level, while allowing for a market rate increase for childcare providers. In order to accomplish this, however, he reduces support for programs and services that enhance the quality of child care. Moreover, the Governor fails to continue funding of $16.4 million for the SUNY and CUNY child care programs, satellite child care, and the facilitated enrollment demonstration projects that are provided for in the current year's budget.

At last count, 27,858 children were waiting for child care subsidies. In SFY 2004-2005, the Executive estimates a 3.6 percent increase in the public assistance rolls. Public assistance recipients are generally required to participate in work or job training activities and often need the added support of child care assistance as well. Once again there will be an increased need for subsidized child care and once again there will be an inadequate supply.

With over 27,000 families on waiting lists, and a guaranteed greater need for child care as the result of job creation and growing welfare rolls, the State needs to expand not only the number of child care subsidies, but child care capacity as well. In SFY 1999-2000 and 2000-01, the Assembly secured appropriations that together totaled $30 million to establish the Child Care Facilities Development Program to create, to renovate and to rehabilitate child care facilities. The Governor, once again, makes no commitment to the expansion of child care capacity in the Executive Budget for SFY 2004-05.

The Assembly consistently works toward a State child care infrastructure that empowers working families, supports employees and businesses, and promotes safe and healthy child development. Since SFY 1998-99, the Assembly has secured over $200 million above the Governor's recommendation for child care programs and services, and targeted these funds for additional child care subsidies and quality initiatives. A sustained commitment to affordable, available, quality child care should be viewed by the Executive as a government obligation. The working people of this State do not deserve less.

In 1996, Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) to replace the Aid to Families with Dependent Children Program (AFDC). The following year, New York State enacted major welfare reform legislation to comply with the new Federal laws and regulations. New York State receives approximately $2.44 billion each year from the Federal Government for the Family Assistance Program through the Temporary Assistance to Needy Families (TANF) Block Grant. The Office of Temporary and Disability Assistance (OTDA) was established in 1997 to administer public assistance programs including Family Assistance (FA) and Safety Net Assistance (SNA). The OTDA also administers Supplementary Security Income (SSI), Home Energy Assistance Program (HEAP), Child Support Enforcement, the Federal Food Stamps Program, as well as capital projects under the Homeless Housing Assistance Program (HHAP).

Welfare Reform Reauthorization

Federal authorization of the TANF Block Grant under PRWORA is currently set to expire on March 31, 2004. An extension of PRWORA is expected at the current funding levels. However, new requirements being promoted by the President and Congress would increase work requirements and eliminate the current caseload reduction credit, thereby diminishing the incentive for states to help public assistance recipients move into the workforce. New York currently does not meet the higher proposed work participation rate and would no longer receive the benefit from the caseload reduction credit. This would trigger a reduction of current funding levels, and jeopardize programs vital to low- income families in New York. It is imperative that the Executive advocate on behalf of New York's low-income families, and send a message to Washington that it is already a challenge to meet the current work requirements under TANF, given current economic conditions. The imposition of stricter guidelines by the Federal Government in this difficult economic environment would make it harder for New York to fulfill the requirements, thereby jeopardizing precious federal TANF funds.

With the economy in the beginning stages of recovery from the recession, it is imperative that the Federal Government and the Executive in New York provide public assistance recipients with access to programs in which they will develop the skills necessary to enter the workforce. They also need access to supportive services (i.e., child care) once they secure employment in order to retain it. Decreasing funding to programs that assist individuals most vulnerable during uncertain economic times is a poor use of Executive power and does not fulfill the obligations of government to meet the needs of its citizens.

TANF Surplus

New York's $2.44 billion TANF allocation is based on the State's caseload and expenditures from the Federal Fiscal Year (FFY) 1995. Because New York's caseload and expenditures were significantly higher in FFY 1995 than in subsequent years, there has been excess TANF funding above the amount needed to support the Federal share of the Family Assistance Program. This funding overage is commonly referred to as the "TANF Surplus". Since 2000, the annual surplus has been $1.5 billion or higher. The Legislature has traditionally appropriated the TANF Surplus to provide additional funding for children and family services, transitional and employment initiatives, local administration, and legislative programs aimed at helping low-income families obtain self-sufficiency.

The Executive is proposing to use the estimated $1.5 billion TANF Surplus in SFY 2004-05 for a variety of programs and initiatives. However, many worthwhile programs that have been funded in the past have either been eliminated or drastically reduced in the Executive's recommended budget.. TANF funding for programs serving individuals with disabilities, employment and training programs, youth employment programs, and preventive or emergency services for families has been substantially diminished in the Executive's proposed SFY 2004-05 budget (i.e., preventive services initiative for families funded through TANF at $18 million in SFY 2003-04 is targeted for elimination; and Summer Youth Employment Program is proposed at $15 million, a 40 percent reduction). This approach simply seeks to leave the most vulnerable individuals behind during difficult economic times. By limiting funding for job skills development and training programs, the Executive diminishes the likelihood that those on public assistance will leave the system by securing employment and achieving self -sufficiency.

Welfare Policy Changes

The Executive introduced drastic restructuring changes in New York's welfare policies in his proposed budget. As part of the proposed budget, full family sanction would be imposed for adult non-compliance in work requirements, and public assistance stays are discouraged for more than one year through reducing the non- shelter portion of a family's basic grant assistance. The Executive also proposes to modify public assistance grant levels and eligibility by including a blind, aged, or disabled person's Supplemental Security Income (SSI) income in a family's grant, then reducing the grant by a pro-rata amount, thereby diminishing the amount of support provided to the entire household. Finally, the Executive recommends reducing the earnings disregard for public assistance recipients, which is essentially a partial exemption of the amount of earned income used to determine the level of assistance. The Executive includes approximately $77 million in General Fund savings in the proposed budget through these policy changes.

Food Stamp Assistance

The Food Stamp Program is a federally funded program that provides monthly allowances redeemable by public assistance recipients and low-income families for basic food staples. Many families that continue to be eligible for Food Stamps are not receiving them after securing employment and leaving public assistance. Food Stamps should be a means of supporting families that are making the shift into the workforce. The State has improved outreach programs to identify and better serve eligible families but support is still needed.

The Food Stamp Program could be made more effective if statewide measures were taken to simplify eligibility rules and adjust the quality control system. The United States Department of Agriculture (USDA) estimates that for every $1.00 spent in food stamps approximately $1.84 is generated in local economic activity. Food Stamps can help create jobs and assist local economies. If the Executive utilizes the federally funded Food Stamp Program more effectively, additional State resources could be employed to promote more programs for low-income families working towards self-sufficiency. Again, the Executive has failed to implement State social services policies in a way that is both successful at assisting families towards self-sufficiency and cost effective.

Safety Net Assistance

Under the federal public assistance program, families are eligible to receive benefits for a lifetime maximum of 60-months. The New York State Constitution requires that certain basic needs be provided for individuals. The State Safety Net Assistance Program provides benefits to families that have reached the Federal 60-month maximum, and to single adults and childless couples that are not eligible for the Federal TANF Program.

In October of 2001, 111,103 recipients were receiving assistance through the State Safety Net Program. In October 2003, that number had increased by 266 percent to 295,695 recipients. Much of this increase is due to Family Assistance recipients who exhausted their 60-month time limit in the federally-supported program during a period of difficult economic times, combined with inadequate access to employment skills development and training programs and case management services, and, as a result, transitioned to the State's Safety Net Program.

Federal TANF guidelines permit states to exempt up to 20 percent of the average monthly caseload from the 60-month time limitation. This exemption is provided for the most severe cases, such as those experiencing extreme hardship and barriers to employment. The Executive's failure to fully utilize the federally allowed exemption for many public assistance recipients has cost the State significant dollars. Failure to fully utilize the 20 percent exemption provided under federal law forces the State and local governments to assume the responsibilities of costs that would otherwise be borne by the Federal Government. A more effective use of the exemption would be prudent in these difficult fiscal times.

According to the Executive, the 2001 recession and recovery were atypical for the postwar period. Though the recession was mild, the early stage of the recovery was unusually weak. According to the Executive, the economy took longer to find its footing in this recovery compared to previous periods due to three distinct additional shocks which included the September 11th attack, corporate governance scandals, and the war in Iraq. However, according to the Executive, the nation's economic expansion now appears to be "on track."

Real Gross Domestic Product (GDP) is expected by the Executive to grow 4.7 percent in 2004, after growing an estimated 3.1 percent in 2003 (see Table 1). According to the Executive, there appears to be a tendency for forecasters, including the Blue Chip consensus, to underestimate economic growth coming out of a recession. Nevertheless, the Executive's forecast is within 0.1 percentage points of the Blue Chip Consensus, with the Consensus forecast averaging 4.6 percent compared to the Executive's 4.7 percent forecast.

The Executive expects consumption to grow 4.0 percent in 2004 following estimated growth of 3.1 percent in 2003. Although national tax cuts were estimated to have some effect on consumption growth in 2003 and 2004, estimates from the Executive show that low-income households are more than twice as likely to spend additional income as high-income households, suggesting that tax cuts contribute much more to short-term growth when they are directed at low-income households. Nonresidential fixed investment is expected to accelerate to 10.6 percent growth in 2004 from the 2.5 percent growth estimated for 2003.

