GOVERNOR PATERSON ANNOUNCES SPENDING IN 2010-11 EXECUTIVE BUDGET FAR BELOW REQUIREMENTS OF HIS PROPOSED SPENDING CAP, WILL PROVIDE MORE THAN $1 BILLION IN PROPERTY TAX RELIEF IN 2011-12

Governor Paterson today announced that spending his 2010-11 Executive Budget is far below the requirements of his inflation spending cap. If enacted, this spending cap initiative will generate a more than $1 billion surplus in the 2011-12 fiscal year. This surplus will be returned directly to property taxpayers in the form of a progressive circuit-breaker tax credit that averages approximately $1,000 per recipient. The spending cap/circuit-breaker proposal is included as legislation in Governor Paterson’s proposed 2010-11 Executive Budget.

“Years of chronic overspending and irresponsible choices have led New York to a period of financial reckoning. As such, the budget I put forward today includes difficult cuts across every area of State spending and proposes expenditures far below the stringent requirements of my proposed spending cap,” Governor Paterson said. “Our first priority must be to put our fiscal house in order by enacting a strict spending cap, which will eliminate our looming structural budget deficits. But once we have imposed long-term fiscal discipline on Albany, New Yorkers will see the direct benefit of their sacrifice through a progressive circuit-breaker that delivers billions of dollars in property tax relief. A spending cap will bring fiscal stability to State spending and put New York on the path to economic recovery.”

Governor Paterson’s spending cap limits growth in the State Operating Funds budget to the average rate of inflation from the three prior calendar years. Additionally, the surpluses generated through this spending cap will be returned directly to property taxpayers in the form of a targeted, progressive, circuit-breaker property tax relief program.

Executive Budget State Operating Funds spending would total $79.9 billion in 2010-11, an increase of $746 million or 0.9 percent. This spending is well-below the projected rate of inflation and the requirements of Governor Paterson’s proposed spending cap (two percent). Based on Division of the Budget projections, if enacted, cuts required by the spending cap are expected to help generate a more than $1 billion surplus in the 2011-12 fiscal year.

Governor Paterson first proposed his spending cap in May 2009, but the Legislature has not yet acted upon it. If the cap had been in place from 2002-03 to 2007-08, State Operating Funds spending for the 2007-08 budget would have totaled $60 billion – $17 billion lower than actual results – and annual spending growth during that period would have averaged 2.6 percent, compared to actual results of 7.9 percent.

The circuit-breaker benefit included in Governor Paterson’s proposal would be calculated by limiting an individual’s property tax burden to a specified percentage of their income. That percentage would decrease based on the size of the surplus. As the State’s fiscal condition improves, the circuit-breaker program provides an increasingly larger benefit to property taxpayers, since households would pay an increasingly smaller percentage of their incomes in property taxes. Individuals with household incomes up to $200,000 upstate and $300,000 downstate would be eligible for this program. Those that have incomes less than $90,000 upstate and less than $120,000 downstate would receive the largest percentage benefit.

The number of recipients and the average value of the benefit would increase based on the size of the State’s budget surplus. At the close of each fiscal year, the NYS Department of Taxation and Finance would calculate the benefit after the Division of the Budget has certified the size surplus and directed a portion to the Rainy Day Fund. Average projected benefits are included below:

Spending Cap

Surplus	Recipients	Average Tax Credit
$100M -$500M	868,000	$589
$500M-$1B	1,063,000	$943
$1B-$1.5B	1,322,000	$1,129
$1.5B-$2B	1,668,000	$1,188
$2B-$3B	2,125,000	$1,405

In order to provide real property tax relief to everyday New Yorkers, local school districts will also have to do their part to control spending. As such, Governor Paterson’s circuit-breaker proposal includes a provision to encourage fiscal responsibility at the local level. This provision presses localities to keep spending and property tax bills under control.

Under Governor Paterson’s proposal, the size of the credit is reduced if property taxes grow by more than 1.2 times the rate of inflation or four percent (whichever is less) from a specified base year. For example, if in 2012 a family’s property tax bill increased five percent and the inflation rate was four percent, then the credit would be multiplied by a factor equaling (104/105), or credit would be one percent less. If the property owner’s tax bill rises by only three percent, then the credit would be increased by a factor equaling (104/103), or one percent more.

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