GOVERNOR PATERSON, SPEAKER SILVER, AND MAJORITY LEADER SMITH ANNOUNCE AGREEMENT TO CLOSE CURRENT-YEAR $1.6 BILLION DEFICIT

Governor David A. Paterson, Assembly Speaker Sheldon Silver, and Majority Leader Malcolm Smith today announced a plan to fully close the State’s current-year $1.6 billion deficit. The agreement does not include the use of either potential federal stimulus funding or resources from the State’s rainy day reserves.

“Regardless of any action that may be taken at the federal level, it is clear that New York has a responsibility to get its own fiscal house in order. Any stimulus aid we receive will only cover a fraction of our long-term deficit. We cannot simply look to Washington to solve all of our budget problems,” said Governor Paterson. “That is why we have come together today to produce a proactive plan that will eliminate our current-year deficit. This is exactly the type of responsible government New Yorkers deserve.”

In addition to closing the State’s current-year $1.6 billion shortfall, the plan will also put a down payment of $800 million on next year’s deficit, reducing the 2009-10 budget gap from $13.8 billion to $13 billion.

“While I applaud the Legislature for working with me to take the prudent and responsible actions necessary to close this year’s deficit, I know that we all recognize an even greater task awaits us in the weeks ahead,” Governor Paterson added. “Addressing next year’s $13 billion deficit will require us to make more tough choices. But today’s agreement demonstrates that we are united in our commitment to meet the challenges ahead.”

Since taking office, Governor Paterson has worked with the Legislature to enact over $3 billion in current-year savings to address a dramatic decline in revenues related to a national economic crisis. These include nearly a $1 billion (10 percent) reduction in agency spending, over $400 million in savings at an August Special Session, and today’s $1.6 billion Deficit Reduction Plan.

“We made a commitment to the people of New York that we would address the budget gap for this fiscal year by adopting a $1.6 billion deficit reduction plan,” Senate Majority Leader Malcolm A. Smith said. “By passing this critical legislation New York State has demonstrated fiscal responsibility and economic discipline, better positioning the State’s bond rating and opportunity to receive federal stimulus funding.”

“As I have said many times I am committed to finding cuts in spending to ensure that New York is able to live within its means. I believe this plan is a prudent and thoughtful response to these difficult times,” Assembly Speaker Sheldon Silver said. “However revenue numbers are not improving so our next step is to continue our work on the 2009-10 State budget recognizing that no budget deficit in excess of $12 billion is going to be closed without federal aid, without cuts and without new revenue measures.”

The major components of the 2008-09 Deficit Reduction Plan are listed below:

Higher Education (2008-09 Savings: $53 million; 2009-10 Savings: $97 million)

• Increase SUNY Resident Undergraduate Tuition. The SUNY Board has voted to increase annual resident undergraduate tuition by $620 (14 percent) from $4,350 to $4,970. Spring 2008-09 tuition will increase by $310. The full annual $620 increase would be effective in the following academic year. Savings will be achieved by using additional tuition revenue to offset state financial support. In a break from more than 30 years of State history, SUNY would retain 10 percent of the value of the tuition increase for new investment in 2008-09 and 20 percent of the full annual increase in 2009-10. (2008-09 Savings: $62 million; 2009-10 Savings: $122 million)
• Increase TAP Award Spending. The recommended tuition increase for SUNY will drive higher costs for the Tuition Assistance Program. (2008-09 Cost: $9 million; 2009-10 Cost: $25 million)

Local Government (2008-09 Savings: $94 million; 2009-10 Savings: $29 million)

• Change Timing of NYC STAR Payment. Consistent with existing statutory authority, the December 2008 STAR payment to the City of New York has been moved to June 2009. This will have no impact on New York City’s Financial Plan, as the payment will be made in the same City Fiscal Year. This action has been taken administratively. (2008-09 Savings: $93 million; 2009-10 Savings: $20 million)
• Scale Back Local Government Efficiency Grant Programs. The 2008-09 Deficit Reduction Plan reduces Local Government Efficiency Grants administered by the Department of State to encourage local consolidation and shared services. The reductions will honor current grant awards in full, but reduce remaining available funds by 50 percent. (2008-09 Savings: $1 million; 2009-10 Savings: $9 million)

Human Services (2008-09 Savings: $4 million; 2009-10 Savings: $18 million)