Unemployment is expected by the Executive to average 5.7 percent in 2004, while employment is expected to grow 1.1 percent in 2004 following a decline of 0.2 percent in 2003. The Executive gives several reasons for the weak employment growth during the current recovery including increasing globalization, rising employee benefit costs, and structural change in the economy. However, according to the Executive, perhaps the most important factor in the weak employment recovery has been financial and geopolitical uncertainty.

After one of the longest bear markets in history, the stock market, as measured by the S&P 500, is expected by the Executive to grow 15.6 percent in 2004. This appears to imply a large gain for the stock market in 2004. However, as of January 23, 2004, the S&P 500 was at 1141.55, an increase of 18.5 percent over the average level in 2003. Therefore, for the Executive's stock market forecast to be accurate, price levels on average in 2004 must actually decline by 2.5 percent from their current level. Since securities industry variable compensation, capital gains, and a number of other variables forecasted by the Executive depend heavily on the performance of the stock market, this conservative stock market forecast has important budget implications.

Table 1

The New York State Economy

According to the Executive, New York State was hit harder and for a more prolonged period than the nation by the recession that began in 2001. Employment is estimated to have declined 0.4 percent in 2003 while wages are estimated to have grown 1.8 percent. Both wage and employment growth were slightly slower than the nation (see Figure 1).

Figure 1

The State has a very high concentration of economic activity in the securities industry. In fact, although the percentages of State employment and wages that come from the securities industry are high, they do not give the full story of how connected the state economy is to this industry. As indicated in Figure 2, the growth and variation in economic activity that comes from this industry is even higher.

Figure 2

According to the Securities Industry Association, industry profits are estimated to have more than doubled in 2003 to $15.0 billion from $6.9 billion in 2002. This is a dramatic improvement from the prior two years, when industry profits dropped from its record level of $21.0 billion in 2000 to its lowest level since 1994 in 2002. Unfortunately, the profit improvement in 2003 came mostly from cost cutting, with total revenue actually declining 4.5 percent in 2003. This suggests that the profit gains will not necessarily translate into increased wages. In 2004, profits are expected to rise 12.7 percent to $16.9 billion.

The Executive expects New York State employment to rise 0.8 percent in 2004 and 1.1 percent in 2005. At the same time, unemployment in 2004 is expected to average 6.0 percent for the State, 0.3 percentage point above the national average for the same period. In 2005, unemployment for the State is expected to average 5.7 percent, 0.5 percentage point above the national rate.

The Executive expects State wages and salaries to grow 5.1 percent in 2004 overall. In 2005, wages and salaries are expected to grow 4.9 percent. These growth rates are higher than the rates estimated by both Economy.com and Global Insight.

Finance and insurance sector variable wages (i.e. bonuses) are expected to grow 23.2 percent to $23.2 billion during the 2003-04 fiscal year and 11.7 percent during the 2004-05 fiscal year. Total bonuses for all industries in the State are expected to grow 15.2 percent during the 2003-04 fiscal year and 8.9 percent during the 2004-05 fiscal year.

The decline in employment in New York State has been particularly strong in New York City. Upstate New York also experienced a decline in employment in the two years prior to the first quarter of 2003. The New York City suburbs have been showing more strength than the rest of New York. Only the suburbs have outperformed the Nation, while the City and Upstate have generally performed worse than the nation (see Figure 3).

Figure 3

The situation with wages is similar to that for employment, with both Upstate New York and New York City performing worse than the nation in the last two yearly periods. The New York City Suburbs, on the other, hand, performed slightly better than the nation. New York City has been hit particularly hard; showing strong wage declines in both of the last two periods despite growth in wages for the nation as a whole (see Figure 4).

Figure 4

New York uses a cash basis Financial Plan to report the amount of money that is collected and spent during the State fiscal year. Each year the Division of the Budget develops a plan that shows proposed receipts and disbursements for the coming fiscal year. The plan is then submitted as part of the Executive Budget. It is revised subsequent to enactment of the budget to show the effect of the changes made by the Legislature to the Executive's original budget proposal. The plan is then updated quarterly to reflect actual experience and revised estimates.

The Financial Plan divides receipts and disbursements into different fund categories. The General Fund is the fund into which most State taxes are deposited and from which State Operations and the state share of local grants are disbursed. The General Fund provides for funding to programs that are not supported by dedicated fees and revenues.

Figure 5

Programs that are supported by dedicated fees and revenues are funded from Special Revenue Funds. These funds are used to insure that monies are used solely for the purpose for which they are raised, or to insure that individual programs are self-supporting. Examples of such dedicated funding streams include the Environmental Protection Fund and the Dedicated Highway and Bridge Trust Fund. When these funds and non-federal capital and debt service funds are combined with the General Fund, the total is known as State Funds.

Special Revenue Funds also contains federal funds. State Funds plus federal funds combine to produce an All Funds figure. The All Funds amount is the figure that is usually reported as the State Budget total.

The Special Revenue Fund is the largest fund for receipts and disbursements surpassing the General Fund. This is a result of increased dedication of tax receipts and increased reliance on Federal aid.

Certain spending of Health Care Reform Act (HCRA) funds and Public Authorities funds are not included in the State's Financial Plan. SFY 2004-05 Financial Plan disbursements related to HCRA are estimated to be $4.4 billion.

Figure 6

Figure 7

Figure 8

Figure 9

Figure 10

Figure 11

($ amounts in billions)
Actual SFY
Change From
Change From
General Fund $37.613 $42.060 11.8% $41.885 (0.4)%
State Funds $55.751 $62.112 11.4% $63.498 2.2%
All Funds $89.055 $98.293 10.4% $99.806 1.5%

General Fund

The Executive proposes General Fund disbursements for State Fiscal Year (SFY) 2004-05 of $41.9 billion, a decrease of $175 million or 0.4 percent from SFY 2003-04.

General Fund disbursements for health and social welfare programs are projected to increase by $487 million, or 5.1 percent, over SFY 2003-04. Medicaid disbursements are projected to increase by $373 million or 6.3 percent, and public assistance disbursements are expected to increase by $20 million, which is a 1.9 percent increase. Mental hygiene funding disbursements are expected to increase by $299 million or 14.1 percent, and education disbursements, including support for both higher education and elementary and secondary education, are projected to increase by $404 million or 2.5 percent.

Public protection spending is projected to increase by $24 million or 0.9 percent, while funding for environmental programs are anticipated to decrease by $1 million or 0.5 percent. General Fund support for transportation is expected to decline by $47 million or 28.8 percent.

State Funds

State Funds, in addition to the General Fund, include, non-federal Special Revenue Funds, Debt Service Funds, and Capital Project Funds. The Executive proposes that in SFY 2004- 05, State Funds disbursements increase by $1.3 billion for a total of $63.5 billion. This represents an increase of 2.2 percent over SFY 2003-04.

State Funds support for health and social welfare programs are projected to increase by $872 million or 6.2 percent. Mental hygiene disbursements are anticipated to increase by $341 million or 13.2 percent. Support for education is anticipated to increase by $584 million or 2.7 percent. STAR Property Tax Relief program disbursements are projected to increase by $163 million or 5.7 percent.

State Funds public protection funding is anticipated to increase by $68 million or 2.3 percent, while disbursements for environmental programs are projected to decrease by $31 million or 3.3 percent. State Funds support for Transportation is anticipated to decrease by $59 million or 1.5 percent.

All Funds

All Governmental Funds includes State Funds plus any federal funds received by the State. Disbursements on an All Governmental Funds basis for SFY 2004-05 are projected to be $99.8 billion, an increase of $1.5 billion or 1.5 percent over SFY 2003-04 estimates.

All Funds disbursements for health and social welfare programs are projected to increase by $809 million or two percent, which is greater than the rate of State Funds spending growth noted previously. Of this amount, $738 million is related to increased Medicaid disbursements. All Funds support for debt service is projected to increase by $566 million, pension costs is projected to increase by $184 million, employer health insurance is projected to increase by $255 million and mental health is projected to increase by $233 million over SFY 2003-04.

Adjusted Disbursements

($ amounts in billions)
Actual SFY
Change From
Change From
General Fund $39.513 $40.160 1.6% $41.885 4.3%
State Funds $57.651 $60.212 4.4% $63.498 3.5%
All Funds $90.955 $96.393 6.0% $99.806 5.5%

The estimated spending for SFY 2003-04 includes an additional $1.9 billion of spending deferred from SFY 2002-03. Spending growth in SFY 2004-05 compared to SFY 2003-04 without the $1.9 billion deferral would result in $1.4 billion or 4.3 percent increase in the General Fund, $3.3 billion or 5.5 percent increase in the State Funds and $3.4 billion or 3.5 percent increase in the All Funds. Funds deferred from SFY 2002-03 are identified in the table below

The Legislature authorized the sale of $4.2 billion in tobacco bonds in SFY 2003-04 to make the deferred payments and support General Fund disbursements in SFY 2003-04. The Executive used $3.8 billion of the sale of tobacco receipts in SFY 2003-04 as General Fund disbursements and deposited $400 million in the Refund Reserve to be used for additional revenues in SFY 2004-05 for General Fund disbursements.

