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TITLE SLIDETITLE SLIDETitle Slide
Title slide
NEW YORKNEW YORK
2009-10 Executive Budget
Governor David A. Paterson December 16, 2008
Overview
� Greatest Economic and Fiscal Challenge of Our Lifetimes
� Guiding Principles, Governor Paterson’s Approach
� 2008-09 Deficit Reduction Plan
� 2009-10 Executive Budget
-2-
Greatest Economic and Fiscal ChallengeGreatest Economic and Fiscal Challenge
of Our Lifetimes
$
General Fund Tax RevenuesGeneral Fund Tax Revenues
50.0
49.0
48.048.0
47.0
46.0
45.0
44.0
$49.5B
-6.6%
$46.2B
0808-0909 09 1009-10
A Struggling Economy – Plummeting Revenues
� Greatest crisis on Wall Street since the Great Depression. Financial services sectoraccounts for twenty percent of state tax revenue.
� Nationally, 533,000 jobs lost in November, highest total in 34 years. Nearly two millionjobs lost since beginning of the year.
� NYSNYS economy expectt ed d tt o ll ose at t ll eastt 180,000 jobs – 60,000 in financial services sector alone. NYS unemployment rateexpected to rise above 7 percent in 2009.
� RR eal l GDPGDP will ill dd ecllii ne ff or ff our consecutitive quarters. Consumer spending will decline for 3 straight quarters. Would represent first time either has happened since World War II.
� NatiN ti onall unempll oyment clt ail i ms hh ave reache h d d4 million, highest total in 26 years.
� Currently, 43 states facing deficits totalingnearly $100 billion.
-4-
Four-year Deficit: $51.1 Billion
ProjectedProjected GeneralGeneral Fund DeficitsFund Deficits
20.0
15.0
10.0
5 05.0
0.00.0
$17.1B
$13 7B
$18.6B
$13.7B
$1.7B
2008-09 2009-10 2010-11 2011-12
-5-
Guiding Principles Guiding Principles
Governor Paterson’s Approach
Guiding Principles
1. Adjusting to New Fiscal Reality: One of the pillars ofour revenue base – Wall Street – has been transformed. We must fundamentally reevaluate how we manageWe must fundamentally reevaluate how we manage
state government and what we can afford to spend.
2. C t ti C Mi i St tConcentrating on our Core Mission: State governmentt will continue to deliver essential services. Some programs will have to be scaled back or eliminated in ord tder to ffocus lili mit itedd resources on eachh agency’’s core mission.
3. Acting Comprehensively, Shared Sacrifice: Given magnitude of the deficit, cannot solve our problems by either reductions or revenues alone – actions taken across every area of government.
-7-
The Importance of Context
Even after proposed reductions, significant spending commitments will remain for our state’s core priorities in every area.
� Historical Perspective: There have been significantincreases in spending over recent years in many policyareas, which were fueled by revenues from record Wall Street profits.
� National Perspective: Even after proposed reductions, New York will still sppend far more than most other states in the nation in many areas – particularly education and health care.
-8-
2009-10 Executive Budget
Budget proposal delivered more than one month before constitutional deadline.
� Step One: 2008-09 Deficit Reduction Plan (February 1)
y Needed to eliminate current-year shortfall.
y Financial Plan assumes February 1 enactment of Deficit Reduction Plan.
� Step Two: 2009-10 Executive Budget (March 1)
y Closes 2009-10 deficit, makes important strides toward structural balance.
y Financial plan assumes March 1 enactment – one month prior to beginning of 2009 10 fiscal year beginning of 2009-10 fiscal year.
