Wednesday, December 17, 2008

Paterson seeks huge cuts, 88 new taxes

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Paterson seeks huge cuts, 88 new taxes
By Joseph Spector • Albany Bureau • December 17, 2008


ALBANY - Saying the state has "lived beyond its means," Gov. David Paterson yesterday called for massive cuts in aid to education and health care, an elimination of a property-tax rebate program for homeowners and 88 new taxes and fees - including a tax on downloading songs to an iPod.

The cost cutting has been expected for months as Paterson tries to close an unprecedented $15.4 billion deficit over the next two years. And few programs would be spared.


The proposed $121 billion budget for fiscal 2009-10 calls for keeping spending flat from the current fiscal year, which expires March 31.

But to keep up with increases in costs and a decline in revenue, particularly from the struggles on Wall Street, Paterson wants to trim school aid, limit the growth in Medicaid spending and reimbursements to hospitals and nursing homes, and lower pension benefits for new state and local government employees. He also wants to reduce the state's work force by 3,100 jobs - including 521 layoffs.

School aid would be cut by an average of 3.3 percent, or nearly $700 million from the current fiscal year, to roughly $21 billion - stoking fears from education officials that local property taxes would need to be increased to make up the difference. Cuts in aid would range from 3 percent to 13 percent based on a school district's wealth, budget officials said.

The growth in aid to hospitals and nursing homes would be reduced as part of a $3.5 billion plan to lower health-care costs. Even with the funding reductions, New York would still rank first in the nation in per capita Medicaid spending at $2,283, aides said.

Paterson warns that the fiscal problems are the result of years of overspending.

"We have made too many promises and made not enough sacrifices," he said during his budget address to members of the Legislature and elected leaders from across the state.

Paterson is presenting the budget to the state Legislature a month earlier than usual in hopes of getting an early agreement to cut spending. The Legislature is required to pass a spending plan by April 1, but Paterson wants it passed by March 1, saying it would save the state about $1.3 billion.

He challenged lawmakers that if they don't like his proposals, they should recommend their own ideas. His budget presentation was met with light applause.

Some lawmakers warned that the budget cuts could lead to higher local property taxes because costs for schools and programs would get passed down to the local level.

"To our residents, it doesn't matter which pocket it's coming out of," said Assemblyman Kenneth Zebrowski, D-New City.

Sen. Stephen Saland, R-Poughkeepsie, said the budget crisis "is one we have never seen, and obviously it's going to require dramatic changes."

The state School Board Association said in a statement that the school cuts would mean "at a minimum, children in some communities will go without extracurricular activities, sports, art and music programs."

The Democratic governor avoided proposing a broad-based income tax increase, but the budget includes 88 new or increased fees and 10 new public safety fines. In total, the budget calls for about $4 billion in new taxes and fees to offset losses of revenue from Wall Street.

The new charges include an 18 percent sales tax on soda and other sugary drinks, called an "obesity tax," an elimination of a sales-tax exemption on clothing and footwear under $110 and a sales tax on cable and satellite radio.

He also pitched a "digital property taxation," which would impose sales taxes, typically 8 percent, on downloaded songs to an iPod.

Critics warn that the increases in fees will only further hurt the state's economy, and the state's legislative leaders warned of putting additional burden on New Yorkers.

"We will look at the whole package," said Assembly Speaker Sheldon Silver, D-Manhattan. "This package will not be balanced on the backs of any one particular class of residents of this state. It won't be students, it won't be state workers, it won't be the poor, and it won't be the wealthy. It will be all of them."

To save $1.4 billion, Paterson would eliminate the STAR rebate tax program in which homeowners receive a check each fall to help offset the state's high property taxes. Paterson would still keep the larger School Tax Assessment Relief program intact; that program lowers a homeowner's property tax bills.

The budget also calls for a $620 a year increase in tuition for state colleges and universities, but Paterson wants to create a higher education loan program to help students afford school.

Aid to municipalities would remain flat, but a scheduled increase in aid of about $61 million would be scrapped. Paterson also wants to cut back on spending for the much maligned Empire Zone economic development program, which provides tax breaks to companies, saving the state $272 million in fiscal 2009-10.

Rochester Mayor Robert Duffy said the cut in growth in aid was expected, but he's hopes the budget plan will give cities fewer unfunded mandates.

"We're looking for more local control and more ways to control our spending," he said.

Six youth detention facilities would be closed, including the Rochester Community Residential Home.

The pension changes for state and local workers would increase the minimum retirement age to 62 from 55, require employees to contribute to the pension fund after their 10th year of service and no longer allow overtime to be included in calculating retirement benefits.

Unions already vowed to fight any cuts in state services and jobs. Unions have called on Paterson to raise income taxes on the wealthy, which Paterson has not ruled out but said wouldn't solve the fiscal crisis.

"The middle class will have to pay more and get less while the wealthiest New Yorkers slide by under the governor's proposal," said CSEA President Danny Donohue. "There is no sharing of the sacrifice here - it's working people getting stuck with the bill."

Paterson calls for extensive cuts to education and health care, 88 new taxes

Albany Bureau Chief Jay Gallagher contributed to this report.

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