($ amounts in millions)
School Aid
CUNY Senior Colleges 219
Medicaid Payment 82
Education 54
Welfare 47
All Other 186

Total Payment Deferrals


Executive Changes From Legislative Enacted Budget

The Legislative adjusted Financial Plan approved $92.8 billion in All Fund spending in SFY 2003-04, an increase of $1.8 billion or 2.1 percent over SFY 2002-03. The difference from the current estimate of $98.3 billion is threefold: a recharacterization of the size of the budget to include the deferred payments from SFY 2002-03 paid in SFY 2003-04; the Executive reestimating the legislative enacted budget; and, additional Federal funds received during the current fiscal year.

($ amounts in billions)
Legislative Financial Plan–Greenbook based on Executive budget submission $92.844
Spending Delays 1.900
Executive Reestimate of Legislative Plan 1.630
Executive Financial Plan Increases 1.919
Executive January Estimate $98.293

Proposed General Fund Reserves

In the Midyear Report released in October of 2003, the Executive projected that the State would end SFY 2003-04 with a $730 million surplus in the General Fund, made up entirely of statutory reserves. The Executive has revised this estimate upwards in the Executive Budget by $284 million for a projected General Fund closing balance of $1.014 billion, including $200 million in the Community Project Fund. The Executive plans to make the maximum allowable deposit of $84 million to the Tax Stabilization Reserve Fund.

The Executive estimates the SFY 2004-05 General Fund closing balance to be $964 million, $794 million in the Tax Stabilization Reserve Fund, $20 million in the Contingency Reserve Fund and $150 million in Community Project Fund. The Tax Stabilization Reserve Fund is a constitutionally restricted fund that can only be used in the event of a revenue shortfall or deficit situation during a fiscal year.

The Executive's projected closing balance for State Funds for SFY 2004-05 is $1.591 billion and $1.9 billion on an All Funds basis.

($ in millions)
Closing Fund Balance
Tax Stabilization Reserve Fund $794 $794
Contingency Reserve Fund 20 20
Community Projects Fund 200 150
Total (closing balance) $1,014 $964

Budget Gaps

The Executive's Financial Plan reflects the projection of a General Fund gap of $5.1 billion budget gap in SFY 2004-05. The Executive proposes to close the SFY 2004-05 budget gap by restricting spending, instituting certain revenue enhancements, as well as using $1.5 billion in nonrecurring budget actions. Listed below are the tables listing those actions:

($ amounts in millions)
Spending Actions $2,589
Revenue Actions 972
One Time Actions 1,510
Total Savings Actions $5,071

Spending Actions to Close GAP

The Executive recommends spending reductions in the General Fund that total $2.59 billion. These reductions include a combination of program restructuring and the use of alternative funding sources.

($ amounts in millions)
Medicaid/Health Care Cost Containment $425
Pension Contribution Change 440
Restructure Welfare Programs/Maximize TANF 362
Mental Hygiene Cost Containment/PIA 298
Withhold TAP 227
Restrain Growth in BOCES/Bldg. Aid/Transportation Aid 186
Debt Management 150
NYC School Aid for SBE (Supplement to VLT Reserves) (70)
Medicaid Long-Term Care Takeover (24)
All Other Spending 595

Total Spending Actions


Revenue Actions to Close Gap

Under the Executive's SFY 2004-05 Budget construct, the projected General Fund gap would be also closed by the actions listed below.

($ amounts in millions)
Eliminate Clothing Sales Tax Exemption $400
Health Care Provider Assessments 323
Criminal Justice Fees 58
Quick Draw Expansion 43
Abandoned Property 42
Enhance Fixed Dollar Minimum on Corporate Taxes 40
Pistol Permit Fee 31
STAR Tax Credit (11)
All Other Revenue 46

Total Revenue Actions


One-Time Actions

The Executive proposes to use $1.5 billion in non-recurring actions. In particular, the Executive proposes to retain $181 million of tobacco receipts in SFY 2003-04 from the tobacco bond sale in SFY 2003-04, and proposes to transfer $181 million to the General Fund from existing HCRA programs to close the projected gap in SFY 2004-05. The following list is illustrative of additional one-time General Fund actions encompassed in the Executive's SFY 2004-05 Financial Plan.

($ amounts in millions)
Capital Projects Bond Financing $283
Use of 2003-04 Surplus 261
Continued Delay of Medicaid Cycle 190
Additional Tobacco Benefit 181
LGAC Payment Restructuring 170
Federal Welfare Funds 115
Reverse Meyers Tax Decision 50
All Other 260

Total One-Time Actions


Capital Program and Financing Plan

The Capital Plan recommends $6.7 billion capital spending in SFY 2004-05, an increase of 10.8 percent or $654 million over SFY 2003-04. Transportation spending accounts for $3.5 billion of the proposed capital spending for SFY 2004-05. The remaining capital spending projection includes $649 million for Environment and Recreation, $807 million for Education, $215 million for Public Protection, $298 million for Mental Hygiene, $802 million for Economic Development and Government Oversight, $128 million for Health and Social Welfare, $185 million for General Government and $75 million for all other categories of capital projects.

The Executive's proposed Capital Program and Financing Plan remains the same for the Federal Funds pay-as-you-go share of capital spending at 27 percent in SFY 2003-04 and in SFY 2004-05. State Funds pay-as-you-go share of capital spending is reduced from 19 percent in SFY 2003-04 to 17 percent in SFY 2004-05. The Public Authority debt share of capital spending is increased to 53 percent in SFY 2004-05 from 50 percent in SFY 2003-04 and General Obligation debt financing for capital spending reduced to three percent in SFY 2004-05 from four percent of the total capital spending in SFY 2003-04.

The Executive capital spending plan includes new capital spending for the Regional Economic Growth Program ($250 million) to support priority high technology and economic development projects; public and private higher education facilities matching grants ($350 million); Transportation Capital Transition Grants ($80 million) for school districts; and the construction of a Veterans Nursing Home facility ($60 million).

SFY 2003-04

The Executive estimates that General Fund revenues will total $42.26 billion in State Fiscal Year (SFY) 2003-04. This represents an increase of $4.86 billion, or 13 percent from SFY 2002-03. The increase is largely attributable to over $2.3 billion in revenue actions taken in the enacted budget, the collection of $4.2 billion in Tobacco Securitization receipts and $645 million in Federal revenue sharing grants.

The Executive's estimate of General Fund revenues has been revised downward by $108 million since the October Midyear Update. However, the decline from the Midyear estimate can be explained by a Refund Reserve deposit of $661 million to support the SFY 2004-05 budget. This deposit consists of $400 million in Tobacco Securitization proceeds planned for use in SFY 2004-05, as well as $261 million in surplus cash. The Refund Reserve transaction has effect of lowering receipts in the current fiscal year and increasing receipts in the subsequent year.

General Fund tax collections, which does not reflect the reserve transaction described above, have actually been revised upward by $184 million since the October update, reflecting the Executive's forecast for modest improvement in the State economy and a rebound in financial services industry profits in 2003. The Executive expects additional collections from the following taxes in SFY 2003-04:

  • $235 million in Personal Income Tax Collections;
  • $60 million in Estate Tax collections; and
  • $35 million in Real Estate Transfer Tax Collections (technically classified as a transfer to the General Fund, since collections in excess of statutory dedications are transferred back to the General Fund).

The revenue increases are offset by decreased estimates in the following taxes:

  • ($67 million) in User Taxes
  • ($41 million) in Business Taxes

All Funds Tax Collections are expected to total $42.696 billion, an increase of $3.06 billion, or 7.7 percent from SFY 2002-03. The Executive estimates that 70 percent of the increase, or $2.16 billion, are due to revenue actions taken in the 2003-04 Enacted Budget.

The Executive projects All Governmental Funds receipts will total $99.053 billion. This estimate is $731 million above the Executive Midyear update.

SFY 2004-05

The Executive projects that a strengthening economy will produce above average growth rates in tax revenues in SFY 2004-05. The Executive forecasts that total All Fund tax revenues will increase by $3.221 billion, totaling $45.913 billion. This represents 7.5 percent growth in collections. After adjusting for the Refund Reserve transaction, total tax collections are expected to grow by 10.5 percent to $46.606 billion.

The Executive forecasts that General Fund Receipts will total $41.835 billion in SFY 2004-05, a decline by $423 million, or one percent, from SFY 2003-04. Overall receipts are expected to decline despite strong growth in General Fund Tax Collections of 12.5 percent, or $3.5 billion above the current fiscal year. This can be explained by the loss of Tobacco Securitization receipts (net decrease of $3.4 billion) and a one- time Federal revenue sharing grant of $645 million, which unlike most other Federal grants, was available for General Fund expenditures.

In addition, the Executive estimates that the impact of tax law changes will reduce receipts by $459 million in SFY 2004-05. These changes include:

  • Sales Tax Exemption on Clothing ($330 million);
  • College Tuition Deduction ($50 million);
  • Earned Income Tax Credit ($44 million); and
  • Marriage Penalty Elimination ($35 million).

These decreases are partially offset by increased revenue generated from the temporary Personal Income Tax and Sales Tax rate increases adopted in SFY 2003-04. In addition, the Executive has proposed several revenue enhancement measures that, if enacted, would increase revenues by $972 million in the upcoming fiscal year.

