Spitzer Unveils New York Budget

by Mike Godfrey, Tax-News.com, Washington

23 January 2008

New York Governor Eliot Spitzer has this week delivered his 2008-09 Executive Budget, which aims to close a projected USD4.4 billion budget gap without raising taxes, while making key investments in education, health care, and economic development.

According to the Governor's office, the balanced budget fulfills the budget goals of responsibly closing the budget gap, protecting core priorities and investing for economic growth.

“The recent downturn on Wall Street has caused significant declines in expected revenue growth across the country and in New York in particular,” observed Governor Spitzer, continuing:

“These challenging economic times require us to make tough but necessary choices and set clear priorities for state spending. By reigning in spending we have produced a fiscally-responsible budget that focuses our limited resources on the critical investments we need for economic growth."

To produce a balanced budget in the difficult economic climate created in large part by the subprime mortgage crisis, Governor Spitzer has proposed savings totalling USD2.3 billion, along with targeted actions to increase recurring revenues by USD1.1 billion.

Additionally, USD1.1 billion of non-recurring revenue is contained in the budget, and USD337 million of labor reserves is used to finance potential collective bargaining agreements.

The 2008-09 Executive Budget includes USD81.8 billion in State Operating Funds spending, an increase of 5.0% compared to 2007-08. This is reportedly consistent with Governor Spitzer’s goal of limiting pending growth to below 5.3%, which is the average long-term rate of personal income growth in New York – and the best measure of affordability.

The USD124.3 billion All Funds budget, which includes federal funds, increases spending by 5.1% General Fund spending, which is a component of the broader State Operating Funds category; spending will total USD56.7 billion, an increase of 5.9%.

According to Spitzer, this year’s budget was the first to be developed completely within the parameters of the Budget Reform Act enacted in January 2007. The new process included greater transparency in spending and appropriations, earlier consensus discussions on revenues, as well as the first-ever statewide public hearings to solicit input on budget priorities in advance of the Governor’s proposal.

This USD4.8 billion plan has allowed the state to close its USD4.4 billion gap and make USD400 million in additional investments in education, health care and economic development while still maintaining a balanced budget.

One of the governor's key priorities was property taxes, and he proposed the establishment of a commission to recommend proposals to develop a fair and effective property tax cap proposal. The commission also will produce a package of reforms to counteract the root causes of New York’s high property taxes and increase the fairness of the State’s current property tax relief system.

This year he also proposed a commission to develop a proposal for a "fair and effective" property tax cap, and unfunded mandate reform to help hold down local property taxes.

“Despite the significant progress we made in last year’s budget with the Middle Class STAR program, property taxes have still continued to increase at an unacceptable and unsustainable rate,” explained Governor Spitzer.

“A fair and effective property tax cap, in concert with efforts to reduce local government costs, represents the right approach for finally tackling the root causes of high property taxes," he added.

In order to offer immediate relief to taxpayers, the Executive Budget also recommended USD5 billion in funding for the STAR program, an increase of USD134 million over last year. Senior citizens will receive a USD91 million increase in their Enhanced Rebate, which will raise their average benefit from USD327 to USD458 – a 40% increase.

Because of the fiscal difficulties facing the state, however, the planned expansion of Middle Class STAR and the accompanying New York City Personal Income Tax Credit, originally scheduled to take place in 2008-09, has been delayed by one year.

The Personal Income Tax credit will also be discontinued for New York City residents with high incomes (over USD250,000). These and other adjustments to the program will produce savings of USD354 million.

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