New York state budget (2011-2012)

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See also: Archived New York state budgets

The New York State Legislature passed the $132.5 billion state budget for FY 2012 on March 31, 2011, marking the first time since 2006 that the state budget had been approved ahead of the April 1 deadline for doing so. The state's fiscal year runs from April 1 to March 30.[1] The budget did not increase taxes or rely on borrowing. It reduced spending by one percent, but relied on spending cuts that had not yet been specified.[1]

Governor Andrew Cuomo missed the deadline for his midyear financial plan update for FY 2012, which was due October 31, 2011.[2] As of the end of October 2011, midway through its fiscal year, the state collected $584 million less in revenue than anticipated. The governor announced in November 2011 that the state budget had a shortfall of $350 million.[3]

Income Tax

The governor and lawmakers agreed to an overhaul of the state's income tax system in December 2011 which generated $1.9 billion in annual revenue. A surcharge expiring at the end of 2011 had been generating about $4 billion a year. Under the new plan, tax rates would range from 6.45 percent for income between $40,000 and $150,000 (for married couples) to 8.82 percent for income over $2 million. Tax brackets would be indexed to the rate of inflation and would take effect in 2012. The new top tax bracket would extend through 2014; the others would be permanent. A special session of the legislature began on December 8, 2011 to vote on the changes.[4]

State Budget

The FY 2012 budget did not raise taxes and did not rely on borrowing. It relied on spending cuts, but at the time the budget was passed, lawmakers did not specify exactly which spending cuts would be made, although some cuts were made public.[1] The enacted budget can be found here. Overall, total spending in the budget was 2.2 percent lower than FY 2011, or $1.4 billion less, largely the result of reduced spending on public schools.[5]

New York's Fiscal Year 2012 began on April 1, 2011. The state faced a budget deficit of $9 billion before passing the budget that eliminated the deficit with spending cuts.[6][7] Under the agreement between the governor and lawmakers, overall spending decreased to erase a $10 billion deficit without raising taxes. The budget capped spending on education and cut government agencies, authorities and commissions by 20 percent.[8]

According to the Division of the Budget, the budget projections were on track through the first quarter of the fiscal year.[9] In the second quarter, however, tax revenues were nearly $400 million — or 1.2 percent — below forecasts. ”If these trends continue, the state may need to adjust its revenue projections downward,” said Comptroller DiNapoli.[5]

Union Concessions

The Civil Service Employees Association, the state's largest public-employee union representing 66,000 state workers, made a deal with Gov. Cuomo that included a three-year wage freeze, the first furloughs ever for state workers, and an increase in the amount employees must pay toward their health insurance.[10] The employee share of health care premiums would rise to between 12 percent and 16 percent based on the employee's salary. It also included pay raises of two percent in the fourth and fifth years of the contract, which had to be ratified by union members. If other unions in the state ratified deals with similar concessions, the state would have saved $73 million in FY 2012, and as much as $1.6 billion over five years.[11] The union agreed to the plan to avoid the layoff of 9,800 state employees called for in the budget should public employee unions not make concession to save money. The budget, however, called for $450 million in savings in pay and benefits.[1]

Fifty-nine percent of Civil Service Employees Association union members approved the deal on Aug. 15, 2011.[10]

The Public Employees Federation, the other major union representing 56,000 state workers, voted in September 2011 on a nearly identical contract.[10]

Education

Under the budget, public schools would receive six percent less funding in the 2011-12 school year.[1] The budget agreement kept state education spending flat at around $20 billion.[12] School districts warned that the cuts could force them to raise property taxes, which were already among the highest in the nation.[1]

The final budget restored $230 million to the $23 billion allotted for state spending on K-12. The governor’s proposed property tax cap was gone, which was good news for schools in need of tax revenue. New York City schools were also particularly shortchanged because their expected allocation of state aid of $6.2 billion was cut by $840 million.[13]

Medicaid

The budget limited Medicaid growth to four percent, mandated higher wages for home-health aides and created a new fund to help hospitals pay for the costs of treating brain-damaged babies.[1] It capped annual Medicaid spending at $15.3 billion, reducing Medicaid spending by $2.8 billion.[14][13] It also capped Medicaid spending at $15.9 billion in 2012-2013.[15]

The governor created a Medicaid Redesign Team, which announced in October 2011 that it had saved nearly $600 million in savings in its first six months of existence, although the program enrollment had grown in that time period.[15] The governor's office said Medicaid spending was in line with projections but pointed to increasing enrollment as a fiscal risk.[16] The New York Medicaid system covered 4.96 million people, almost a quarter of the total state population, as of October 2011.[15]

Courts and Corrections

The budget cut the court system by an additional $70 million, for a total of $170 million.[13] Days after the budget was passed, the state’s chief administrative judge instructed judges to close their courtrooms a half hour early to avoid paying overtime to court personnel such as court clerks and court officers.[17]

The budget eliminated 3,700 prison beds across the state.[8]

On July 20, 2011, the governor's administration urged a state commission considering whether to increase the pay of New York judges to exercise restraint and "consider the state's fiscal outlook." Judges had not received a raise in 12 years and argued that they had been treated unfairly.[18]

Other Spending Cuts

The budget includes the consolidation of the state's Banking and Insurance departments into a single agency to be known as the Department of Financial Services.[8]

Cuts included:

  • $170 million budget reduction for the Office of Court Administration[8]
  • 10 percent reductions in the budgets of the executive branch and the offices of the Attorney General and the Comptroller[8]
  • 10 percent budget cuts in nearly all state agencies[14]
  • $54 million in other miscellaneous cuts[8]
  • $1 billion or more of Medicaid cuts haven't been fleshed out but exist merely as vaguely defined targets[12]
  • $70 million in cuts to the state's court system.[19]