• Delay Implementation of Bridges to Health Program. The budget delays the phase-in of 2,695 slots for the “Bridges to Health” program until 2011-12. This Medicaid waiver program is designed to provide intensive services to children in foster care, with the goal of keeping these children out of institutional settings. (2008-09 Savings: $1 million; 2009-10 Savings: $15 million)
• Reduce OASAS Prevention Funding. This action reduces Office of Alcoholism and Substance Abuse Services (OASAS) funding for school-based prevention services in New York City schools. After this reduction, $19 million in funding would remain for this program in 2008-09. (2008-09 Savings: $3 million; 2009-10 Savings: $3 million)

Workforce (2008-09 Savings: $5 million; 2009-10 Savings: $0 million)

• Rescind 2008-09 Vacation Exchange Program. A program to allow management/confidential employees to exchange limited amounts of unused vacation time for cash payments has been rescinded for 2008-09 – an action which has been taken administratively. (2008-09 Savings: $5 million; 2009-10 Savings: $0)

Miscellaneous Reductions (2008-09 Savings: $254 million; 2009-10 Savings: $68 million)

• Reduce New Legislative Programs. Funding for new legislative programs will be reduced by 20 percent of remaining spending. An itemized list of these programs is available here.   (2008-09 Savings: $26 million; 2009-10 Savings: $5 million)
• Eliminate Member Items Transfer. A planned $30 million transfer from the General Fund to the Community Projects Fund will be eliminated in 2008-09. (2008-09 Savings: $30 million; 2009-10 Savings: $0)
• Reduce Funding for Certain Economic Development Programs. Funding for several economic development initiatives will be reduced, including tourism marketing ($1.5 million), JOBS Now ($1.5 million), Technology Transfer ($1 million), and Faculty Development programs ($1 million). Furthermore, the Centers for Applied Research and Technology program will also be allowed to expire at the end of 2008, providing savings of $900,000. (2008-09 Savings: $6 million; 2009-10 Savings: $6 million)
• Reduce Arts Grants Funding. This proposal reflects a reduction of grant funding that has not yet been awarded. After these reductions, state funding for arts grants would total $39 million in 2008-09, which will still represent the highest level in the nation. (2008-09 Savings: $7 million; 2009-10 Savings: $7 million 2009-10)
• Environmental Protection Fund (EPF) Reduction. Appropriations for the EPF will be reduced by $50 million, from $255 million to $205 million. Even with this reduction, funding for the EPF will still have increased by 37 percent compared to 2005-06. (2008-09 Savings: $50 million; 2009-10 Savings: $0 million)
• Statewide Spending Controls. Three months ago, Governor Paterson issued an order that requires the Division of the Budget and the Office of State Operations to approve all agency contracts, capital projects, and other nonpersonal spending over $500. By carefully scrutinizing agency spending, significant savings are expected to be achieved. (2008-09 Savings: $135 million; 2009-10 Savings: $50 million)

Health Care (2008-09 Savings: $359 million; 2009-10 Savings: $386 million)

• Delay Nursing Home Rebasing. This action will delay nursing home rebasing from January 1, 2009 to April 1, 2009. (2008-09 Savings: $22 million; 2009-10 Savings: $0 million)
• Eliminate Retroactive Trend Adjustment. This action will eliminate the retroactive 2008 trend (inflation) adjustment (to reflect the difference between the budgeted and actual 2008 CPI) for hospitals, nursing homes, and home care providers. (2008-09 Savings: $0; 2009-10 Savings: $69.6 million)
• Increase Covered Lives Assessment. This action will increase the covered lives assessment on the insurance industry. (2008-09 Savings: $120 million; 2009-10 Savings: $120 million)
• Reduce Grant Funding. This action will reduce Public Hospital Recruitment and Retention grant funding. (2008-09 Savings: $9.0 million; 2009-10 Savings: $12.0 million)
• Eliminate Non-public Hospital Grants. This action will eliminate unspent funding for a disproportionate share adjustment for non-public hospital grants. (2008-09 Savings: $11 million; 2009-10 Savings: $7 million)
• Change HMO Direct Pay Financing. This action will finance through insurance assessments the cost of the HMO Direct Pay program.  This program provides “stop-loss” funds to Health Maintenance Organizations by assuming liability for costs above a certain level to help stabilize the premiums for policy holders who directly purchase insurance coverage. (2008-09 Savings: $40 million; 2009-10 Savings: $40 million)
• Eliminate Grant Funding. This action will eliminate unspent grant funding for the Adirondack Cancer Network. (2008-09 Savings: $4.6 million; 2009-10 Savings: $0)
• Reduce Grant Funding. This action will reduce recruitment and retention grants for public nursing home facilities. (2008-09 Savings: $4.2 million; 2009-10 Savings: $0)
• Change Healthy NY Financing. The Healthy NY program provides a subsidy to eligible small businesses to help them provide health insurance to their employees. Workers whose employers do not provide health insurance may also purchase coverage through Healthy NY. Healthy New York will now be financed through an insurance assessment. (2008-09 Savings: $137 million; 2009-10 Savings: $137 million)
• Recoup Overpayments. This action will recoup Early Intervention Program overpayments from New York City. (2008-09 Savings: $11.1 million; 2009-10 Savings: $0)

