Governor and Legislature Reach Deal on Spending Budget Passed on Time
On Thursday, March 31st, Governor Andrew Cuomo announced the passage of the budget for the 2011/12 fiscal year. The new fiscal year began on April 1st and this was only the fourth time since 1983 that the budget had been passed on time.
The $132.5 billion plan is actually $3.6 billion less, 2%, than the previous year’s budget and will eliminate a projected $10 billion deficit. In addition to lowering spending, the budget, according to the Governor, “Includes historic reforms that redesign state government, create efficiencies through consolidation, cap spending increases for education and Medicaid, and transform the future budgeting process.” Out year expected gaps have been also reduced by over $50 billion. Over 90% of the savings comes from spending cuts to State programs.
Despite the challenges he faced in putting together this budget, Governor Cuomo was able to reach agreement with the Legislature and the Republican and Democratic Leaders in both the Senate Assembly praised the deal. The Governor noted this new spirit of cooperation and accomplishment, which may have come as a surprise to many as Albany had had an ever increasing reputation for dysfunction. "Tonight the Legislature not only passed an on-time budget, but a historic and transformational budget for the people of the state of New York," the Governor said. "This bi-partisan and bi-cameral cooperation will give New Yorkers the good budget they deserve. It was an invaluable public service for the state government to 'function' so well at this difficult time and I especially applaud the leadership of Senate Majority Leader Dean Skelos and Assembly Speaker Sheldon Silver for this demonstration of competence and performance in state government."
The budget included over a billion dollars in cuts to education and $2.3 billion in cuts to the State’s Medicaid program. These were based on the recommendations of the Governor’s Medicaid Redesign Team (MRT). There was also a 10% cut to State Operations which could lead to reductions in the State workforce.
Not included in the deal was a plan to place a $250,000 cap on non-economic damages in medical malpractice cases. This idea had been part of the MRT’s recommendations and was strongly supported by the physicians, hospitals, and the business community. Strong pushback from the trials lawyers and opposition from the Assembly ultimately defeated this idea, despite strong support from the Governor who argued that it would save the State well over $100 million a year and reduce malpractice costs for physicians and hospitals across the state.
The budget deal did include one major piece of medical malpractice reform -- creation of the New York State Medical Indemnity Fund. The fund will cover the medical costs in malpractice actions for infants born with a neurological impairment. By removing medical costs from malpractice awards and settlements, the fund will provide care over the full lifetime of the patient and reduce costs for obstetricians and hospitals.
The budget level funds stem cell research and other science based economic development programs. It also folds NYSTAR into the Department of Economic Development but leaves the Foundation’s programs in place as part of a new Division of Science, Technology, and Innovation.
Budget Deficit Reduction Plan (DRP) Finally Agreed To & Passed
On December 4th, 2009 Governor Paterson signed a Deficit Reduction Plan (“DRP”) that closes $2.7 billion of the $3.2 billion estimated current-year deficit. Major components of the plan include: up to 12.5% across-the-board reductions to many local assistance programs and other targeted local assistance savings ($550 million in 2009-10); the creation of a tax penalty forgiveness program to encourage individuals to resolve unpaid claims ($250 million in 2009-10); accelerating the use of education stimulus funding ($391 million in 2009-10); increasing the Medicaid Fraud Target ($150 million in 2009-10); as well as a variety of other actions.
Since the final DRP agreement included less cuts than originally proposed, the Governor announced that he will move forward with $750 million in delays to scheduled local aid payments in December. The $750 million includes: $436 million in delayed payments to school districts for the STAR program; $146 million in delayed payments to school aid; $45 million in delayed payments to cities through the Aid and Incentives to Municipalities (AIM) program; $47 million in delayed payments to health insurers for State employee fringe benefits; and $76 million in delayed payments to counties for human services reimbursements. The Governor indicated that as sufficient revenue becomes available, the State will potentially pay the amounts that were delayed. The Governor also stated that he reserves the right to institute further payment delays later over the remaining months of the fiscal year in order to preserve the State’s cash position. At this time, delayed payments do not include Medicaid or health care programs.
