State and Local Issues
State Budget Woes
On Monday, November 2nd, Governor David Paterson held a rare joint Session of the Legislature warning of unprecedented financial perils and that New York was running out of money. The Governor’s 15-minute address was coolly received by the Legislature. Despite the Governor’s dire warnings, many Senate and Assembly Democrats remain skeptical. After his speech, the Governor met privately with Assembly Speaker Sheldon Silver and Senate Democratic Conference Leader John Sampson. Legislative aides expressed doubt that any agreement could be reached in time for the Tuesday Special Legislative Session called by the Governor to cut $5 billion in spending over a two-year period.
Budget experts believe New York can no longer afford to spend so much in this economic crisis, rising unemployment, the collapse of the stock market and the problems on Wall Street. New York spends $2,283.00 per capita on Medicaid, twice the national average and $14,884.00 per student, well above the national average of $9,138.00. According to the Governor, New York faces a $3.2 billion deficit for this fiscal year. Greater worries are the unprecedented deficit the State faces in 2011 and 2012 when Federal stimulus money and taxes on the wealthy expire.
Education and healthcare advocates have angrily opposed cuts to Medicaid and education, the two largest parts of the State budget. The powerful labor unions that dominate debate in the Capitol are determined to fight them.
The Governor also asked the Senate to follow the Assembly and pass the same-sex marriage bill. A Senate spokesman said the bill, which lacks majority support, would not be brought up for a vote. The Senate met briefly on Monday and unanimously voted to create a special nine-member committee consisting of five Democrats and four Republicans that could recommend the ouster of Senator Hiram Monserrate. The Committee will be chaired by Senator Eric Schneiderman.
Tuesday came and went. The Special Session called by Governor David Paterson to address the fiscal crisis was a bust. The Legislature failed to close the $3.2 billion budget gap for this fiscal year. The Senate took no action on the gay marriage bill. Before adjourning for the week, both Houses passed two low-level bills sought by the Governor. The Legislature is expected to return to Albany next Monday and Tuesday to address a deficit reduction plan.
Governor Paterson Proposes Two-Year, $5.0 Billion Deficit Reduction Plan
On Thursday, October 15th, Governor David Paterson outlined a two-year, $5.0 billion Deficit Reduction Plan (DRP) that would eliminate the State’s current-year budget gap without raising taxes, as well as institute major structural reforms – such as Tier V pension reform and a State spending cap – in order to improve New York’s long-term fiscal health.
Governor Paterson’s two-year $5.0 billion DRP would have a current-year impact of $3.0 billion in 2009-10 and a recurring impact of $2.0 billion in 2010-2011. Over the State’s five-year financial plan period, it would produce cumulative savings of $9.3 billion to help continue addressing the State’s long-term structural deficit.Major components of the plan include the following:
- Across-the-board Spending Reductions (2009-10 Savings: $1.8 billion; 2010-2011 Savings: $2.0 billion)
The largest component of the proposed DRP is $1.8 billion in current-year, across-the-board spending reductions. These include the $500 million in across-the-board administrative agency spending reductions as well as $1.3 billion in additional across-the-board current fiscal year reductions to local assistance spending.
Specific 2009-10 programmatic impacts as part of this $1.3 billion across-the-board local assistance reduction include the following:
- $480 million State fiscal year cut to school districts ($686 million on a 2009-10 school-year-basis);
- $287 million cut to Medicaid;
- $184 million cut to other health and mental hygiene programs;
- $28 million cut to social service programs;
- $67 million cut to Aid and Incentives to Municipalities;
- $125 million cut to transportation programs; and
- $62 million cut to higher education programs.
Governor Orders Cuts to State Budget
Governor David Paterson brought out the budget axe, ordering $500 million in cuts to state agencies for non-personnel services. In an interview, the Governor insisted the cuts were needed to deal with what he believes will be a $3 billion budget deficit for the current fiscal year. He hoped to show the Legislature he is willing to advance even more politically perilous cuts.
Governor Paterson insisted his decision to make the cuts now would not reduce his options in future budget talks by, in essence, removing a valuable bargaining chip from the table. While the $500 million in cuts are a significant chunk of the estimated deficit, it excludes personnel costs. Also excluded are the vast array of financial aid programs that help localities with schools and health care costs. Those would need legislative approval in order to be cut.
State Budget Director Robert Megna said the size of the proposed cuts was based on the budgets of various agencies. The State University system, for example, was ordered to cut $90 million, or 3% of its annual operating budget. The Governor now has to produce legislation to address a $3 billion shortfall. When he does, the Assembly and Senate will analyze and approve or disapprove these proposals. Until that takes place, no special session is scheduled.