Other Actions (2008-09 Savings: $823 million; 2009-10 Savings: $205 million)

• Manhattan DA Settlements. Reflects additional settlements by the Manhattan District Attorney, above those already included in the financial plan, to which the state is entitled. (2008-09 Savings: $82 million; 2009-10 Savings: $25 million)
• New York Power Authority Transfers. The New York Power Authority will transfer $306 million to the state’s General Fund in 2008-09 and $170 million in 2009-10. Of this amount, $215 million represents funds that were reserved by NYPA to pay for the disposal of waste at a federal repository. It is anticipated that NYPA will not need these funds for several years. The remaining transfer represents assets not necessary to meet NYPA’s short term operating, capital, or debt service costs. (2008-09 Savings: $306 million; 2009-10 Savings: $170 million)
• Department of Law’s Litigation Settlement Account. An estimated $91 million will be transferred from the Department of Law’s Litigation Settlement Account to the General Fund in 2008-09. After this transfer, sufficient funds will remain in the account to satisfy anticipated spending in the account for the remainder of the year. (2008-09 Savings: $91 million; 2009-10 Savings: $5 million)
• Environmental Protection Fund (EPF) Capital Financing. A total of $25 million of eligible capital expenses from the EPF will be financed through bond proceeds rather than on a pay-as-you-go basis. (2008-09 Savings: $25 million; 2009-10 Savings: $0 million)
• Existing Fund Balances. The 2008-09 Enacted Budget approved $350 million in blanket authorization for General Fund transfers, which can be initiated at the discretion of the Division of the Budget. Previously, the state Financial Plan only assumed that $300 million of this authorization would be used in the 2008-09 fiscal year. Now, that entire authorization will be used. Additionally, $50 million in the Debt Reduction Reserve Fund will be utilized for Financial Plan relief. (2008-09 Savings: $100 million; 2009-10 Savings: $0)
• Other General Fund Transfers. The state will transfer excess revenues from certain state authorities and special revenue accounts into the General Fund. None of these transfers will impact current operations. These entities would include the Dormitory Authority (2008-09 Savings: $6 million; 2009-10 Savings: $0 million), the Insurance Department (2008-09 Savings: $4.5 million; 2009-10 Savings: $0 million), the Banking Department (2008-09 Savings: $6 million; 2009-10 Savings: $0 million), and the Office of Temporary Disability Assistance’s federal administration account for child support enforcement activities (2008-09 Savings: $100 million; 2009-10 Savings: $5 million). (Total 2008-09 Savings: $116.5 million; Total 2009-10 Savings: $5 million)
• Finance Certain Housing Programs with Bonding. Eligible remaining capital expenses for the Greater Catskills Flood Remediation Program, the Housing and Economic Stabilization for Long Island Program (HELP), and the Mitchell Lama Rehabilitation and Preservation Program that were previously anticipated to be financed on a pay-as-you-go basis, will be financed through bonding. (2008-09 Savings: $25 million; 2009-10 Savings: $0)
• Use Accumulated Fund Balance to Support Volunteer Recruitment Scholarship Costs. An accumulated balance in the Volunteer Recruitment Services Scholarship account will be used to support 2008-09 program costs, eliminating the need for a planned transfer from the General Fund. This action will not have any impact on current recipients. (2008-09 Savings: $2 million; 2009-10 Savings: $0)
• Statewide Wireless Network. A total of $25 million will be transferred from the public safety communications account to the General Fund, reflecting slower than expected spending on the Statewide Wireless Network. Additionally, a $50 million letter-of-credit to which the state is entitled after M/A-COM was found to be in default of its contract to construct a Statewide Wireless Network, has been deposited in the General Fund. (Total 2008-09 Savings: $75 million; Total 2009-10 Savings: $0 million)