-9-
Step One: 2008-09 Deficit Reduction Plan
Environment HigherLocal Gov.$75M Education
Medicaid/
Health Care
$500M New SavingsNew Savings $771M
All Other
$140M
Human
Services
$15M
New Legislative Programs $93M $68M$30M$30M
20082008--09 $1.7 Billion09 $1.7 Billion Deficit Reduction PlanDeficit Reduction Plan
2008-09 Deficit Reduction Plan
Examples
� NYPA Transfer: $306M
� Agency Spending Controls: $100M
� AA vaailable ilable FF und nd BalancesBalances: $100M
� Member Items: $45M
New Savings: $771 MillionNew Savings: $771 Million
-11-
Step Two: 2009-10 Executive Budget
$13.7 Billion Savings Plan$13.7 Billion Savings Plan
Non-recurring Actions,
$1.1B, 8% Recurring Revenue Actions,
Recurring $3.1B, 22%Recurring $3 1B 22% Spending
Actions,
$9.5B, 70%
2009-10 Executive Budget Overview
Balanced plan for a balanced budget:
� Recurring Actions (92%)
� Recurring Spending (70%) � Recurring Revenue (22%)
� Non-recurring Actions (8%)
� Does � not include FederalDoes not include Federal Stimulus Package or use ofRainy Day Reserves.
-13-
-
0.0
ProjectedProjected GeneralGeneral Fund DeficitsFund Deficits
Four-year deficit
2008-09 2009-10 2010-11 2011-12 20.0
$17.1B
$18.6B Four year deficit would decline by 88 percent from $51.1 billion to $5.8 billion
10 0
15.0 $13.7B
$1
3.7
B
$1
5.3
B
$1
4.6
B
5 0
10.0
$4 0B
0.0
5.0
$1.8B
$4.0B
$1.7B
Important Strides Toward Structural Balance
-14-
General Fund Spending GrowthGeneral Fund Spending Growth
6.7% 7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Average 2003-04 2009-10
to 2008-09
6.7%
0 0%0.0%
All Funds Spending GrowthAll Funds Spending Growth
Lowest spending
5.0%5 0% growth ith in
5.0%
4.0%
3.0%
2.0%
1 0%1.0%
0.0%
Average 2003-04 2009-10 to 2008-09
13 years
1.1%
Reining in Unaffordable Spending Growth
-15-
t t
General FundGeneral Fund
$56 4B$56.4B
$1.0B
-1.8%
$55.4B
6.4
6.2
6.0
5.8
5.6
5.4
5 25.2
5.0
4.8
2008-09 2009-10
EEnactedd EExecutiive
5
5
5
5
5
5
55
5
5
0.5%
All FundsAll Funds
$121 6B$121.6B
121.6
121.5
121 4121.4
121.3
121.2
121.1
121.0
120.9
2008-09 2009-10
EnactedEnacted ExecutiveExecutive
$548M
-0.5%
$121.1B
Decline Compared to Original 2008-09 Enacted Budget
-16-
School Aid
Substantial Investment in Education
21.0
19.019.0
17.0
15.0
13.0
11.0
School Aid (School Year)School Aid (School Year)
$21.4B
$19.8B
69%
$16.3B
$17.8B $8.7B
$13.6B
$14.4B $14.6B
$14.5B
$15.3B
$12.7B
99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09
-18-
Highest Per Pupil Education Spending in the Nation
63 percent Above the National Average
#1 New York: $14,884 US Average: $9,138
NY
NJ
VT
CT
MA
RI
ED
AK
WY
PAMD
ME
NH
WI
HI
OH
MI
VA
WV
ILMN
US
INNE
ND
MT
GA
OR
CA
LAKS
IAMO
SC
NM
CO
AR
WA
FLKY
SD
AL
TX
NC
NV
MS
OK
TN
AZ
IDUT
-19-Source: Most recent US Census Data Available (2006)
15,000
13,500
12,000
10,500
9,000
7,500
6,000
4,500
3,000
1,500
0
Adjusting to Changing Fiscal Circumstances
� Remain committed to $7.0 billion increase in School Aid originallyproposed in 2007-08. But have to responsibly adjust timeframe to changing fiscal circumstances.
� Year-to-yyear School Aid reduction of $698 million (3.3 percent). School Aid would total $20.7 billion.
y Maintain Foundation Aid and UPK at 2008-09 levels. Extend phase-in from four years to eight years.
y
A llOne-time Deficit Reduction Assessmentt. PPartitially offffset
b t byincreases in some other aid
categories such as Building Aid.
