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ZippyTheChimp
January 4th, 2006, 09:07 AM
January 4, 2006

News of $2 Billion Surplus Precedes Pataki's Speech

By DANNY HAKIM

ALBANY, Jan. 3 - A day before his final State of the State address, Gov. George E. Pataki said on Tuesday that New York's budget surplus was now projected to be $2 billion, twice previous estimates.

The revelation of the surplus in the state's $106.7 billion budget led Republicans in the State Senate to speculate that the governor would announce new tax cuts in his address on Wednesday afternoon. But Mr. Pataki, who is not seeking re-election, declined to give a preview of his 12th and final speech to open the legislative season.

Mr. Pataki, who has been spending time in Iowa and New Hampshire and is considering a presidential bid, could use a fresh round of tax cut proposals to bolster his conservative credentials for a potential run.

"This is a dramatic turnaround from last year, when we were looking at a $4 billion deficit," Mr. Pataki said on Tuesday. "It just shows that good government policies like reforming and controlling the cost of Medicaid and putting in place economic policies where our economy is expanding and growing have led to higher revenues and lower costs."

Budget experts have said some of the chief reasons for the state's improving financial picture are somewhat beyond the governor's control, namely improvements in the economy. Mr. Pataki also said that "stronger economic growth than had been anticipated" was a major factor. The budget was also helped this year by windfall proceeds from the conversion of New York's largest health insurer, Empire Blue Cross Blue Shield, into a profit-making company that has since been taken over by WellPoint.

Timothy Blake, the lead New York State analyst for Moody's Investors Service Inc., which upgraded New York's debt rating last month, said strengthening profits among Wall Street firms were probably driving the increases in revenue projections.

"Bonuses are quite good and the firms' profits are quite good, and they're taxed on their profits," Mr. Blake said. "But it's not unreasonable for the state to be cautious, because this industry is volatile."

Tax increases approved by the Legislature in 2003, overriding Mr. Pataki's veto, were also a factor in the current surplus.

"It was the Legislature that pushed that through," Mr. Blake said. Those tax increases, however, were phased out at the end of last year, and a $2.5 billion deficit is projected for the coming fiscal year, which ends in March 2007.

Assembly Speaker Sheldon Silver, a Democrat, called on the governor to use at least some of the surplus to begin complying with a court ruling that found that students in New York City public schools had been shortchanged, and a related court order to increase spending for them by $5.6 billion a year. The order has led other communities across the state to file lawsuits similar to the one that led to it.

"It's time that we did what every court in this state has said that we had to do," said Mr. Silver, who has favored school spending increases across the state. The Pataki administration is appealing the court order.

Joseph L. Bruno, the Republican majority leader of the Senate, said tax cuts should be a top priority. "I think he'll propose tax cuts," he said, referring to the governor's coming speech. "We're going to be interested in which tax cuts he proposes, because we feel you've got to focus on property tax cuts."

Mr. Pataki cautioned against spending all the surplus. "We have to look at '07, '08 and beyond and look at the long term," he said

The three state leaders appeared together Tuesday to announce financing for a new center for research into nanotechnology in the Albany area, and they also appeared later to announce the creation of three new Empire Zones, which offer tax breaks to businesses to promote job growth, in Chinatown, and in Nassau and Livingston Counties.

Mr. Pataki cut short questions at the second event. "I have to go write a speech," he said.

Michael Cooper contributed reporting for this article.

* Copyright 2006The New York Times Company

Ninjahedge
January 4th, 2006, 09:23 AM
They have extra $$ and everyone wants to spend it.

Typical.

I think they should ONLY spend it on something that will make us either NEED less in the future or MAKE MORE.

And I do not mean $1M more either.

There is so much NYC and NYS need that this 2% surplus is not as big as it seems. It is like being able to put $2000 in the bank at the end of the year when your salary is $100K! When you look at it like that, you see that the next time your car needs repair, your "surplus" goes bye-bye.

ZippyTheChimp
January 19th, 2006, 12:30 AM
January 18, 2006

Pataki Proposes Major Tax Cuts in Final Budget

By DANNY HAKIM

ALBANY, Jan. 17 - Gov. George E. Pataki called for billions of dollars worth of tax cuts and rebates on Tuesday as the centerpiece of his 12th and final budget, proposing that the state lower income taxes, eliminate New York's tax on inheritances and abolish the so-called marriage penalty.

But only a small part of the package of tax cuts and rebates, $844 million, would take effect while Mr. Pataki is in office. That figure would rise to nearly $3.3 billion by the fiscal year ending in March 2009. That led Democrats to criticize the governor for presenting a budget plan that was meant to score political points as he considers a presidential run.

In addition to lowering the income tax rate paid by most New Yorkers to 6.75 percent from 6.85 percent, the governor proposed sending out school property tax rebate checks of $400 to homeowners in school districts across the state that promise to limit spending increases - a condition that will most likely disqualify homeowners in New York City, a district that most agree needs to increase spending on education.