The governor and Senate Republicans rejected the Assembly Democrats proposal of a special "millionaire's tax."[12]

New York City Mayor Michael Bloomberg strongly opposed the budget agreement and said that the spending cuts to New York City were an "outrage."[20] Prior to the agreement, the city was planning on cutting 6,100 teachers, 20 fire companies and 100 senior centers, but believed that the agreement between the governor and legislature would require it to make additional cuts.[21]

Governor's Proposed Budget

Gov. Cuomo presented his $132.9 billion proposed budget to the state legislature on Feb. 1, 2011.[22] Gov. Cuomo's budget proposed cutting $1.5 billion education and $1 billion Medicaid to close a $10 billion deficit.[22] He proposed no new or increased taxes.[22]

Gov. Cuomo said that to get the budget under control he would freeze salary increases for state employees and cap state spending as well as consolidate the number of state agencies, commissions and authorities to save 20 percent.[23] Cuomo said contracts for 96 percent of the state workforce were up for renegotiation on April 1, the first day of fiscal year 2012, and he intended to keep them at their current levels.[24] Cuomo said he planned to save $450 million in state employee contracts and that if he was unable to do so, he then had to consider laying off up to 9,800 workers.[25] State contracts with the Public Employees Federation and the Civil Service Employees Association expire at the end of March.[25]

Gov. Cuomo, said he would cut his $179,000 salary by five percent and that he intended to reduce other salaries of the governor's staff, including the governor's secretary, counsel, director of state operations, counselor and chief of staff.[24]

Cuomo said that he would not support increases in personal, corporate or sales taxes despite the state's large deficit.[23] There were two minor fee increases expected to raise $19.5 million. Cuomo proposed a horse racing purse surcharge of 2.75 percent and an increase in an unexplained "clearance registrar fee," to $60 from $5.[24]

The 2011-12 Executive Budget Briefing Book can be found here.

Public Employee Unions and Pensions

In May 2011 the governor proposed pension reforms, including raising the minimum retirement age to 65, ending early retirement and requiring higher contributions from employees. The changes would be effective only for new employees hired after the law was passed. The plan would save $93 billion over 30 years. The Civil Service Employees Association opposed the changes.[26]

Labor unions and Democrats had said that the governor should seek higher taxes on the wealthy to avoid cuts.[27]

References

  1. 1.0 1.1 1.2 1.3 1.4 1.5 1.6 The Wall Street Journal, "New York State Passes Budget," March 31, 2011
  2. Cite error: Invalid <ref> tag; no text was provided for refs named deadline
  3. International Business Times, "Not There Yet: U.S. States Can't Meet Revenue Forecasts," November 24, 2011
  4. The New York Times, "Albany Tax Deal to Raise Rate for Highest Earners," December 6, 2011
  5. 5.0 5.1 The Wall Street Journal, "New York’s Sluggish Tax Trends Worry DiNapoli," October 19, 2011
  6. Bloomberg, "New York State Faces $315 Million Budget Deficit on Lower Tax Collections," November 1, 2010
  7. State of New York, "New York State Mid-Year Financial Plan Update 2010-11 through 2013-14," November 1, 2010
  8. 8.0 8.1 8.2 8.3 8.4 8.5 CNN.com, "N.Y. governor, legislature agree on state budget," March 28, 2011
  9. Cite error: Invalid <ref> tag; no text was provided for refs named wnyc
  10. 10.0 10.1 10.2 The New York Times, "In Albany, a Labor Pact Without Attacks on Unions," August 16, 2011
  11. The New York Times, "Cuomo Secures Big Givebacks in Union Deal," June 22, 2011
  12. 12.0 12.1 12.2 The Wall Street Journal, "Cuomo, Legislature Strike a Deal on Budget," March 28, 2011
  13. 13.0 13.1 13.2 The New York Times, "Gov. Cuomo’s Budget," April 1, 2011
  14. 14.0 14.1 Reuters, "NY legislature passes $132 billion budget, no new taxes," March 31, 2011
  15. 15.0 15.1 15.2 The Albany Times Union, "Medicaid overhaul saves $600M," October 6, 2011
  16. The Wall Street Journal, "N.Y. Budget Gap Seen," October 28, 2011
  17. The New York Times, "State’s Judges Told to Shut Courtrooms Earlier to Cut Costs," April 6, 2011
  18. The New York Times, "Caution Urged on Raises for State Judges," July 20, 2011
  19. The Wall Street Journal, "State Budget would Change Regulatory Landscape," March 30, 2011
  20. The Wall Street Journal, "Mayor Slams State Budget's Effects on City," March 29, 2011
  21. The New York Times, "Bloomberg Calls State Budget Deal an ‘Outrage,’" March 28, 2011
  22. 22.0 22.1 22.2 Yahoo! News, "Cuomo slashes spending, freezes taxes in NY budget," February 1, 2011
  23. 23.0 23.1 MoneyCNN.com, "New governors:Budget cuts not tax hikes," November 15, 2010
  24. 24.0 24.1 24.2 CNNMoney.com, "States in fiscal mess: N.Y. governor cuts his pay," January 3, 2010
  25. 25.0 25.1 phttp://www.timesunion.com/default/article/State-jobs-pacts-in-play-997843.php#ixzz1D6ARh3B8 The Albany Times-Union, "State jobs pacts in play," February 4, 2011]
  26. NY1.com, "Cuomo's Proposed Pension Reform Met With Union Backlash," May 16, 2011
  27. The Wall Street Journal, "Budget Battles Roil Straitened States," February 25, 2011