Testimony of Lee Goldman, M.D., before the New York State Senate Committees on Codes, Health, and Insurance
December 1st, 2009
Senator Breslin, Senator Duane, and of course, our senator and friend Senator Schneiderman, good morning to you and to Senators Volker, Seward, and Hannon and other members of the committees, thank you for asking me to testify today. My name is Dr. Lee Goldman and I am the Executive Vice President for Health and Biomedical Sciences and Dean of the Faculties of Medicine and Health Sciences at Columbia University.
I have prepared written testimony which I asked be included in full in the record of this hearing. I will now summarize this testimony and then welcome the opportunity to answer any questions you may have.
Columbia University Medical Center (CUMC) is the health and biomedical sciences campus of Columbia University. Consisting of the College of Physicians and Surgeons, the School of Nursing, the College of Dental Medicine, and the Mailman School of Public Health, at CUMC we have three basic missions – clinical care, research, and education. This means that we provide the highest quality patient care, conduct cutting-edge research, and train the next generation of doctors, nurses, dentists, and public health professionals.
Our more than 1,200 full time faculty, whose aggregate patient volume represents the largest group practice on the East Coast, includes many of the leading members of their fields who in many cases provide services and perform procedures that cannot be duplicated elsewhere. Our doctors are salaried and as a not-for-profit, we reinvest any revenue beyond their salaries in our mission – patient services, education, and research. Likewise, any money that we have to spend on things like malpractice insurance diverts resources away from that mission.
I am a practicing cardiologist and have done extensive research on health outcomes. I am the current Editor of the Cecil Textbook of Medicine, the oldest continuously published textbook of Medicine. Earlier this year, an op-ed that I coauthored with Dr. Herbert Pardes, President and CEO of the New York Presbyterian Hospital (NYPH), was published in the Daily News. I asked that a copy of that op-ed be included with my testimony as part of the record.
I plan to talk about the problems with our current medical malpractice legal system and offer possible solutions. Throughout my testimony you will often hear me touch on three themes – affordability, access, and quality – three challenges which are very much at the heart of the debate over health care reform going on in Washington as we speak, and let there be no doubt, in looking at affordability and access today in this country, and especially in New York, we have a medical malpractice crisis. Doctors know this to be true, as do experts who have examined the issue, and so do elected officials, both Republican and Democrat, and perhaps most importantly, so do the American people.
A Pacific Research Center report commissioned by New Yorkers for Lawsuit Reform released only two weeks ago notes that 93% of doctors report practicing defensive medicine. I do not agree with everything mentioned in this report, but the data are very telling. This same report says that over $865 billion of our nation’s Gross Domestic Product is spent on our tort system. The first slide shows that this is 2.2% of the economy, the highest in the world, and with the exception of Italy at 1.7%, more than double what any other nation spends. This same report ranked New York last among the fifty states for losses due to medical malpractice and at or near the bottom in most other tort categories. According to a recent Associated Press poll, 54% of all Americans support medical malpractice reform, while only 32% oppose it, the rest being undecided.
As can be seen from slide 2, malpractice costs are significantly higher in New York than in other states. The slide compares New York rates to those in California and Massachusetts, two states in which I have practiced at earlier points in my career. Both have malpractice laws and rules which protect the patient's interests without driving malpractice rates as high as ours. Whether it is a low-cost field like internal medicine or a high-cost field like obstetrics and gynecology (OB/GYN), rates are much higher in New York.
And they are rising. At Columbia the average cost per insured physician has more than doubled over the past ten years and today we have reached the point where annual malpractice insurance costs for us and our affiliated hospital, NYPH (uptown only) are now expected to exceed $80 million in 2010. I might add that this is during a period when physician and hospital reimbursements have been largely flat and have come nowhere near to keeping up with the increase in practice costs.
High malpractice rates are reducing patient access and forcing many providers out of business. Several hospitals have closed their maternity wards and in Northern Manhattan, where CUMC is located, the only practicing OBs remaining are those who are part of our Faculty Practice Organization. With average annual premiums approaching $150,000 in New York County, higher in other places, an OB simply cannot earn enough to support him or herself in a community like ours, where many residents are low income and are on Medicaid, Family Health Plus, or are uninsured. The burden of high medical practice rates falls especially hard in poorer communities. The only reason we can still afford to have practicing OBs is because we can cross-subsidize them, but if rates continue to rise, I do not know how long even we can keep this up.
Think about it: before paying rent, before paying staff, before paying for new equipment, before taking home a dime to pay the mortgage, feed the family, or put away something for the kids’ education, an OB has to earn close to $150,000. If an OB/GYN stops delivering babies his/her rates will decrease by about 40%. No wonder practitioners are leaving the field.