The Executive is also expecting $240 million in revenues from the opening of Video Lottery Terminal (VLTs) facilities in several of the authorized harness racing tracks in the coming fiscal year. Video Lottery Terminals are expected to become operational at the following facilities: Saratoga Equine Sports Center, Buffalo Trotting Association, Inc., Finger Lakes Race Track, Monticello Raceway Management, Inc., and Batavia Downs. The Executive proposes that these funds be put into a reserve to enhance education funding.

On an All Governmental Funds basis, receipts in SFY 2004-05 are expected to total $99.516 billion, an increase of $463 million above SFY 2003-04, an increase of less than one-half of one percent.

Tax Law Changes Effective in SFY 2004-05

In order to maintain the State's crucial investments in education and health care and to spare property taxpayers from the largest property tax hike in history, the Legislature enacted several temporary revenue enhancement measures in the 2003-04 budget. Major portions of these measures are scheduled to phase out over a two-year period. What follows are the major changes taking effect in the upcoming fiscal year.

Personal Income Tax

The SFY 2003-04 Budget established a temporary rate increase of 7.5 percent in Tax Year 2003 for income of $100,000 or more for single taxpayers, $125,000 for head of household, and $150,000 for taxpayers whose filing status is married filing jointly. The temporary rate is reduced to 7.375 percent for those taxpayers in the 2004 Tax Year and to 7.25 percent in Tax Year 2005. The increase is phased out altogether in Tax Year 2006. The reduction in tax rates in the 2004 Tax Year is expected to reduce revenues by approximately $400 million in SFY 2004-05.

Sales and Use Tax

Temporary Rate Increase

The SFY 2003-04 Enacted Budget temporarily increased the statewide Sales and Use Tax rate from 4 percent to 4.25 percent. The increase went into effect on June 1, 2003 and is scheduled to sunset on May 31, 2005. The increase will be fully annualized in SFY 2004-05 and is therefore expected to generate an additional $100 million in upcoming fiscal year.

Temporary Suspension of Clothing Exemption

The SFY 2003-04 Enacted Budget temporarily suspended the Sales and Use Tax Exemption on purchases of articles of clothing under $110 for a period of one year. The Exemption was replaced with two one-week Sales Tax Holidays in August 2003 and January 2004. The exemption is scheduled to be reinstated beginning June 1, 2004 and is expected to reduce SFY 2004-05 revenues by approximately $341 million. However, the Executive has proposed a permanent repeal of the clothing exemption effective on June 1, 2004, which would increase taxes on middle class and working families by approximately $400 million in SFY 2004-05 and $429 million in SFY 2005-06.

Prior Year Tax Law Changes of Note

The Assembly has two main tax policy goals -- job creation and the reduction of tax burdens on the State's working families. The previously enacted tax cuts that are still in the process of being phased in are in line with those goals, and include the following:

Working Families

The Legislature has enacted numerous tax reductions aimed at alleviating the tax burdens felt by middle class families.

College Tuition Deduction/Credit

To help make college more affordable for working families, legislation enacted in 2000 provides taxpayers with a choice of an itemized deduction or a refundable credit for qualified tuition expenses. When fully implemented, the itemized deduction will be 100 percent of qualified tuition expenses up to $10,000. For qualified tuition expenses of up to $5,000, the credit will be the lesser of $200 or tuition paid. For qualified tuition expenses between $5,000 and $10,000, the credit will be equal to four percent of tuition paid. The credit and deduction are currently being phased in over a four-year period, and will be fully effective in Tax Year 2004.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) benefits working families earning less than $34,692 annually. Taxpayers with no children may qualify for the credit, but must be between the ages of 24 and 65. Legislation enacted in 2000 increased the EITC from 25 percent to 30 percent of the Federal credit over a two-year period. As of Tax Year 2003 and thereafter, the State credit is equal to 30 percent of the Federal credit.

Marriage Penalty

Legislation enacted in 2000 largely eliminated the marriage penalty by increasing the standard deduction over a three-year period. As of the 2003 Tax Year, the standard deduction is now equal to $14,600.

Job Creation

Over the past several years, the Legislature has enacted several tax reductions to promote a better business climate in New York State. Some of these reductions are still being phased in, and include the following:

Utility Tax Reform

In 2000, legislation was enacted to change the method of taxation for utility companies from a gross receipts base to a net income base, and the Gas Import Tax was eliminated. These changes were phased-in over a four-year period, and will be fully effective in Tax Year 2005.

Sales Tax on Energy

Beginning September 1, 2000, a four-year phase-out of the Sales Tax on the transportation, transmission or distribution of gas or electricity became effective.

Brownfields Remediation Tax Credits

Three new tax credits were enacted in the 2003 Legislative session to encourage the clean- up and remediation of Brownfields. The credits are refundable, and apply to tax years beginning on or after April 1, 2005.

Executive Revenue Proposals
For State Fiscal Year 2004-2005
($ amounts in millions)

Revenue Source 2004-2005
Revenue Impact

Revenue Enhancement Proposals $537.0
Add New Fixed Dollar Minimum 40.0
Direct Wine Shipments 2.0
Empire Zones Program 0.0
Low Income Filings 1.0
Replace Permanent Clothing Exemption 400.0
Reverse Meyers’ Decision 50.0
Sales Tax Surcharge to Fund Public Safety 39.0
Tax Nonresidents Gain from Sales of Co-op Stock 5.0

Fee Increases $628.9

Department of Agriculture and Markets
Retail Food Stores Inspection Fee 0.4

Division of Alcoholic Beverage Control
Increase Filing Fees 0.2

Banking Department
Fee Increase 2.0

Department of Civil Service
Increase Exam Fees 0.8

Consumer Protection Board
Increase Fine 0.1

Department of Correctional Services
Cook Chill Revenue 1.0
Federal Bed Capacity Contracts 15.0

Crime Victims Board
Mandatory Fees for Youthful Offenders 0.5
Crime Victim Assistance Fee & Surcharge 0.03
Sex Offender Fee 0.6

Division of Criminal Justice Services
Increase Record Review Fee 0.1
Expand Parking Ticket Surcharge 7.5
Vehicle & Traffic Local Prosecution Program 17.8
Work Zone Automated Speed Enforcement 15.0
Vehicle & Traffic Local Prosecution Program 5.0

Department of Environmental Conservation
Extend Waste Tire Fee 0.3
Increase Storm Water Fees 7.0
Increase Air Regulation Fee 1.8

Department of Health
Establish Early Intervention Provider Registration Fee 1.0
Home Care Assessment 15.0
Hospital Assessment 183.3
Nursing Home Assessment 320.4

Division of Housing and Community Renewal
Increase Tax Credit Application Fee 0.5
Increase Low Income Housing Credit Monitoring Fee 0.5

Department of Law
Increase Deceptive Trade Practices Penalty 0.5

Division of Lottery
Eliminate Restrictions on Quick Draw 43.0
VLT Expansion 0.0

Division of Military and Naval Affairs
Increase REP Fee 2.4

Department of Motor Vehicles
Driver Responsibility Program 17.5
Increase ATV Registration Fee 5.8

Parks and Historic Preservation
Increase Snowmobile Fee 3.6

Public and Private Employment Relations Board
Impasse/Improper Practice Filing Fee 0.2

Office of Real Property Services
Real Property Transfer Filing Fee 14.2

Department of State
Campus Fire Safety 1.1

Division of State Police
Handgun License Fee 32.5

Department of Transportation
Increase Divisible Loan Permits & Fines 1.5
Increase Divisible Loan Permits & Fines 0.8


Executive Revenue Proposals
For State Fiscal Year 2004-2005
($ amounts in millions)

Revenue Source 2004-2005
Revenue Impact


Revenue Reduction Proposals (29.0) (120.0)
Extend Alternative Fuels Vehicle Credit (10.0) (10.0)
Biotechnology Investment Credit (5.0) (10.0)
Exempt Federal Military Pay (1.0) (1.0)
Low-Income Housing (2.0) (2.0)
Single Sales Factor for Manufacturers 0.0 (40.0)
STAR Adjustment for Inflation (11.0) (57.0)



The Executive tax proposals would result in a net increase of approximately $469.0 million in SFY 2004-05 and $442.0 million when fully implemented.


The Executive has proposed various tax increases that total approximately $498.0 million in SFY 2004-05 and $562.0 million when fully implemented. These proposals include:

Modify Fixed Dollar Minimum Base $40.0 million

This proposal would modify the Corporate Franchise Tax by changing the calculation of the Fixed Dollar Minimum Base. Two new brackets would be added so that taxpayers with a gross payroll of $6.25 million to $25.0 million would calculate their Fixed Dollar Minimum Base amount as $5,000 and taxpayers with a gross payroll of $25.0 million or more would calculate the base as $10,000. Additionally, all taxpayers with a gross payroll of $500,000 or less would calculate their Fixed Dollar Minimum amount as $100. These amounts would be the amount of tax due if the Fixed Dollar Minimum results in the highest liability of the alternative bases.

Direct Wine Shipments $2.0 million

This proposal would allow out-of-state wineries that obtain an out-of-state winery shipper's license from the New York State Liquor Authority, to ship up to two cases (18 liters) of wine per month to New York residents who are at least twenty one years of age. To be eligible for the out-of-state shipper's license, a winery must belong to a state which has a reciprocity agreement with New York, must pay an annual fee of $125 and must collect and remit all New York State and local sales and excise taxes.