21.0
19.0
17.0
15.0
13.0
11.0
School Aid (School Year)School Aid (School Year)
Inflation = 32 percent
$20.7B
$12.7B
99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10
-20-
Average Deficit Reduction AssessmentAverage Deficit Reduction Assessment by District Wealth*by District Wealth*
14%
12%
10%
8%
6%
4%
2%
0%0%
1 2 3 4 5 6 7 8 9 10
Wealth Percentile
Poorest Wealthiest
Deficit Reduction Targeted in Equitable Manner � Progressive Approach:
Individual districts experience Deficit Reduction Assessments ofAssessments of approximately between 3 percent to 13 percent based
need tax on district wealth, student
effortneed, tax effort.
� School Districts have reported over unreserve d f und b
$1.3 billion in d f d ballances.
More than 87 percent ofschool districts statewide
ab l ances i have unreserved fund
f t ih b l in excess o f their proposed year-to-yearSchool Aid reductions.
-21- *Excludes NYC and Yonkers
Medicaid/Health Care
$
20092009--10 $3.5 Billion* Savings Plan10 $3.5 Billion* Savings Plan
Hospitals Insurance$700M Industry20% $855M 24%
Pharmacies
$111M
3%
Nursing Homes Oth $420M$420M $264M Other
12%
8%
Medicaid Fraud
$125M
3%
Tax on Non-diet Home Care Soft Drinks for $189M
Health Care 5%Delay CycleInvestments Payment Public Health$404M $400M $122M11% 11 % 3%3%11 %
Medicaid/Health Care Overview
� Balanced plan spread across all sectors.
� Reduces growth. No year-to-year reduction. Medicaid spending will still behihighhest it in ththe nattii on.
� No reductions in eligibility or or benefits benefits for for MedicaidMedicaid recipients.
� Continues implementing critiiticall reiimbbursementt reform efforts to improvequality, efficiency of NewYoork’ss heaealtth cacare e systesyste m.
-23-*Net total after $60 million in New Investments
$
0%7.0%
Total Medicaid SpendingTotal Medicaid Spending
49 049.0 $48.2B
48.0
47.0
46.0
45.0
44.0
43.0
42.0
41.0
2008-09 2009-10 2009-10 Before After Actions Actions
$45.4B $45.0B
$3.2B
7.0%
$432M
1.0%
Total MedicaidTotal Medicaid Spending:Spending: Actual vs. InflationActual vs. Inflation
Actual: 51% Increase, $45.4B Inflation: 32% Increase, $39.7B
50.0
45.0
40.0
35.0
30.0
25.0
$45 4B$45.4B
$39.7B
$30.1B
99-00 Inflation 09-10
Slowing Growth in Medicaid Program
-24-
#1 New York: $2,283 More than Twice the National Average #2 Rhode Island: $1,659
US Average: $1,026
National Average
NY
RI
VT
ME
MA
AK
NM
PALACT
WV
MN
DE
MS
TN
AR
MO
KY
OH
NC
AZ
US
NJ
ILMD
SC
OK
MI
NH
WA
IAINHI
NE
WI
AL
WY
ND
CA
KS
GA
SD
OR
TX
MT
FLIDVA
CO
UT
NV
2,000
1,500
1,0001,000
500500
0
Highest Per Capita Medicaid Spending in the Nation
-25-Source: Most Recent CMS Data Available (FFY 2007)
Spending Exceeds the National Average Across Almost Every Sector
Medicaid Spending (Avg. Cost per Eligible Recipient)Medicaid Spending (Avg. Cost per Eligible Recipient)
$2,500
$2,000
$2,038 Legend
US Average New York
Only sector New
$1,500 $1,287$1,209
$1,032
Only sector New York is reimbursing below the national average
$1,399
$500
$1,000 $752 $730
$572
$0
$500 $352
$191 $137
$267
Hospitals Home and Nursing RX Clinics Physicians / Community- Homes Other based Care Practicioners
-26-Source: CMS, 2008 Statistical Supplement Table 13.2 13.3 (FFY 2005 Data)
Hospital Reimbursement Reform – A More Rational System
Inpatient Primary/Investing in Primary and
Services
More Costly,
Preventative
Less Costly,
Preventative Care
Less Efficient, Over-reimbursed
More Efficient, Under-reimbursed
Increase
$$$ Reimbursement
Increase Reimbursement
LowerLower
$$$ -27-
�
A Healthier New York
� Poor diet and physical inactivity causeup to 365,000 deaths per year.*
PercentagePercentage of New Yorkersof New Yorkers Who are Obese*Who are Obese*
�
��
Obesity epidemic One out of every fourObesity epidemic. One out of every four New Yorkers is obese (25.5 percent).Up from 13.9 percent in 1995.*
Each additional 12-ounce soft drinkEach additional 12 ounce soft drink consumed per day increases risk of a child becoming obese by 60 percent.**
24.0%
26.0%
22.0%
25.5%
� High soft drink consumption increases risk of diabetes by 83 percent inwomen.***
20.0%
18.0%
� Levy 18 percent additional sales tax on non diet soft drinks Expected to reducenon-diet soft drinks. Expected to reduce consumption by 5 percent.