Many areas in New York face physician shortages. Both the Executive and the Legislature have responded with programs like Doctors Across New York and by pressing for strengthened Graduate Medical Education in order to improve access in underserved urban areas and rural counties. Yet at the same time we are all working to attract new doctors, the State’s extremely unfavorable malpractice climate is scaring them.
Although absolutely necessary at some level, money spent on malpractice insurance and paying claims does not go towards treating patients, does not go towards promoting public health, does not go towards training doctors and other professionals and does not go towards new equipment; it does not even go towards utilities or general maintenance of the doctor’s office. Less than half even goes to compensate the victim and the victim’s family.
Since we are a not-for-profit, any savings from reduced malpractice costs would be reinvested in our mission. We could create hundreds of new jobs; we could develop new community programs to provide increased services to the uninsured; we could purchase new equipment that will allow us to provide even better and more efficient care; we could do more research to prevent and treat disease; we could upgrade our facilities to make our campus more inviting to patients and visitors; and yes, we could even lower the rates we charge patients for medical services. Regardless of whether it is one of these ideas, some combination of the above, or another idea all together, we could improve care and lower costs for your constituents and all New Yorkers.
In 2003, Texas passed Proposition 12, which enacted a series of medical malpractice reform measures. I will not go into details as to what those reforms were, but I do want to point out the results. Looking at slide 3, you can see that in those same fields to which I referred earlier, internal medicine, general surgery, and OB/GYN, malpractice rates in Texas have decreased by about a third. OB/GYNs in New York now pay twice as much as their colleagues in Texas.
What has this meant? For one thing, more doctors in Texas. In 2003, about 2,500 applied to take the Texas medical licensure exam. In 2009, that figure was close to 4,000 -- more doctors in all fields from primary care to many of the high-cost specialties, and in all parts of the state, from inner city Houston to rural west Texas. This 60% increase is well above the population increase Texas has seen in that same time period. By contrast, in roughly the same time period, New York’s increase was less than 500. This means greater access to care, especially for the underserved in Texas. Charity care has increased 24%, close to $600 million, and at the Catholic hospital system, there is no longer any need for additional OBs, something that is almost unheard of in New York. It also means that Texas hospitals have been able to do many of the things mentioned above that I would like to do in New York but cannot because of our malpractice costs.
Now, it has been said that the reason Texas has so many new doctors is that the bad doctors, or at least the negligent ones, are moving there because they no longer fear malpractice suits. First, let us remember that Texas did not repeal malpractice laws; it just reformed them. Second, I have not heard any evidence to substantiate this claim. From, 2006 to 2008, 0.26% of Texas physicians were subject to serious disciplinary action, slightly less than prior to passage of Proposition 12, and also slightly less than New York’s figure.
Two years ago, we recruited a top pediatrician from the University of Texas at Galveston, Dr. Lawrence Stanberry to become Chair of our Department of Pediatrics. I asked Dr. Stanberry about this and he said unequivocally that he saw no decrease in the quality of physicians in his community post 2003. I will also tell you that in 2001 Columbia University’s College of Physicians & Surgeons had about 165 alumni living in Texas. Today that number is 209. This is a small, unscientific sample, and there are no doubt other contributing factors, but I think it is somewhat noteworthy. I may be biased, but I hope that you all would agree with me that, with very few exceptions, Columbia alumni do not make bad doctors.
I am sorry to say that recent actions by this Legislature threaten to make things worse. It pains me to say this, because when it comes to Graduate Medical Education, promoting public health, providing for the underserved, and funding biomedical research, the Legislature has been very supportive of our profession and especially academic medicine. Yet, if you look at some of the bills that have been introduced and considered, it is depressing, especially when you consider that no bills which would really make things better have been passed. Whether it is measures to increase plaintiffs’ attorney’s fees, limit a defendant’s ability to question the plaintiff’s treating physician, or eviscerating the statute of limitations, we seem to be heading in the wrong direction.
This last bill, S. 1729, concerns me the most as it has already passed through committee and could be considered on the floor. When it was first explained to me, I jokingly said that it would allow a plaintiff to sue for a 19th century bloodletting of an ancestor. That is not as far off from the truth as you might think. This bill would allow a one-year window for any malpractice cause of action to be brought, regardless of when the events in questions took place. Our medical school is over 200 years old. A descendent of someone that one of our doctors treated in the early 20th century or even the 19th century could bring suit against us under this law.