Reform Empire Zones Program $0.0 million

The Executive is proposing changes to the Empire Zones program that will impact the administration of the program and the benefit structure for Qualified Empire Zone Enterprises. Among the tax law changes are:

  • Changes in the business tax benefit period, for businesses certified on or after April 1, 2004 the proposed period would eliminate the five year phase-out of benefits, reducing the benefit period from 15 years to 10-year period.
  • Changes the employment test used in the determination of a taxpayer’s Qualified Empire Zone Enterprise (QEZE) status for certain businesses certified after April 1, 2004. The proposed new test would not count any employees previously employed in New York State by an entity related to the taxpayer.
  • The employment increase factor used in the calculation of certain tax credits would be changed for all but certain businesses certified before April 1, 2004. These businesses would calculate the factor as the number of new jobs in Empire Zones divided by 100.
  • The definition of eligible real property taxes, used in the calculation of the Empire Zone Real Property Tax Credit, would be amended so that QEZEs that make direct payments of certified eligible Real Property Taxes or PILOTs as part of a lease agreement may receive benefits. The definition would be further amended so that the full amount of any PILOTs paid in excess of the estimated effective full value tax rate would be deemed ineligible.
  • Zone Equivalent Areas (ZEAs), or census tracts that met the criteria for designation as an Empire Zone but were not selected, will be eliminated on June 13, 2004. Taxpayers that qualify for ZEA Wage Tax Credits will be allowed to continue claiming such credits for a period of five tax years.
  • The Empire Zones Capital Tax Credit will no longer be applicable for investments made in Zone Capital Corporations in taxable years beginning on or after January 1, 2005. Qualified investments made in Zone Capital Corporations established prior to July 31, 2004 will continue to be eligible for the credit.

Low Income Filings $1.0 million

Eliminates the requirement that residents must file New York Personal Income Tax returns even if they do not have sufficient income to incur New York tax liability. Current law requires that an individual if is required to file a Federal return, or has more than $4,000 of income.

Replace Permanent Clothing Exemption $400.0 million

This proposal would change the year-round State and local Sales Tax exemption on clothing and footwear, which is scheduled to be reinstated on June 1, 2004, to an exemption during four seven-day periods each year, effective June 1, 2004. Additionally, this proposal places a $500 limit for exemptions during sales tax holidays and provides localities with the option to exempt clothing and footwear from the local Sales and Use Taxes during the same four periods that apply to the State Sales Tax.

Reverse Meyers’ Decision $50.0 million

This proposal restores former State practice and eliminates hearings prior to payment in regard to taxes owed due to mathematical or clerical errors, federal changes or failures to pay the tax shown on the return. After payment, the taxpayer will be able to apply for a refund and, if the refund is denied, a conference and hearing process is available to the taxpayer to contest the denial. The $50 million estimate is an acceleration of revenue as eventual payment was made in most such cases under the current system where hearings are made available to the taxpayer pursuant to Meyers v. Tax Tribunal, 201 A.D.2d 810 (1994).

Sales Tax Surcharge to Fund Public Safety $39.0 million

This proposal would impose an additional three percent State Sales and Use Tax surcharge on safety and security services and an additional four percent State Sales and Use Tax surcharge on admissions to sporting events and amusement parks. Under this law, revenue from the new surcharges will be deposited in the Public Safety and Security Account, previously called the New York State wireless telephone emergency services

Tax Non-Residents on Gains From Sales Of Co-op Stock $5.0 million

This proposal would tax non-residents on the sale of shares in a cooperative housing association where the property represented by such shares is in the State. Under current law, non-residents are taxed on the sale of real property or condominium property in the State but not on the sale of cooperative shares. This proposal also authorizes New York City, Yonkers and counties to enact a tax on the filing a financing statement in regard to shares in a cooperative housing association to perfect a securing interest in such shares under the Uniform Commercial Code (UCC). Generally, the rate of tax would be seventy-five cents for each $100 of principal debt or obligation, of which fifty cents would be distributed to the cities and towns in the county. The rate in New York, Yonkers, Rockland County and Broome County would be higher to equal the sum of the 75 cent rate and the current Mortgage Recording Tax rates in those localities. The proposal also provides that the security interest may not be enforced unless the tax is paid and that the financing statement may not be filed until the tax is paid.

Native American Price Parity Agreements $0.0 million

This proposal allows the Governor to enter into agreements with Native American Nations or Tribes regarding the imposition of parity agreements or the collection of state sales and excise taxes on Native American Reservations. The Executive expects no additional revenue to be generated from this change in current law.

Video Lottery Terminal Expansion

The Executive is proposing an expansion of the Video Lottery Terminal (VLT) program. The proposal would authorize the Division of the Lottery to award up to eight licenses to operate video lottery gaming facilities. Any entity, including, but not limited to Off Track Betting Corporations, which demonstrates to the satisfaction of the Division that it possesses the qualifications and expertise to operate the video lottery franchise would be eligible to competitively bid for a license.

The licenses to operate the new facilities may not be granted for locations within 15 miles of an existing racetrack licensed to operate a VLT gaming facility. The operation of VLT gaming facilities in New York City is limited to Manhattan, South of 59th Street, Brooklyn, and Staten Island, with no more than five locations. Furthermore, licenses will not be granted for locations within Westchester, Rockland and Putnam Counties. Such restrictions may be waived if a racetrack licensed to operate a VLT facility is not operational or scheduled to begin operations by April 1, 2005.

Net revenues (after cash payouts and administrative costs) generated at the new facilities would be deposited into a new fund, to be called the Sound Basic Education Account, and would not be co- mingled with existing Lottery revenues. The new program is not projected to increase revenue in the 2004-05 fiscal year, but the Executive estimates that the program could generate in excess of $2 billion annually when fully implemented.

Quick Draw Extender and Removal of Certain Operational Restrictions $43 million

The Executive is proposing to permanently extend the Quick Draw Lottery game, which is scheduled to sunset on May 31, 2004. In addition the Executive is proposing to remove the restrictions on the hours of operation, the minimum size of premises and the food sales requirement. Current law limits the hours of operation to 13 hours per day, no more than eight of which may be consecutive. In addition, Quick Draw may only be offered at premises licensed for the sale of alcoholic beverages for on-premises consumption where at least 25 percent of gross sales are from, the sale of food and premises that are greater than 2,500 square feet in size.


In addition, the Executive has proposed the following measures, that would reduce revenues by a total of approximately $29.0 million in SFY 2004-05 and $120 million when fully implemented.

Extend Alternative Fuels Vehicle Credit ($10.0) million

The Executive proposal extends the Alternative Fuels Vehicle Tax Credits under the Personal Income Tax and Corporate Franchise Tax for a period of one year. The proposal also amends the Sales Tax exemptions by clarifying certain differences between hybrid and clean-fuel vehicles, and by statutorily setting the incremental cost used in determining the exemption amount for hybrid vehicles at $3,000. The Sales Tax Exemptions are also extended for a one-year period.

Bio-Technology Investment Credit ($5.0) million

Creates a new program that is intended to provide biotechnology companies with a source of capital by allowing them to transfer their net operating loss carry forwards to other general business corporations. The biotechnology company would be able to receive 90 percent of the product of (1) its net operating loss carry forward, (2) its business allocation percentage and, (3) the tax rate for the year in which the transfer occurs.

Exempt Federal Military Pay ($1.0) million

The Executive proposes to exempt from the Personal Income Tax military pay received by members of the New York State National Guard who are deployed full-time to combat terror in New York State. In addition, Astronauts who have perished in the line of duty after December 31, 2002 will be allowed the same exemptions currently allowed to victims of terrorist attacks, including exemptions related to the Estate Tax. The proposal would also revoke, for New York State purposes, the tax-exempt status of organizations that have had such status revoked by the IRS in relation to terrorist activities.

Expand Low-Income Housing Credit ($2.0) million

The Executive proposes expanding the amount of Low- Income Housing tax credits by $2.0 million annually, for a period of ten years. This would result in a total annual Low-Income Housing Credit amount of $6.0 million.

Single Sales Factor Apportionment for Manufacturers $0.0 million

This proposal would change the income apportionment formula for manufacturers and certain other taxpayers subject to the Corporate Franchise Tax. The current formula is the average of the New York State amounts of property, payroll and sales to those amounts everywhere, with the sales ratio is double- weighted. The proposed formula would be the ratio of the taxpayer’s New York State sales to sales everywhere, and would be phased-in over a period of five years.


STAR Adjustment for Inflation ($11.0) million

The Executive Proposes to provide certain taxpayers a Personal Income Tax credit equal to the product of their STAR tax savings and the Consumer Price Index adjustment for that year. The taxpayer must reside in a school district that meets annual school budget caps proposed by the Executive.