Governor Paterson Announces Administration Appointments
Governor David A. Paterson announced the appointments of James J. Wrynn to serve as New York State Superintendent of Insurance and Wendy Saunders to serve as Deputy Secretary for Health, Medicaid and Oversight. The Governor also announced the appointments of Kristin Proud to serve as Deputy Secretary for Human Services, Technology and Operations and Senior Advisor to the Office of Taxpayer Accountability, and Mark Leinung to serve as Deputy Director for State Operations.
James J. Wrynn is the Executive Director of the New York State Insurance Fund. He is a founding partner of MacKay, Wrynn & Brady LLP, where he has litigated cases focused on insurance issues and claims on behalf of major companies, their policyholders, municipalities, and public authorities. His professional career has provided considerable experience in the areas of insurance, accounting and tax issues. He is a member of the New York and New Jersey State Bar Association, has served on the New York City Economic Development Corporation and is an active participant in his community. Mr. Wrynn is a graduate of St. John’s University College of Business Administration and received his juris doctorate from St. John’s University School of Law. Effective August 20, 2009, Mr. Wrynn began to serve as Superintendent-designate and assume the permanent appointment pending Senate confirmation.
Wendy Saunders has served as Executive Deputy Commissioner for the New York State Department of Health since April, 2007. Ms. Saunders is in charge of the day-to-day operations of the Department, policy coordination and strategic planning. She joined the Department in February 2007 to head the Office of the Director of Governmental Affairs and Strategic Planning. Prior to that appointment, Ms. Saunders was Director of Government Relations at the New York Association of Homes and Services for the Aging. She also represented numerous non-profit health and human services organizations at the law firm Malkin & Ross.
Kristin Proud has served as Deputy Director of State Operations since her appointment in November 2007. In that role, she has worked with the Director of State Operations and the Deputy Secretaries to coordinate the activities of the State’s more than 80 agencies and authorities. Prior to that, she served from January 2007 as the Director of Health and Human Services.
Mark Leinung Mark served from January, 2007 as Policy Director to then Lieutenant Governor Paterson. For most of his professional career, Mr. Leinung worked in the New York State Senate. He was Deputy Secretary of the Senate Minority Leader from 2005 to 2006 and Program Director for the Minority Leader from 1996 to 2004. Prior to that, he was Deputy Program Director from 1988 to 1995 and a Program Analyst from 1980 to 1987 for the Senate Minority.
More Budget Problems for the State
In May, Governor David Paterson announced more bad news regarding the State’s fiscal situation by indicating that it is likely that this year’s State budget faces a shortfall of approximately $3 billion due to the drop in revenues. When combined with the already projected $2.5 billion deficit for the 2010-11 budget, the total deficit could rise to nearly $6 billion. The Governor indicated that the State would have to have to look at further spending cuts and possible reductions in the State workforce to cope with this situation.
The Governor’s pessimism was not shared by Assembly Speaker Sheldon Silver (D-Manhattan) nor Senate Majority Leader Malcolm Smith (D-Queens). Both said it was too early to predict the State’s financial fate and they felt there were hopeful signs of improvement. Earlier, State Comptroller Tom DiNapoli revealed that the State’s budget, which had been approved in April, was already $250 million off from projections. DiNapoli said that State revenues in April were down by $239.1 million, or nearly 5% from the projected figures that the Governor and State lawmakers prepared when the budget was completed, not a good sign so early in the fiscal year the Comptroller noted.
Governor Paterson had proposed a cap on State spending, limiting State Operating Fund growth at the average rate of inflation from the three previous years, but almost a month after he made the suggestion, not one lawmaker had stepped up to introduce the legislation for consideration. In response the Governor indicated that he would veto any bills that require the State to lay out additional money unless lawmakers acted on his spending cap proposal. The Governor said that he fears that without a spending cap, “Everybody would think that we could go back to partying and start acting the way we acted before.” Asked if he believes the Legislature is rebuffing him because of his historically low poll numbers, Governor Paterson warned that would be a mistake. Senator Smith said he is open to moving forward with the Governor’s proposal “as long as we think it’s reasonable”. Speaker Silver did not promise that he would introduce the bill.
Medical Malpractice Awards – Uncapping Legal Fees
New York Governor David Paterson has indicated his intentions to roll back a two-decade old tort reform law that capped legal fees from medical-malpractice awards. The proposal, if implemented, would hand the State’s powerful trial lawyers a huge victory.
The roll back has long been sought by the Trial Lawyers Association, which has donated more than $2 million since 2004 to top state politicians, including Governor Paterson and Assembly Speaker Sheldon Silver. The measure was discussed as part of secret State budget talks being conducted at the Capitol between aides to the Governor and legislative leaders. The discussions were described as part of a package of medical malpractice legislation that could place a one year freeze on malpractice insurance premiums for doctors and other healthcare professionals.