S. 1729 would add a tremendous amount of uncertainty to the system, precisely the opposite purpose that statutes of limitations are designed to serve. It is simply unfair to ask doctors to try to defend themselves against open ended lawsuits. Senators, please do not let this bill become law.
I want to talk a bit about patient safety for no one should take my opposition to a broken legal system to mean that we do not care about patient safety. Nothing can be further from the truth.
At CUMC we constantly stress patient safety and have initiated a number of efforts designed to promote continued improvement. In fact, we have a senior physician whose job is "patient safety officer". In this role he spearheads efforts to review our data and construct initiatives to improve outcomes. For example, our physicians have worked with NYPH to develop a deep vein thrombosis (DVT) prophylaxis program. DVT is a significant contributor to hospital-acquired maladies if it is not systematically managed.
Our obstetricians have generated new data and reviewed published research to discern the most likely preventable causes of poor outcomes at birth. Among the responses are specific training and testing using mannequins to ensure the obstetricians avoid a condition called shoulder dystocia during delivery. In addition, we have established a requirement for periodic training and certification in fetal monitoring by nursing staff and physicians.
Our hospital and physicians work together to conduct what we call "patient safety Fridays". Every Friday the day begins with all management reviewing one or two specific patient safety items followed by rounds throughout the hospital to focus on just those initiatives. This weekly focus has raised awareness and improved compliance with a wide variety of important quality processes.
I have heard it said that if it were not fear of malpractice lawsuits nobody would be policing the medical profession.” Nothing could be further from reality.
First, doctors are subject to oversight and review on many levels. As noted above, we have very strict internal mechanisms for ensuring quality and rooting out sub-par practices. All medical professionals are subject to licensure and discipline form the New York State Department of Education and other state agencies. Is the New York State Bar Examiners an effective policing organization? Why doesn’t the medical board deserve the same respect? We are also subject to review by payers, Medicare, Medicaid, and private insurers, all of whom measure quality. With the new physician and hospital quality measures coming out of Washington and the emphasis on comparative effectiveness research, this will only increase. Finally, there are surveys like the U.S. News and World Report and New York Magazine’s Best Doctors, and perhaps most importantly, our patients who absolutely demand excellence from each and every one of our physicians, as well they should, and do let us know when they are displeased.
Second, medical malpractice lawsuits are not a very good way to police against bad doctors. Some estimate that virtually every neurosurgeon will, at some point in their career, be sued for malpractice, 80% within the first ten years of beginning practice. OBs have similar numbers. We can argue back and forth about what percentage of neurosurgeons are bad doctors, but I can say with certainty that the number is nowhere near 80%.
As slide 4 shows, a very small percentage of the cases account for a very large percentage of the awards and settlements. At Columbia/NYPH, 4% of the cases account for over 40% of the claims. This means that a vast majority of the doctors being sued are undeservedly getting caught up in the malpractice system, costing them and their employers a lot of money, suffering damages to their reputations, and having to take time away from treating patients.
Studies have shown that the medical malpractice system is not a very good way to prevent substandard care. A 1993 Harvard University Study of New York’s medical malpractice system found that, “A substantial majority of malpractice claims filed are not based on actual provider carelessness.” Negligence was found to occur in only one-sixth of cases analyzed. Ironically, this same study found that there were many instances of substandard care where no medical malpractice claim was ever filed.
You may have noticed that throughout my testimony I have used the term “malpractice reform,” not “insurance reform.” That is because the problem we face in this state is not just with high insurance rates, it is with the whole medical malpractice system. To borrow some medical terminology, high insurance rates is just one of the ways the disease manifests its symptoms. Actually, I believe the problem is with the tort system in New York in general, but that is really not my area of expertise so I am just focusing on the malpractice problem.
Some elected officials have said that they could support malpractice reform if they could be assured that the savings would be passed on to the doctors and not captured by insurance companies. Several years ago, Columbia teamed up with NYPH and several other academic medical centers to form the Medical Centre Insurance Company (MCIC). MCIC, which is self-insured, provides medical malpractice coverage only to the member institutions as well as a very high percentage of our individual faculty members. Their rates are based on the actual experiential data of our doctors and hospital. The six institutions that make up MCIC are MCIC’s Board of Directors. If there are savings to be had, we have every incentive to pass those savings onto the insured, since we are the ones paying the premiums.