16.0%
14.0%
13.9%
� Revenue dedicated to health care programs.programs.
12.0%
10.0%
95 96 97 98 99 00 01 02 03 04 05 06 07
-28- *CDC **Harvard Medical School/School of Public Health ***Journal of the American Medical Association
STAR Program
t
STAR Program
� Continues STAR exemption ($3.25 billion). Has a direct impact on New Yorkers’ property tax bill. Maintains core purpose of the program.
� Eliminates STAR rebate check ($1.4 billion). No direct relation to property tax billproperty tax bill.
� Equitable treatment. NYC STAR income tax credit returned to pre-rebate (2005-06) levels. Decreases credit from $290 to $125 for
i d l d $145 $62 50 f i di id l ($364 illi )married couples and $145 to $62.50 for individuals ($364 million).
� Pre-rebate Levels. Effectively returns total STAR spending to pre-rebate levelsrebate levels.
-30-
Returning STAR to Pre-rebate Levels
STAR SpendingSTAR Spending
5.0 $4.8B $4.7B
$1.5BLeggend* $1.5B4.5 $
$4.2BExemption
$0.9B4.0 Rebate
3 53.5 $3.2B $3.2B$3.1B
$3.3B $3.3B $3.2B3.0 $2.8B$2.7B
$2.5B
2.5
$1.9B2.0
1.5 $1.2B
1.0 $0.6B
0.5
0.0 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10
-31-*Includes NYC PIT Credit
Higher Education
Investing in Higher Education
� Investment Plan: For the first time in at least 30 years, tuition increase ((SUNY $620, CUNY $600)) is tied to an investment pplan. In 2008-09, 10 percent of fiscal benefit from tuition increase will be set aside for increased investment. Twenty percent will be set aside in 2009-10, growing to 50 percent in later years.
� Minimizes Further Reductions: Tuition increase minimizes need for further reductions in state support for SUNY/CUNY.
� Tuition Remains Affordable: SUNY and CUNY tuition would remain below Tuition Assistance Program (TAP) maximum threshold of $5,000. Lowest in region and below national average.
� Capital Investment: Continues the $9.3 billion multi-year capital plan enacted in 2008-09, including $834 million in new appropriations for critical maintenance projects.p j
-33-
Bank
Public/Private Partnership
Bank
provides loan
to studdent
StudentStudent
Private Bank
Originates the Loan
SONYMA issues bondsissues bonds,
purchases loan from
bank
Student’s loan
repayments repayments
used to repay
SONYMA bonds
SONYMA IssuesIssues Bonds,
Purchases Loans
NYHELPs Student Loan Program
� Will provide at least $350 million in loans to 45,000 students annually.
� All resident undergraduate and graduate students enrolled full-time in a degree program at a college or university in New York State would be eligible to apply.
� Expected interest rate 8 percent. Would be up to 10 percentage points lower than conventional private loans. Future rates will will vary vary based based on on market market conditionsconditions , butbut NYHELPs loan will always be lower than conventional private loans for almost all borrowers.