Raising the fee cap is a move fought for years by insurance companies, the Medical Society and other healthcare groups who argued that it would generate millions of dollars in windfall earnings for some of the State’s politically influential law firms. These law firms include Weitz & Luxemberg, where Speaker Sheldon Silver is employed and also would benefit lawyers at Myer, Suozzi, English & Klein, the Long Island law firm where Governor Paterson’s father, Basil, is a partner.
Governor Paterson, Majority Leader Smith, Speaker Silver agree on eliminating $1.3 billion in proposed tax increases from the 2009-’10 Executive Budget
Governor David Paterson and the two legislative leaders, Speaker Sheldon Silver and Senate Majority Malcolm Smith agreed to eliminate new taxes from next year’s budget. Governor Paterson had proposed new and increased taxes on such common goods and services as clothing, sugared soft drinks, digital downloads, cable and satellite television, manufacturers’ coupons, haircuts, manicures, concerts, movies, live theatre, health clubs, bowling, golf, skiing and a host of others. Additionally, to help businesses and families in a struggling real estate market, a proposal to limit the sales tax exemption on capital construction improvements made to property was also dropped.
The $1.3 billion eliminated from the budget will be restored through funds made available by the American Reinvestment and Recovery Act which is expected to provide New York with $6.5 billion in aid through the end of 2009-’10. This includes $5 billion in flexible funding through increased Medicaid reimbursements, $1.2 billion specifically designated to restore education reductions, and $274 million in other flexible funding. The use of the remainder of the economic recovery aid, as well as further agreements concerning tax and fee action in the 2009-’10 state budget, will be determined through continuing budget negotiations.
Governor Paterson, Majority Leader Smith and Speaker Silver all agreed that taking these taxes off the table is a positive step forward in the budget process and agreed that the elimination of these taxes will help New York’s sagging economy and provide relief to so many working families who are struggling to make ends meet.
Governor and Legislature Reach Agreement on Plan to Close Current Year Budget Deficit
In their first real test since taking control of state government, Democratic leaders were able to pass a series of budget bills that will close the $1.6 billion budget deficit in the state’s current fiscal year which ends March 31st. The three-way agreement between Governor David Paterson, Assembly Speaker Sheldon Silver and Senate Majority Leader Malcolm Smith relies heavily on increased taxation of the insurance industry and on transferring or what is commonly called “sweeping-fund balances” from state agencies and public authorities into the state’s general fund.
At the same time that the three leaders were reaching agreement, their actions were questioned and concerns were raised by Minority Leader Dean Skelos who stated that Republicans were excluded from the process. None of the Senate Republicans voted in favor of the two deficit reducing bills which passed on a “party-line” vote of 32 to 29. Included in the above mentioned transfer of funds or “sweeps” as it is called was $306 million from the New York Power Authority fund under their Power for Jobs program which Republicans objected to, saying that the money would hurt Upstate New York and reduce money that could be used to create jobs.
In the health industry, the budget reduction plan adds to a tax that has been growing for years, raising insurance taxes by $514 million over the next two years. This tax, which is on the number of lives insured for medical costs, is now at $920 million. The plan will increase that figure to $1.16 billion. Indications are that the difference will be passed on in premium costs of private health insurance policies and is part of the $3.2 billion in total taxes paid by health insurers. The deal also calls for statewide spending controls of $100 million and cuts in funds to localities and member items for legislators.
Governor Paterson Delivers First State of the State Address
Before a packed Assembly Chamber, on January 7th New York Governor David A. Paterson delivered the annual Address to the Legislature, the first such speech he has made. While State of the State addresses normally tend to be upbeat, the Governor was up front about the challenges New York is facing, “My fellow New Yorkers: Let me come straight to the point – the state of our state is perilous.” He then went on to note the current state of the economy and how it is affecting the State’s finances.
The timing of the speech was also different this year. In previous years, the Governor would always deliver the State of the State address in early January and then unveil his budget proposal later in the month. The speech was a general outline of policy goals, and the budget filled in the details of how those goals would be achieved. But this year, the details were already known, the Governor having introduced his budget proposal a month before.
In the speech, the Governor made several references to health care policy. Citing the difficulties that young people are having finding work and getting health insurance coverage, he proposed requiring that insurance policies cover all children, at the family’s expense, ages nineteen to twenty-nine. He also stressed the importance, from both a health and economic perspective, of battling childhood obesity and announced that First Lady Michelle Paige Paterson would be leading a statewide effort to this effect. Finally, in his speech he once again expressed his support for continuing efforts to improve health information technology and shifting focus and resources away from inpatient and institutional care to primary, preventive, and community based care.
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