The medical malpractice insurance market is different from other markets. Unlike the health, life, homeowners, and car insurance markets, publicly traded for profit companies actually provide only a small portion of the coverage. Most doctors and hospitals get their coverage from an arrangement similar to ours or from a government agency or some other form of captive or not-for-profit cooperative, all of whom, unlike perhaps the more traditional types of insurance, are incentivized to pass along any cost savings that would be realized from malpractice reform onto their customers – doctors and hospitals.
You would think that if insurance companies were hoarding all this money, their rates would be a lot higher than ours. After all, MCIC has no real profit motive. Our rates are a little bit less than we could get on the open market, to the extent there is one, but not by a lot. We run a little more efficiently and we have a disproportionate share of the top rated doctors by every metric for rating physicians, but there is no great pot of money that the insurance companies are keeping for themselves.
I have spoken a lot about the problems with the system so I want to finish up by talking about solutions. That is what doctors do. We diagnose the problem and then we figure out how to treat it. Unfortunately, in recent years, most of the focus has been on insurance reform ideas like freezing rates. This is a short-term solution that will only make things worse in the long run. If you stop refilling the water tower but keep the tap open, eventually you will run out of water. That is what we are seeing today, with the Medical Liability Mutual Insurance Company facing bankruptcy.
Nor do I think it is appropriate to shift these costs to the State as some ideas would do. As a taxpayer, I do not feel it is my responsibility to subsidize plaintiffs attorneys’ income nor doctors’ malpractice costs. As I said, we need to focus on ideas that reform the whole malpractice liability system, not just insurance costs.
In October, the Congressional Budget Office (CBO) issued an opinion estimating the potential budget affects of medical malpractice reform. The CBO concluded that reform could lower malpractice costs by 10%. They also stated that in states that had not enacted reforms, like New York, the savings would likely be greater since the changes would be much more extensive than in states which had enacted reforms, but that is hard to measure so let’s just stick with the 10% figure for now.
The CBO also estimated that medical malpractice reform could lower overall health care costs by 0.5%. Among Medicaid, the Children’s Health Insurance Program, and FHP, and other programs, New York State spends about $61 billion a year on health care. Reducing those costs by 0.5% would save the state $305 million. That may not sound like that much in the context of a $120 billion plus budget, but think about it. Over the past month, the Governor and the Legislature have been working to close a $3.2 billion budget gap but have been unable to reach an agreement. Medical malpractice reform takes almost 10% of the problem off the table, and not just this year. These are not one time savings. How many education jobs were just saved? How many health care cuts were just avoided? What would you rather spend the people’s tax dollars on – paying malpractice costs or improving health outcomes, raising children’s test scores, cleaning up superfund sites, improving roads and mass transit, you name it. Seems like a pretty easy choice to me.
Let me also mention some reform ideas that could work and that could lower costs, increase access, and promote quality.
- Caps: Many reform proponents have focused on capping non-economic damages. I support caps. They were a central part of the California and Texas reforms and it is important to remember that they apply only to non-economic damages. Medical costs and lost income would continue to be fully compensated. The only damages that would be limited would be pain and suffering and, in some cases, punitive damages, which are amorphous as it is.
Of course, caps are very controversial. Maybe the caps could be indexed or could be deviated from only if the plaintiff meets a very high burden of proof and receives approval from the Appellate Division. In any case, we should not let the search for solutions get bogged down in an argument over caps.
- Safe Harbor: One idea that has a lot of promise is the “safe harbor”. It is an absolute scandal that a doctor who meets or exceeds the standard of care, who does everything he or she is supposed to do and does it well, can still be held liable in a medical malpractice case simply because there is a bad outcome. Doctors who do not depart from the standard of care should not be subject to malpractice liability, plain and simple. Some have suggested special malpractice courts to determine whether a deviation occurred and to resolve these cases expeditiously and fairly. I think that could work.
- Sorry Works: Another idea is to apologize and compensate. Even though a simple apology often goes a long way, because of the current litigation climate, a doctor who makes a mistake and knows he or she made a mistake is very reluctant to admit that mistake and apologize to the patient for fear that the apology could be used in a future law suit. Amending the rules of evidence so this type of apology cannot be used in court, as thirty other states have done, will go a long way toward turning down the temperature when a mistake is made.