With Mr. Pataki in his final year as governor, his ambitious plans for the tax code faced an uncertain future.

The plan for wide-ranging tax cuts represented a return for Mr. Pataki to an overriding theme of his first years as governor, when he cut taxes and tried to rein in state spending. But since he took office in 1995, his reputation for fiscal conservatism has been eroded by state spending that has outpaced inflation, with Tuesday's proposed $110.7 billion budget representing a 4.1 percent increase over the previous year's budget. [News analysis, Page B6.]

The budget Mr. Pataki proposed on Tuesday also includes a package of business tax cuts and a $500 per child tax credit for families with incomes below $90,000 who live in districts with underperforming schools. The credits could be used to pay for private or parochial schools, or for tutoring or after-school programs.

Not all taxes would be cut. His reductions would be offset by raising state cigarette taxes outside New York City to $2.50 from $1.50 per pack. Mr. Pataki also decided to continue charging sales taxes on clothing purchases under $110, eliminating a previous tax break that had been scheduled to come back into effect. The governor instead continued a far less generous two weeks with no sales tax - one of them a back-to-school week - on clothing purchases of less than $250.

The mix of election-year politics and projected budget surpluses of $2 billion could fuel competing agendas for state lawmakers. The Republican majority leader of the State Senate, Joseph L. Bruno, called Mr. Pataki's proposal "one of the best budgets he has submitted in his 12 years as governor."

"It's good because it focuses on job creation and job retention," Mr. Bruno said.

But the Assembly speaker, Sheldon Silver, a Manhattan Democrat, criticized the proposal to repeal the estate tax and other tax cuts as providing "the greatest benefit to those New Yorkers who need it the least."

The governor would pay for the tax cuts in part by sharply cutting Medicaid, the largest single piece of the budget at nearly $50 billion. Mr. Pataki proposed Medicaid cuts and cost reductions of nearly $1.3 billion, with $246 million coming from the federal government's plan to have Medicare pick up prescription drug costs. However, the state's assumption of more of the share of Medicaid paid by New York City and the counties is increasing the state's burden by more than $1 billion this year.

"Let's stick to the guiding principles that have seen us through the challenges of the last 11 years," Mr. Pataki said in a speech on Tuesday unveiling his budget proposal. "Let's remain committed to creating jobs and improving our economic climate, building up our fiscal reserves, cutting taxes, restraining spending and debt, and enacting major reforms."

The governor's budget plan fell far short of complying with a court order that the state sharply increase aid to New York City schools, to the tune of $2.8 billion in the coming year. Statewide, the budget included $634 million in new spending on public education. In higher education, the governor called for $200 million in cuts, including changes in tuition assistance programs; and new revenue including tuition increases of up to $500 at the State University of New York.

A proposal to allow three new sites for video lottery machines was also aimed at education financing.

Mr. Silver criticized the governor for refusing to increase aid to city schools by the billions of dollars demanded by a court order. Mr. Pataki's administration is appealing that order, which stems from a lawsuit filed by the Campaign for Fiscal Equity, or C.F.E.

"The governor is passing on the challenge of C.F.E. to the next governor," Mr. Silver said. "That means one more year that New York State's children will be left behind in the global race for the best jobs and the best careers of this new millennium."

Mr. Pataki, Mr. Silver and Mr. Bruno - Albany's ruling triumvirate - all said that they were again committed to passing a budget on time for a second year after more than two decades of late budgets.

While the size and scope of the tax cuts are sure to be contested, many budget watchers said that Mr. Pataki's budgetary swan song did not have many of the more controversial elements of past proposals, perhaps a signal that he wished to leave office with another on-time budget.

Many of the proposals he talked about may curry favor among Democrats, including a slate of proposals aimed at curbing oil consumption and encouraging use of alternative energy, including reinstating tax credits for some hybrid electric cars and setting aside $20 million for refineries that use a new method of producing ethanol that would be far more efficient than using corn.

"He's trying to set a tone that's nonconfrontational," said Blair Horner, the legislative director with the New York Public Interest Research Group, which criticized the proposed education cuts. "It bodes well for getting things done on time."

E. J. McMahon, a budget expert at the Manhattan Institute, a conservative research group, said: "There's plenty that is meant to ease the way to early agreement with the Legislature. He's not really going after any sacred cows. The Medicaid piece is the budgetary equivalent of 'round up the usual suspects.' "

Diana Fortuna, president of the Citizens Budget Commission, a fiscal watchdog group, said Mr. Pataki was "not looking to wave any red flags in front of the Legislature, other than on the tax cuts."

But she was critical of the budget proposal over all, in part because Mr. Pataki's plan for tax cuts would result in deficits in future years.