State Fiscal Years 2002-03, 2003-04, 2004-05
($ amounts in millions)


Opening Cash Balance 1,980 1,222 2,148 926 75.8%

Taxes 40,676 42,116 46,608 4,492 10.7%
Miscellaneous Receipts 14,146 19,750 16,643 (3,107) -15.7%
Federal Grants 33,251 37,187 36,265 (922) -2.5%
Total Receipts 88,073 99,053 99,516 463 0.5%

Local Assistance Grants 63,991 72,433 72,713 280 0.4%
State Operations 14,988 15,050 15,300 250 1.7%
General Service Charges 3,239 3,842 4,312 470 12.2%
Debt Service 3,038 3,353 3,919 566 16.9%
Capital Projects 3,799 3,615 3,562 (53) -1.5%
Total Disbursements 89,055 98,293 99,806 1,513 1.5%

Other Financing Sources (Uses)
Bond and Note Proceeds 245 248 131 (117) -47.2%
Transfers from Other Funds 14,929 16,336 17,023 687 4.2%
Transfers to Other Funds (15,004) (16,418) (17,066) (648) 3.9%
Total Other Financing Sources (Uses) 170 166 88 (78) -47.0%

Excess (Deficiency) of Receipts and (812) 926 (202) (1,128) -121.8%
Other Financing Sources over
Disbursements and Other
Financing Uses

Closing Cash Balance 1,168 2,148 1,946 (202) -9.4%

Source: Executive Budget


State Fiscal Years 2002-03, 2003-04, 2004-05
($ amounts in millions)


Opening Cash Balance 2,138 1,645 2,061 416 25.3%

Taxes 40,676 42,116 46,608 4,492 10.7%
Miscellaneous Receipts 14,002 19,621 16,517 (3,104) -15.8%
Federal Grants - 657 12 (645) 0.0%
Total Receipts 54,678 62,394 63,137 743 1.2%

Local Assistance Grants 35,322 41,128 41,400 272 0.7%
State Operations 11,754 11,744 12,116 372 3.2%
General State Charges 3,055 3,670 4,114 444 12.1%
Debt Service 3,038 3,353 3,919 566 16.9%
Capital Projects 2,582 2,217 1,949 (268) -12.1%
Total Disbursements 55,751 62,112 63,498 1,386 2.2%

Other Financing Sources (Uses):
Transfers from other funds 13,025 13,859 14,668 809 5.8%
Transfers to other funds (12,744) (13,973) (14,575) (602) 4.3%
Bond and note proceeds 245 248 131 (117) -47.2%
Net Other Sources (Uses) 526 134 224 90 67.2%

Change in Fund Balance (547) 416 (137) (553) -132.9%

Closing Cash Balance 1,591 2,061 1,924 (137) -6.6%

Source: Executive Budget


State Fiscal Years 2002-03, 2003-04, 2004-05
($ amounts in millions)


Opening Cash Balance $1,032 $815 $1,014 $199 24.4%

Personal Income Tax 16,791 15,791 18,520 2,729 17.3%
Consumption/Use Taxes and Fees 7,063 7,897 8,340 443 5.6%
Business Taxes 3,380 3,395 3,739 344 10.1%
Other Taxes 743 784 762 (22) -2.8%
Miscellaneous Receipts 2,091 5,970 2,087 (3,883) -65.0%
Federal Grants 645 (645) -100.0%
Transfers from Other Funds
PIT in excess of Revenue
Bond Debt Service 4,215 5,242 5,628 386 7.4%
Sales tax in excess of LGAC debt service 1,919 1,944 2,047 103 5.3%
Real estate taxes in excess of
CW/CA debt service 263 247 240 (7) -2.8%
Other 931 344 472 128 37.2%
Total Receipts 37,396 42,259 41,835 (424) -1.0%

Local Assistance Grants 24,887 29,311 28,455 (856) -2.9%
State Operations 7,678 7,055 7,251 196 2.8%
General State Charges 2,699 3,257 3,652 395 12.1%
Debt Service - - - -
Transfers to Other Funds
Debt Service 1,496 1,468 1,753 285 19.4%
Capital Projects 166 227 187 (40) -17.6%
State University 26
Other Purposes 661 742 587 (155) -20.9%
Total Disbursements 37,613 42,060 41,885 (175) -0.4%

Excess (Deficiency) of (217) 199 (50) (249) -125.1%
Receipts over Disbursements

Closing Cash Balance $815 $1,014 $964 (50) -4.9%

Source: Executive Budget


State Fiscal Years 2003-04, 2004-05
($ amounts in millions)


Personal Income Tax 16,547 17,781 1,234 7.5%
Consumption/Use Taxes and Fees 7,934 8,436 502 6.3%
Business Taxes 3,194 3,719 525 16.4%
Other Taxes 766 776 10 1.3%
Miscellaneous Receipts 8,224 4,940 (3,284) -39.9%
Federal Grants 645 - (645) -100.0%
Total Revenues 37,310 35,652 (1,658) -4.4%

Local Assistance Grants 30,807 31,099 292 0.9%
State Operations 9,796 9,851 55 0.6%
General State Charges 2,785 2,998 213 7.6%
Capital Projects - - 0
Debt Service 24 25 1 4.2%

Total Expenditures 43,412 43,973 561 1.3%

Other Financing Sources (Uses)
Transfers from Other Funds 11,609 11,883 274 2.4%
Transfers to Other Funds (4,535) (4,593) (58) 1.3%
Proceeds of refunding and Other Financial Arrangements 360 340 (20) -5.6%

Net Other Financing Sources (Uses) 7,434 7,630 196 2.6%

Excess (Deficiency) of Receipts and 1,332 (691) (2,023) -151.9%
Other Financing Sources over
Disbursements and other Financing Uses

Accumulated deficit (1,988) (2,679)

Source: Executive Budget

ALL FUNDS - ($amounts in millions)


Health & Social Welfare
Medical Assistance 27,980 28,718 738 2.6%
Income Maintenance 3,110 3,060 (50) -1.6%
Health 3,949 4,154 204 5.2%
Other 5,546 5,464 (82) -1.5%
Health - Total 40,586 41,396 $809 2.0%

School Aid 14,272 14,550 278 1.9%
State University 4,574 4,634 60 1.3%
City University 1,092 1,127 35 3.2%
Other 5,132 5,169 37 0.7%
Education - Total 25,070 25,480 $411 1.6%

Star Property Tax Relief 2,835 2,998 163 5.7%

Mental Hygiene
Mental Health 2,116 2,165 49 2.3%
Developmentally Disabled 2,636 2,823 188 7.1%
Other 495 491 (4) -0.8%
Mental Hygiene - Total 5,246 5,479 $233 4.4%

Transportation 5,371 5,484 $113 2.1%

Public Protection 3,211 3,287 76 2.4%

General Government 1,368 1,623 255 18.7%

Environmental Affairs 1,145 1,114 (31) -2.7%

Economic Affairs 924 1,405 481 52.1%

All Others
Local Government Assistance 824 799 (24) -2.9%
General State Charges/Misc 3,118 3,358 240 7.7%
Long Term Debt Service 3,353 3,919 566 16.9%
Other 5,243 3,464 (1,779) -33.9%
All Others - Total 12,537 11,540 (997) -8.0%

Total 98,293 99,806 $1,513 1.5%

Source: Executive Budget

STATE FUNDS - ($amounts in millions)


Health & Social Welfare
Medical Assistance $8,640 $9,312 $672 7.8%
Income Maintenance 1,062 1,081 20 1.9%
Health 2,240 2,369 129 5.8%
Other 2,086 2,138 52 2.5%
Health - Total 14,027 14,900 872 6.2%

School Aid 14,272 14,550 278 1.9%
State University 4,403 4,462 60 1.4%
City University 1,092 1,127 35 3.2%
Other 2,128 2,338 210 9.9%
Education - Total 21,894 22,478 584 2.7%

Star Property Tax Relief 2,835 2,998 163 5.7%

Mental Hygiene
Mental Health 1,457 1,644 187 12.8%
Developmentally Disabled 792 959 167 21.1%
Other 337 324 (13) -3.8%
Mental Hygiene - Total 2,585 2,927 341 13.2%

Transportation 3,959 3,900 (59) -1.5%

Public Protection 3,006 3,074 68 2.3%

General Government 1,268 1,373 105 8.3%

Environmental Affairs 960 928 (31) -3.3%

Economic Affairs 865 1,347 481 55.6%

All Others
Local Government Assistance 824 799 (25) -3.0%
General State Charges/Misc 2,932 3,156 225 7.7%
Long Term Debt Service 3,353 3,919 567 16.9%
Other 3,603 1,699 (1,904) -52.9%
All Others - Total 10,711 9,574 (1,138) -10.6%

Total $62,112 $63,498 $1,386 2.2%

Source: Executive Budget

GENERAL FUND - ($amounts in millions)


Health & Social Welfare
Medical Assistance 5,952 6,325 373 6.3%
Income Maintenance 1,062 1,081 20 1.9%
Health 824 875 51 6.2%
Other 1,778 1,821 43 2.4%
Health - Total 9,615 10,102 487 5.1%

School Aid 12,361 12,530 169 1.4%
State University 1,237 1,221 (16) -1.3%
City University 684 729 46 6.7%
Other 1,974 2,178 205 10.4%
Education - Total 16,255 16,659 404 2.5%

Mental Hygiene
Mental Health 1,148 1,342 194 16.9%
Developmentally Disabled 683 799 116 16.9%
Other 295 284 (11) -3.7%
Mental Hygiene - Total 2,127 2,426 299 14.1%