Mistakes occur, but mistakes usually get corrected, and get corrected quickly. Even in cases of a departure, the harm to the patient may ultimately not be that great. Let those cases be dealt with directly by the provider and the patient. Do not let fear of lawsuit prevent people from settling problems quickly and easily.
- Other Ideas. Other ideas include setting up a pool to reimburse families as they actually incur expenses to care for their children born with defects related to doctor’s management, establishing a no fault system for cases of babies born with non-preventable birth defects, enacting more enforceable sanctions for frivolous lawsuits, compelling expert discovery and disclosure, and strengthening the physician certification requirement. A physician claiming that a malpractice case has merit should at least have to assert so in writing; furthermore, the certifying physician should be truly knowledgeable on the subject at issue.
My colleagues may have other thoughts and I encourage you to look at all options, but please, focus on those ideas which will bring about real changes to our medical liability system, not those which just provide short-term insurance rate relief.
After many years of arguing about this issue, we have an opportunity to make some real progress. As you know, in Washington, both the House of Representatives and the Senate are considering legislation to reform health care and ensure greater access and affordability in this country. Both bills include language to address malpractice reform, and President Obama has instructed the Department of Health and Human Services (HHS) to fund demonstration projects aimed at promoting patient safety and reducing malpractice costs.
This is a huge step in the right direction, maybe not as forceful and forward thinking as I would prefer. For instance, caps are off the table in the House bill, but it is a huge step nonetheless. To hear a Democratic President and a Democratic Congress, with its historical opposition to tort reform, admit that we have a medical malpractice problem and state that doctors are being forced to practice defensive medicine, is a big step forward and one that has given me hope that we can finally make progress on this very important issue. Former Senator Bill Bradley called malpractice reform the grand compromise that could bring about universal coverage.
So my challenge to you today, and to the Governor and to your colleagues in the Assembly and throughout government, is that if and when health care reform passes, and I hope and believe it is a question of when and not if, when HHS issues a medical malpractice demonstration projects request for proposals, let New York State be first in line to apply. Show the people of this State that you are serious about improving affordability and access. Show the physicians of this State that you take their concerns seriously. Show that you will not let powerful interest groups get in the way of enacting common sense changes to the law and making real progress on this issue. The federal government is going to provide funding to carry this out. How can we pass up this chance?
Again, I want to thank you for holding this hearing and for asking me to appear. In closing, I want to stress again how important it is that you make real changes to New York’s medical malpractice system, not just for the doctors’ sakes, but for your constituents and all New Yorkers. I welcome the opportunity to respond to any questions you may have or engage in discussion about any of the issues I raised, and also look forward to hearing the testimony of the other witnesses.
Dr. Lee Goldman's Slide Show Presentation
Governor and Legislature Fail to Reach Agreement on Budget Gap Measure
The Legislature returned to Albany on Monday, November 16th to continue Governor Paterson’s Extraordinary Session that was adjourned the week before. Governor David Paterson still had three of his main issues yet to be resolved coming into this week’s session -- his Deficit Reduction Plan, marriage equality, and Tier V Pension Reform.
Although the State is set to run out of cash next month, Governor Paterson and the Legislature remain apart on a plan to close a $3.2 billion current year budget hole. The Governor has now said he would not rule anything out, including the possibility of delayed payments in December or the possibility of furloughing State workers. However, after a Tuesday night leaders’ meeting, Assembly Speaker Sheldon Silver and Senate Majority Conference Leader John Sampson, seemed to agree that they were getting very close on a Deficit Reduction Plan that all parties could live with. However, the deal has yet to be finalized.
All sides have been stuck on whether to slash more than $1 billion in education and healthcare spending as the Governor has proposed. Senate Democrats oppose mid-year cuts to school districts. All parties are in agreement that lawmakers were not proposing any new taxes or one-shot revenue raisers to balance this year’s budget.
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.
Governor Paterson Unveils Budget Proposal Early
In what many health care advocates may have considered an unwanted Christmas present, on December 16th New York Governor David A. Paterson delivered his proposed Executive Budget proposal for the 09/10 fiscal year. The plan was introduced more than a month before the mid January Constitutional deadline and included some very tough proposals intended to close the State’s looming budget gap.