"He's leaving his successor with a lot of big problems, many of which were around when he started," Ms. Fortuna said: "high debt, a weak upstate economy, high local taxes, a Medicaid program that's out of whack with the rest of the country and inequitable school financing."

Lawmakers predicted that with this being an election year, an on-time budget was likely.

"I want to be optimistic," said James N. Tedisco, a Republican and the Assembly's minority leader. "We've only done that once in 21 years, so the percentages are not with us, but we're moving in the right direction. If we show up this time around and don't do it again I think there's going to be tremendous pressure at the polls, and that affects both sides of the aisle."

Mr. Silver said Assembly Democrats were "wholeheartedly committed to working with the Senate again in a process, again, that produces a fair and on-time budget. Make no mistake about that. It's just that we do have hurdles to overcome."



January 18, 2006
News Analysis

A Rising Curve

By MICHAEL COOPER

ALBANY, Jan. 17 - Eleven years ago, as a rookie governor, George E. Pataki shook up Albany by proposing a budget that cut overall state spending for the first time since World War II. That year he called for a $62.6 billion spending plan.

On Tuesday, Governor Pataki unveiled his 12th and final state budget proposal. It calls for spending $110.7 billion in the next fiscal year.

Over the years, spending increases helped the Republican governor win re-election twice in this overwhelmingly Democratic state, but they have sparked distrust of Mr. Pataki in some conservative circles. Now, as Governor Pataki ponders an uphill run for president, it is one of the areas he is taking pains to explain as he works to burnish his record.

Spending has risen an average of 5 percent a year during his three terms, according to the state budget division, well above the average growth from inflation, which was 2.6 percent. So Mr. Pataki sought to put his spending in perspective on Tuesday, showed reporters a chart indicating that the 5 percent annual growth in spending was less than the average for all states (5.9 percent) and less than the average growth during the administration of his predecessor, Mario M. Cuomo (7.5 percent).

Asked if, as a first-term governor, he had ever imagined proposing a $110 billion budget, Mr. Pataki said, "No."

Then he elaborated, explaining that he believes the increase was, in a way, made possible by his early austerity. "I've always believed that when you control spending, cut taxes and improve the economic climate, and you grow the private sector, then you have the resources to support the public good," he said. "And that's what has happened."

All that spending has not exactly allowed the governor to put a chicken in every pot.

Mr. Pataki is still appealing a court ruling that would require the state to increase its annual spending on schools by billions of dollars. Medicaid continues to eat up more and more state dollars, but the poor people who rely on it say that too often, their quest for good, reliable health care is undermined by voluminous paperwork, inscrutable rules and a shortage of doctors. And many big public projects are still spoken of in the future tense, from the Second Avenue subway to the rail link between Lower Manhattan and Kennedy International Airport.

The governor's spending habits have changed over time, according to an analysis of his budgets by the Citizens Budget Commission, a nonpartisan fiscal watchdog group. Through 2000, Mr. Pataki's average spending increases were smaller than the average spending increases of some comparable states, the analysis found. Beginning in 2001, it found, New York's rate of budget growth began to outpace the other states'.

"He came in as a belt-tightener, and over time succumbed to the pressure to add spending, la Albany," said Diana Fortuna, the president of the commission.

Of course, governing New York State requires striking a balance among fiscal responsibility, the needs of the state and the politics of Albany, and at different times during his three terms, Mr. Pataki has found himself praised and criticized in all three areas.

Fiscal watchdogs applauded his early austerity but tsk-tsked his later spending. Social-service advocates praised him when he expanded health coverage, and castigated him when he proposed health and education cuts. He had success some years in striking deals with the Legislature, but in other years impasses led to record late budgets, and one year a budget was passed over his veto.

The governor also raised some eyebrows by using his final budget address to call for overhauling the state budget process, and its debt practices. During his three terms, state debt has increased to $49.4 billion, from $36.4 billion when he took office. The state has one of the highest per capita debt rates in the nation: it is estimated to be $2,563 in the coming fiscal year, up from $1,973 when he took office, according to the state.

Like many of the tax cuts Mr. Pataki proposed on Tuesday, the bulk of which will only take effect after he leaves office, the debt proposal will be an issue for the next governor, if it goes forward.

"A different set of rules for the next governor than you had for yourself," noted Senator David A. Paterson, the Democratic minority leader.

Edmund J. McMahon, the director of the Empire Center for New York State Policy, a project of the Manhattan Institute, a conservative research group, was pleased to see tax cuts, and a proposal to give tax credits to some parents for educational expenses including private school tuition.

But he said he was concerned by the spending increase this year, and the fact that so many of the tax increases do not take effect - or have to be paid for - until Mr. Pataki leaves office.

"He's attempting to establish his legacy," Mr. McMahon said, "with one foot out the door."


* Copyright 2006The New York Times Company