Transportation 163 116 (47) -28.8%

Public Protection 2,616 2,640 24 0.9%

General Government 868 852 (16) -1.9%

Environmental Affairs 203 202 (1) -0.5%

Economic Affairs 189 206 17 8.8%

All Others
Local Government Assistance 824 799 (25) -3.0%
General State Charges/Misc 4,079 4,418 339 8.3%
Long Term Debt Service 1,468 1,753 285 19.4%
Other 3,651 1,712 (1,939) -53.1%
All Other - Total 10,022 8,682 (1,341) -13.4%

Total 42,059 41,885 (174) -0.4%

Source: Executive Budget


Agency Current
Abolition Attrition Transfers

Adirondack Park Agency 59 0 0 0 0 0 59
Advocate for Persons w/Disabilities 16 0 (1) 0 0 (1) 15
Aging, Office for the 131 0 (4) 0 8 4 135
Agriculture and Markets 541 0 (27) 0 10 (17) 524
Alcoholic Beverage Control Bd 159 0 (6) 0 0 (6) 153
Alcoholism and Substance Abuse 951 0 0 0 7 7 958
Arts, Council on the * 55 0 0 400 0 400 455
Audit and Control 2,271 0 0 0 0 0 2,271
Banking Department 569 0 0 0 18 18 587
Budget, Division of the 335 0 (5) 0 0 (5) 330
Capital Defender Office 61 0 (2) 0 0 (2) 59
Children & Family Services, Council on 0 0 0 0 0 0 0
Children & Family Svcs., Office of 3,881 0 (28) 0 0 (28) 3,853
Civil Service, Dept of 579 0 (4) 0 0 (4) 575
Collective Bargaining Agreements 53 0 0 0 0 0 53
Commission of Correction 35 0 0 0 0 0 35
Consumer Protection Board 29 0 0 0 0 0 29
Correctional Services 30,538 0 (213) 0 0 (213) 30,325
Criminal Justice Services 725 0 0 95 0 95 820
Crime Victims Board ** 103 0 (8) (95) 0 (103) 0
Deferred Compensation Board 4 0 0 0 0 0 4
Economic Development, Dept of 219 0 0 0 0 0 219
Education Department, State 3,054 0 (25) (400) 25 (400) 2,654
Election, State Board of 40 0 (1) 0 6 5 45
Employee Relations, Office of 62 0 0 0 0 0 62
Environmental Conservation 3,326 0 (16) 0 35 19 3,345
Environmental Facilities Corp. 92 0 0 0 0 0 92
Executive Chamber 160 0 (7) 0 0 (7) 153
Financial Control Board, NYS 18 0 0 0 0 0 18
General Service, Office of 1,631 0 0 0 3 3 1,634
Health, Department of 5,919 0 (208) 0 150 (58) 5,861
Higher Education Services Corp. 735 0 0 0 0 0 735
Housing and Community Renewal 935 0 0 0 0 0 935
Hudson River Greenway 5 0 0 0 0 0 5
Human Rights, Division of 205 0 (2) 0 0 (2) 203
Inspector General, Office of State 71 0 (3) 0 0 (3) 68
Insurance Department 908 0 0 0 0 0 908
Interest on Lawyer Account 9 0 0 0 0 0 9
Investigation, Temp State Comm. 27 0 0 0 0 0 27
Judicial Commissions 28 0 0 0 0 0 28
Labor, Department of 4,138 0 0 0 0 0 4,138
Law, Department of 1,717 0 0 0 0 0 1,717
Lieutenant Governor, Office of 6 0 (1) 0 0 (1) 5
Lottery, Division of 331 0 0 0 6 6 337
Lobbying, State Commission 16 0 0 0 0 0 16
Mental Health, Office of 16,392 0 (175) 0 66 (109) 16,283
Mental Retardation 21,280 0 (37) 0 222 185 21,465
Military and Naval Affairs 551 0 0 0 19 19 570
Motor Vehicles, Department of 2,817 0 (156) 0 149 (7) 2,810
N.E. Queens Nature & Historic Comm. 2 0 (2) 0 0 (2) 0
Parks, Recreation & Hist. Pres. 1,567 0 (80) 0 70 (10) 1,557
Parole, Division of 2,130 0 (41) 0 0 (41) 2,089
Prevention of Domestic Violence 33 0 0 0 0 0 33
Probation, Division of 32 0 (4) 0 0 (4) 28
Public & Private Employ. Relations Bd. 39 0 (2) 0 0 (2) 37
Public Security, Office of 67 0 0 0 6 6 73
Public Service, Department of 545 0 0 0 0 0 545
Quality of Care for Mentally Disabled 90 0 0 0 0 0 90
Racing and Wagering Board 120 0 0 0 13 13 133
Real Property Service, Office of 401 0 0 0 0 0 401
Regulatory Reform, Office of 36 0 0 0 0 0 36
Science, Tech.& Academic Research 30 0 0 0 0 0 30
State, Department of 803 0 (8) 0 11 3 806
State Police, Division of 5,514 0 0 0 94 94 5,608
Statewide Wireless Network 25 0 0 0 0 0 25
Tax Appeals, Division of 30 0 0 0 0 0 30
Taxation & Finance, Department of 4,888 0 (122) 0 0 (122) 4,766
Technology, Office for 643 0 (9) 0 2 (7) 636
Temporary & Disability Assistance 2,366 0 (19) 0 0 (19) 2,347
Transportation, Department of 9,538 0 (219) 0 180 (39) 9,499
Veterans' Affairs, Division of 113 0 0 0 0 0 113
Welfare Inspector General 10 0 0 0 0 0 10
Workers' Compensation Board 1,544 0 0 0 0 0 1,544

Total 136,353 0 (1,435) 0 1,100 (335) 136,018

Adjustment (280) 0 325 0 0 325 45

Total 136,073 0 (1,110) 0 0 (10) 136,063

Universities & Off-Budget Agencies
City University 10,300 0 0 0 0 0 10,300
Roswell Park 1,996 0 0 0 0 0 1,996
SUNY Construction Fund 113 0 0 0 0 0 113
State Insurance Fund 2,638 0 0 0 27 27 2,665
State University 36,752 0 0 0 0 0 36,752

GRAND TOTAL 187,872 0 (1,110) 0 1,127 17 187,889

*The Executive proposes the creation of a new public benefit corporation, the New York Institute for Cultural Education (NYICE), within the Council on the Arts. NYICE will oversee statewide cultural educational programs such as the State Museum and the State Archives, programs currently administered by the State Education Department (SED). The proposal would result in a transfer of 400 FTEs from SED to NYICE.

**The Executive proposes a merger of the Crime Victims Board (CVB) into a new victim services program in the Division of Criminal Justice Services (DCJS). The proposal would result in a transfer of 95 FTEs from CVB to DCJS.


A.9550/S. 6050 Public Protection and General Government

A.9551/S. 6051 Legislature and Judiciary

A. 9552/S. 6052 Debt Service

A.9553/S. 6053 Education, Labor and Family Assistance

A.9554/S. 6054 Health and Mental Hygiene

A.9555/S. 6055 Transportation, Economic Development

Budget Bill #1 Deficiency Appropriations for State Fiscal Year 2003-04

Budget Bill #2 Deficiency Language for State Fiscal Year 2003-04


A. 9556/S. 6066 - Public Protection and General Government

  • Authorize deposits, temporary loans for various funds, and bond cap changes; propose provisions relating to debt and other general fiscal management issues.
  • Clarify the authority of the Department of Civil Service regarding the administration of the Employee Health Insurance Fund.
  • Provide General Purpose Local Government Aid to cities, towns and villages.
  • Increase registration and renewal fees for student athlete agents to reflect State administrative costs.
  • Increase the penalty for violations of New York State's No Telemarketing Sales Call Law to conform with the Federal penalty.
  • Increase fees paid by operators of nuclear power reactors to fund enhanced State and local emergency preparedness.
  • Abolish the State Liquor Authority and transfer its functions to the Division of Alcoholic Beverage Control.
  • Eliminate certain transcript requirements for Workers' Compensation Board proceedings.
  • Extend the period when the Division of Parole can process a parole violation warrant for certain out-of-State parole violators.
  • Increase most new filing fees for alcoholic beverage licenses and permits to reflect State administrative costs.
  • Authorize the use of owner-controlled insurance by State agencies, public authorities, and municipalities.
  • Propose an alternative Municipal Assistance Corporation refinancing plan.
  • Authorize comprehensive mandate relief initiatives for localities.
  • Permit a new standard using "aggregate weight" for lab analysis of illegal drug evidence.
  • Make permanent the authorization to fund part of the State's public safety efforts with Motor Vehicle Law enforcement fees.
  • Permit grand jury testimony by police officers to be provided by affidavit rather than requiring personal appearance.
  • Authorize the Superintendent of Banks to establish various assessments, fees and penalties by regulation.
  • Establish new filing fees for various services provided by the Public Employment Relations Board.
  • Establish comprehensive pension reform.
  • Require a mandatory surcharge and a crime victim assistance fee for defendants adjudicated as youthful offenders.
  • Allow localities to assess a fee up to $5 on vehicle insurance policies to fund local public safety needs.
  • Authorize mandatory surcharges and the crime victim assistance fee to be imposed in cases where the defendant paid restitution.
  • Establish a new fee to be paid by convicted sex offenders.
  • Authorize counties to assess probation fees to support county probation services.
  • Expand the parking ticket surcharge statewide.
  • Merge the Crime Victims Board into the Division of Criminal Justice Services.
  • Authorize the Consumer Protection Board to recover costs incurred while investigating complaints pertaining to the Motor Fuel Practices Act.
  • Establish a medical payment cap and catastrophic allowance for crime victim claims.
  • Increase the maximum civil penalty for unfair and deceptive business practices and false advertising.
  • Establish a State licensing fee on pistol and revolver permits and an expiration date for all gun licenses.
  • Accelerate the reimbursement payment for indigent legal services.
  • Authorize the Division of Criminal Justice Services to implement automated photo-monitoring at work zones to reduce speeding.
  • Increase the minimum daily rate of pay for New York National Guard members on State active duty.
  • Encourage intergovernmental cooperation for the statewide deployment of enhanced wireless 911 service.
  • Authorize the Municipal Bond Bank to issue Fiscal Stability Bonds on behalf of distressed upstate cities.
  • Require that speeding ticket fines be based on the initial charged offense.
  • Clarify when the Division of Parole is responsible for reimbursing local jails for housing a presumptively released, paroled or conditionally released violator.