� State invests $50 million to capitalize program in 09-10, then $10 million annually.
-34-
Tax and Fee Actions
;
Tax Reforms and Actions
Examples:
Eliminate Clothing Exemption;g p Eliminate Ineffective Gas Tax Cap; Close Digital Download Loophole;
Wealthy Share in Burden ($216M) Luxury Tax on High-cost Furs, Jewels, Jets
Limit Deductions for Millionaires Close Hedge Fund Loophole
Close Tax Free Yacht/Jet Loophole
$2.2 Billion General Fund$2.2 Billion General Fund ($4.1 Billion All Funds)($4.1 Billion All Funds)
Fees
lExamples: Drivers License (Last Changed 1992)
License Plates (Last Issued 2001) Auto Registration (Last Changed 1998) Tobacco Retail Fee (Last Changed 1990)
Specific Sectors
Examples:
Tax on Non-diet Soft Drinks
Utility Assessment
Insurance Assessment for Timothy’s Law
Reinstitute Hospital AssessmentReinstitute Hospital Assessment
Reinstitute Home Care Assessment
Tax Reforms and Actions
$1.5B GF ($1 5B AF)($1.5B AF)
Targeted tog Specific Sectors
$652M GF ($2.3B AF)
Tax and Fee Actions
-36-
Local Governments
Aid and Incentives for Municipalities
� Maintain 2009-10 AIM payp y ments at 2008-09 levelsoutside NYC, eliminating $61 million increase.
�� Funding for AIM outside NYCFunding for AIM outside NYC has increased by $290 million or 62 percent compared to 2004-05 and will still total $755 million in 2009-10.
� Eliminate NYC AIM payment.Last y ear NYC received $246Last year NYC received $246 million. Represents 0.5percent of NYC’s revenue.
Historical AIM PaymentsHistorical AIM Payments (Outside NYC)(Outside NYC)(Outside NYC)(Outside NYC)
800
750
700
650
600
550550 500
450
400
350350
300
2004-05 2009-10 After
Proposed Freeze
$755M
62% Increase
$465M
-38-
Mandate Relief and Local Savings Measures
� New pension tier will provide substantial savings over the long term for localities.
� School districts would receive full Wicks exemption for five years. For NYC, would raise Wicks Law threshold from $3 million to $10 millionmillion.
� Provides greater contracting and procurement flexibility for local governmentsgovernments.
� Advances Commission on Local Government Efficiency reforms. Simpplifies pprocess for consolidatingg local ggovernments, reforms special districts, and removes legal barriers to allow more shared services.
-39-
Critical Investments
Targeted Investments in a Time of Economic Difficulty
� Increase Basic Welfare Grant ($109 million by 2012-13)
� Establish NY HELPs Student Loan Program ($350 million)
� Extend HEAL New York Capital Grants ($650 million over Two Years)
� Streamline Access to Public Health Care Coverage ($5.0 million)
� Provide Food Bank Funding ($4.4 million)
� Provide Lead Poisoning Prevention Funding ($2.5 million)
� Establish New York Growth, Achievement and Investment Strategy (GAINS)
Grant Program ($50 million)
� Expand Research and Development Tax Credits ($50 million by 2012-13)13)Expand Research and Development Tax Credits ($50 million by 2012
� Increase Support for Veterans Counseling and Services ($1.1 million)
� Increase Funding for Volunteer Centers ($500,000)
-41-
A Foundation for Changing the WayA Foundation for Changing the Way
State Government Does Business
p
600
700 $610M
(Projected)
500
$355M
300
400
$338M
200
Empire Zones
$338M (With Reforms)
0
100
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Expenditures
Empire Zone Reform
� Reform: Requires all 9,800 current participants in the prp oograg am
toto meeteet 200:1benefit/cost standard.
� New Investment: Establish a new ESDCESDC grantt program and d R&D tax credits using a portion of savings that accrue – $$100 million when fulleffective.
yy
�
t Sunset
i : Empire Zone program
sunsets in J 2011June 2011.
