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Calling this the worst fiscal downturn in the economy since the Great Depression, Governor David Paterson unveiled his Executive Budget which is rife with tax increases that will affect all New Yorkers and massive cuts to agencies across the state.
The Governor unveiled his plans, which included significant spending cuts to both education and healthcare, one month early in order to accelerate the budget negotiation process in the State Legislature in hopes of closing the $15.4 billion budget gap for this year and next - a gap that is only continuing to increase.
“I want us to be optimistic,” Paterson said. “I think we can come back to Albany. We can take responsibility. We can take control of this budget, and we can take over Saturday Night Live,” the Governor quipped in response to a Saturday Night Live sketch poking fun at his blindness - during one of the only light-hearted moments of his address.
During the speech, Paterson laid out two separate plans - one to close the $1.7 billion mid-year budget gap, and one to balance the 2009-2010 project budget deficit that currently stands at $13.7 billion.
Paterson’s plan for this year includes new savings of $771 million with a significant amount coming from a New York Power Authority (NYPA) transfer ($306 million), agency spending controls ($100 million) and available fund balances ($100 million). In addition, it also includes nearly $1 billion in cuts with $500 million slated for Medicaid/health care, $93 million to local governments and $68 million to higher education. Paterson wants Albany lawmakers to approve a plan by February 1.
Meanwhile, the plan for closing the much greater 2009-2010 budget gap of $13.7 billion includes $9.5 billion in recurring spending reductions, $3.1 billion in recurring revenue actions and limits non-recurring action to the remaining $1.1 billion for 2009-2010.
“Given the magnitude of our current crisis, the only way we are going to overcome our budget problems is by acting comprehensively through shared sacrifice,” Paterson said.
In the 2009-2010 budget, the largest spending reductions are again in education and healthcare - the two areas that account for more than half of the overall $121 billion budget. The Governor’s proposals call for reducing school aid funding by 3.3 percent or $698 million while increasing tuition at City University of New York (CUNY) and State University of New York (SUNY) institutions.
“Cuts in school aid will not only harm children, they will also damage our state’s fragile economy,” said Karen Scharff, Executive Director of Citizen Action of New York. “Our children’s future and our state’s economic future both require that we balance the budget by asking the wealthiest New Yorkers to pay their fair share, rather than cutting school aid.”
In addition to seeing spending reductions at all state agencies, all New Yorkers will see increases or new taxes and fees associated with everyday items including an 18 percent “obesity tax” on non-diet soda, cable TV services, beer and wine and auto rental that could raise nearly $3.1 billion in 2009-2010.
Paterson said that he hopes to engage in dialogue with the state lawmakers who may have their own ideas on how to reduce some of the deficits.
“We are open to corrections, open to advice,” Paterson said. “We are also open to replacing anything you would wish us to relinquish in favor of a better idea.”
However, one area the budget plans did not take into account was any economic stimulus action the federal government could take in the upcoming weeks or months. There has been talk about President-elect Barack Obama instituting a stimulus plan that some estimates say could be up to $1 trillion.
“The best that we can hope for is short-term relief but also long term capital,” State Budget Director Laura Anglin.
The State Legislature, which includes the Senate and Assembly, will now take their cue from the Governor’s Executive Budget and try to hammer out a budget agreement. Paterson hopes that all sides can agree on a budget by March 1 - one month earlier than the usual budget deadline - which he believes will save the state more than $1 billion.

New proposed taxes and fees

  • Eliminate the sales tax exemption for clothing and footwear priced under $110 and replaces it with two, one-week exemption periods for clothing and footwear priced under $500. Localities will have an option to join the state in offering this exemption.
    Expected Revenue for 2009-2010 = $462,000,000

  • Impose a sales tax on entertainment-related consumer spending, including but not limited to, movie theaters and sporting events.
    Expected Revenue for 2009-2010 = $53,000,000

  • Impose a sales tax on transportation-related consumer spending, including but not limited to, taxis, limousines and buses.
    Expected Revenue for 2009-2010 = $45,000,000

  • Repeal the current state sales tax cap of eight cents per gallon on motor fuel and diesel motor fuel.
    Expected Revenue for 2009-2010 = $90,000,000

  • Impose sales tax on television and radio services provided by cable, satellite or other similar means.
    Expected Revenue for 2009-2010 = $136,000,000

  • Increase the tax on wine from 18.9 cents per gallon to 51 cents per gallon, and the beer tax from 11 cents per gallon to 24 cents per gallon.
    Expected Revenue for 2009-2010 = $63,000,000

  • Impose an additional 18 percent rate of sales and compensating use taxes on fruit drinks that contain less than 70 percent of natural fruit juice and non-dietetic soft drinks, sodas and beverages.
    Expected Revenue for 2009-2010 = $404,000,000