A.9557/S. 6067 - Education, Labor and Family Assistance

  • Authorize the SUNY Trustees to transfer the operations of the SUNY teaching hospitals to private not-for-profit corporations.
  • Restructure TAP awards to provide incentives for college graduation and create a Tuition Assistance Loan Program.
  • Exempt CUNY Capital Projects from Wicks Law requirements.
  • Protect taxpayers' STAR savings by placing limitations on school budget increases.
  • Authorize the entire welfare grant to be withheld if the head of the household does not fulfill his or her employment obligation.
  • Increase various worker protection and labor standards fees.
  • Align fiscal responsibility for tenured teachers' disciplinary hearings with the local district initiating such hearings.
  • Increase the real property transfer recording fee.
  • Establish a block grant to reimburse counties for secure and non-secure detention costs.
  • Restructure the Board of Regents and establish a New York Institute for Cultural Education (NYICE) that would be responsible for administration of the State Museum, the State Library, the State Archives and other cultural education programs that are currently administered by the State Education Department.
  • Step-down the amount of earnings an individual may retain while receiving public assistance based upon the length of time an individual has been on welfare.
  • Reduce the non-shelter component of the public assistance grant by 10 percent for families on welfare for more than 5 years and by 10 percent for single adults and childless couples on welfare for more than 1 year.
  • Implement school aid reforms.
  • Establish a New York State Higher Education Capital Investment Review Board to guide the awarding of capital matching grants for higher education facilities.

A. 9558/S. 6068 - Health and Mental Hygiene

  • Authorize the Commissioner of the Office of Mental Health to review and retroactively certify the rate methodology for dually licensed mental health outpatient programs.
  • Amend the Health Care Reform Act (HCRA) and amend the Insurance Law to authorize additional non-profit insurance company conversions to for- profit entities and invest a portion of the proceeds from such conversions in HCRA.
  • Restructure the State's Medicaid program through initiatives to reduce costs, enhance revenues and maintain access to health care services.
  • Enact public health initiatives to eliminate low- priority programs, strengthen pharmacy fraud prevention, achieve cost savings and facilitate access to the new Medicare Discount Card for low- income EPIC enrollees.
  • Re-establish reimbursement parity among Methadone Maintenance Treatment Programs certified in accordance with Article 28 of the Public Health Law.
  • Close the Middletown Psychiatric Center on April 1, 2005 and require that 50 percent of the savings from facility closures be reinvested into State- operated community services.
  • Establish the bipartisan Commission for the Closure of State Psychiatric Centers and extend the Community Mental Health Support and Workforce Reinvestment Act to 2010.

A.9559/S. 6069 -Transportation, Economic Development and Environmental Conservation

  • Authorize funding for the Cornell Supercomputer.
  • Make permanent the general loan powers of the New York State Urban Development Corporation.
  • Expand the Waste Tire Management and Recycling Act of 2003 to include new tires sold for motorcycles and all-terrain vehicles.
  • Authorize the New York State Energy Research and Development Authority to make payments to the General Fund and the Environmental Conservation Special Revenue Fund.
  • Authorize assessments on utilities to be used for New York State Energy Research and Development Authority research costs.
  • Authorize certain State agencies to finance their activities with revenues from assessments on public utilities and cable companies.
  • Authorize the Public Service Commission to redirect certain revenue from currency-operated telephone assessments and underground facility training fees to the General Fund.
  • Revise and expand the heavyweight truck permit system administered by the Department of Transportation.
  • Provide the annual authorization for the CHIPs and Marchiselli local transportation programs.
  • Delay implementation of the State Hazmat Fingerprinting Program to address Federal requirements.
  • Establish acreage-based fees for stormwater management permits.
  • Authorize additional purposes for the Environmental Protection Fund.
  • Establish new biennial inspection fee for food establishments; achieve efficiencies in the inspection of retail food stores; and require preventative measures to better protect the safety of the State's food supply.
  • Increase and restructure air regulatory fees.
  • Eliminate the annual inspection requirement for pet dealers' facilities and authorize the Department of Agriculture and Markets to conduct inspections on a risk-based frequency.
  • Re-authorize the New York Power Authority to make contributions to the General Fund to fully support the Power for Jobs Program and authorize a new rebate program.
  • Establish a Driver Responsibility Program imposing additional monetary assessments for drivers convicted of drug or alcohol-related offenses; or who refuse to submit to chemical tests; or who accumulate six or more points on their driving records.
  • Increase all-terrain vehicle (ATV) and snowmobile fees; create an ATV trail development and maintenance program; and provide reimbursement to local governments for State Forest Property Tax Credits.
  • Establish the $250 million Regional Economic Growth Program to be administered by the New York State Urban Development Corporation (UDC); and provide UDC, or other public authorities if appropriate, with bonding authority to finance the program.
  • Make permanent provisions relating to petroleum bulk storage fees to support the Oil Spill Program.

A.9560/S. 6070 - Revenue

  • Create a new State STAR credit under the personal income tax to protect the STAR benefit from the effects of inflation.
  • Create a new exemption from the personal income tax for Federal military pay for New York State Guard members activated and deployed full-time in the New York War on Terror.
  • Create a new biotech program that would allow qualified biotech companies to sell their unused losses to eligible corporations based on 90 percent of the value of the losses.
  • Allow for an additional $2 million in tax credits annually, or $20 million over the ten-year life of the program, for the Low-Income Housing Tax Credit program which will spur a new round of affordable housing construction.
  • Reduce the tax burden for manufacturers by phasing in a 100 percent receipts factor in determining income apportioned to New York State.
  • Extend and reform the Empire Zones Program.
  • Modify the fixed dollar minimum tax base.
  • Extend the Alternative Fuels Vehicle Program for one year.
  • Include in New York source income, gains from sales of cooperative apartment stock for non- residents.
  • Replace the permanent $110 clothing and footwear tax exemption with four $500 exemption weeks.
  • Allow the direct shipment of wine into New York State from out-of-state wineries.
  • Place sales tax rate surcharges on certain taxable services to fund public safety and security initiatives.
  • Authorize up to eight new facilities to be licensed by the Division of the Lottery to operate video lottery terminals.
  • Make Quick Draw permanent.
  • Remove restrictions on Quick Draw.
  • Extend the bank tax for one year and the Federal Gramm-Leach-Bliley Act provisions for two years to preserve current revenues.
  • Extend the MTA surcharge that is scheduled to expire on December 31, 2005.
  • Clarify rights regarding the availability of tax hearings.
  • Provide for the State to enter into price parity agreements with Native American nations with respect to cigarettes, motor fuel and alcoholic beverages and exempt such Native American nations from current regulations to collect the respective taxes.
  • Ease filing requirements for low-income taxpayers under the personal income tax.

Source: 2004-05 New York State Executive Budget

Schedule of Legislative Public Hearings
on 2004-05 Executive Budget Proposal
Date Location Time Topic
January 26 Hamilton Room 10:00 AM Local Government Officials and General Government
January 27 Hamilton Room 9:30 AM Transportation
January 28 Hamilton Room 9:30 AM Workforce Issues
January 28 Hamilton Room 1:00 PM Housing
January 29 Hamilton Room 9:30 AM Environmental Conservation
February 2 Hamilton Room 10:00 AM Public Protection
February 3 Hamilton Room 9:30 AM Health, Medicaid & Aging
February 4 Hamilton Room 9:30 AM Mental Hygiene
February 5 Hamilton Room 9:30 AM Higher Education/Academic Research
February 9 Hamilton Room 10:00 AM Elementary & Secondary Education
February 10 Hamilton Room 9:30 AM Economic Development/Taxes
February 11 Hamilton Room 9:30 AM Human Services
On or before February 23
Release of revenue receipts by the Fiscal Committees of the Legislature
All Hearings will be held in the Hamilton Room - Hearing Room B in the Legislative Office Building, Albany.

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