-43-
Merge Performing Arts Agencies
Merge Anti-fraud Agencies
Merge Land Use Agencies Merge/Integrate Economic Development Agencies
Theater Institute
The Egg Welfare
Inspector General
Medicaid Inspector General
NE Queens Preserv.
Dept. of State
Hudson River
Greenway
Dept. of Economic Develop.
ESDC NYSTAR
The Egg Medicaid Inspector General
Dept. of State
ESDC/ DED
State Employ.
Relations
Dept. of Taxation and Finance Hosts Operations of Office of
Real Property Services
Division of the Lottery Hosts Operations of Racing and
Wagering Board
Merge Employment Relations Agencies
Relations Board
Public Employ.
Relations Board
Public Employ.
Relations Board
Dept. of Tax and Finance
ORPS Div. Of Lottery
Racing and Wagering
Agency Consolidations/Integration
-44-
Facility Closures
� DOCS: Close four prisoncamps, several annexes. Prisonpopulation has declined by over 11,000 or 15 percent comparedto 1999.
� OCFS: Close six, downsize two youth facilities. Close threeevening reporting centers. Affected youth facilities have averagge vacancyy rate of 63 percent.
� OMH: Eliminate 450 beds from inppatient ppsyychiatric system, moving patients tomore appropriate settings.
� OAS ASO S S: Addictio
CCloseose Maanhaattaan n Treatment Center.
DOCS Weekly Prison PopulationDOCS Weekly Prison Population
74,000 71,538
72,000
70,000
68,000
66,000
64,000
62,000
60 00060,000
15% Decrease
60,47258,000
-45-
,
Employee with $50,000 Salary in 03Employee with $50,000 Salary in 03--0404 after Proposed 09after Proposed 09--10 Action10 Action
65,000
55 000 57,000 59,000 61,000 63,000
$52 659 $54,239
$56,690 $58,391 $58,391
$60,727
47,000 49,000 51,000 53,000 55,000
$50,000 $51,250
$52,659
45,000 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11
2.5
%
2.7
5%
3.0
%
3.0
%
3.0
%
4.0
%
+$800 Bonus
State Workforce
Governor Paterson continues his call for a partnership with public employee unions to lower cost of state workforce.
� Eliminate scheduled 2009-10 general salary increase.
� Defer five days worth of salary� Defer five days worth of salary payments
Average state employee salary: benefits$62,$62 453 plus generous 453 plus generous benefits
General salary increases of 25 percent scheduled from 2003-04 to 2010-11. Would still receive 22 ppercent raise compared to 2003-04 under Executive Budget proposal.
-46-
199,400
196,292
State Workforce (FTEs)State Workforce (FTEs)
199,754 200,000
198 000198,000
195,526196,000
194,000
191,391192,000
190,000 188,931
187,,365188 000188,000
186,000 03-04 04-05 05-06 06-07 07-08 08-09 09-10
State Workforce
� In 2009-10, state
b y 3,108 and workforce would
ld t ttaldecline
b 3 108 d would to l 196,292.
� Would still � representWould still represent increase of 8,927 compared to 2003-04.
20092009-10 10 ddecli� line iinclluddes estimated 521 layoffs.Layoffs primarily limited to agency consolidations,to agency consolidations, facility closures, programeliminations.
-47-
;
Pension Reform
Tier IVTier IV
1990 & 1994
L
d i i
Tier VTier V
R t i i l1990 & 1994: Lowered minimum retirement age for public employee from 62 to 55.
2000: Removed employee’s 3
Returns minimum employee retirement age to 62.
ib i f 2000: Removed employee s 3 percent contribution after ten years of service.
Restores 3 percent contribution for entire length of employee’s service.
1998: Lowered threshold for 21998: Lowered threshold for 2 percent “multiplier” to 20 years of service.
Restores original threshold for 2 percent multiplier: 25 years of service.
1998: Lowered required years of Restores 10-year service
Overtime compensation used to calculate pension benefit; allows
New Requirement: Excludes overtime when calculating pension
service to draw pension from 10 to 5.
requirement to draw pension.
-48-
p salary “spiking” at end of service.
g p benefit.