Currently, the State is facing a $1.7 billion current-year shortfall in the 08/09 fiscal year and a deficit of $13.7 billion next year, and the Governor’s budget aims to close both those gaps. Under the plan, all funds spending would increase 1.1% to $121 billion, the lowest level of growth in over ten years. According to the Governor, in this proposal the Administration made a series of difficult decisions to cut spending across every area of State operations, as well as several targeted revenue increases.
He argued that these measures were necessary to address an unprecedented fiscal and economic crisis, noting that, “For years, record revenues from Wall Street allowed State spending to increase at an unsustainable rate. With the financial services industry in the midst of an unprecedented crisis, we must fundamentally reevaluate what our State can afford to spend.”
A large portion of the savings will come from the health care sector, which at $45.4 billion makes up 38% of the State budget. The Governor’s plan would cut $3.5 billion in total from Medicaid, the Health Care Reform Act (HCRA), and long term care, public health, insurance, and aging programs. Specifically the budget proposal would reinstitute the 0.7% assessment on hospital revenues, eliminate the FY 09/10 trend factor, reduce and redirect graduate medical education funding, and eliminate several HCRA funding programs.
Of particular interest to practicing physicians is an increase in the biennial licensing fee from $600 to $1,000 and a new 9.6% surcharge on outpatient surgical and radiological procedures. The budget also proposes to eliminate the Foundation for Science, Technology, and Innovation (NYSTAR) and folds its programs into the Empire State Development Corporation. Several NYSTAR programs will also be eliminated or substantially reduced, most notably the Centers for Advanced Technology, which includes the Center for Advance Information Management at Columbia, which will see funding reduced by a third.
The news was not all bad for the academic medical community. The Governor wants to extend funding for the HEAL-NY program which funds Information Technology and restructuring projects. He also intends to fully fund the Empire State Stem Cell Board which supports stem cell research in New York. Columbia has been a major beneficiary of this program.
There was also a new and somewhat controversial proposal that could offset some of the cuts to public health programs. The Governor wants to implement an 18% sales tax on all non-diet soft drinks. The Governor hopes to reduce consumption and raise $404 million for HCRA public health programs.
The next steps in the budget process are still unclear. Governor Paterson will deliver his State of the State address on January 7th, his first such speech. Normally the Governor lays out a general agenda on the State of the State and then fills in the details later with the Executive Budget Proposal, but this year the details have already been filled in. He has also called upon the Legislature to pass the budget by March 1st, a month before its deadline, and to pass part of the plan by the beginning of February. Neither the Assembly nor the Senate has committed to do so.
City Council Approves Term Limits Extension
On October 23rd, the New York City Council voted to extend term limits for City elected officials from two to three terms. The vote was 29-22 in favor of the change. Both Mayor Michael Bloomberg and City Council Speaker Chrstine Quinn supported the measure. Two Council members, James Vacca (Bronx) and Darlene Mealy (Brooklyn) changed their no position to yes votes while eight undecided members voted with the Mayor and Speaker. An amendment to the bill to force a public vote in February was defeated 28-22. The term limits extension will likely be challenged in the courts.
Governor Paterson Calls Legislature into Session after Election Day
The recent turmoil on Wall Street has created significant current and next year deficits prompting Governor David Paterson to call the legislature back for another “special economic session”, this one to be held in November. The State Division of the Budget is predicting a new budget gap this year from $1.2 billion to $2.5 billion. In August, the Governor and Legislature enacted $427 million in spending reductions, now the Governor says nothing is sacred – all areas of the budget, including education and health care will need to be looked at for additional cost savings.
Senate Majority Leader Dean Skelos estimates the State is losing as much as $1 billion in revenue per year for the failure to collect taxes on cigarette and gasoline sales to non-Native Americans at Native American owned businesses and casinos. The last four Governors failed to legally collect those taxes and the legislature has passed a number of bills to authorize this tax collection. One more bill will be sent to the Governor this year for his approval. The Governor acknowledges this problem and is trying to negotiate with the various nations.
Governor and Legislature Agree on Deficit Reduction Plan
Responding to concerns about the economy and impending budget deficits, and making references to the Great Depression, Governor David A. Paterson called the State Legislature back to Albany on August 19th for a special emergency economic session to address New York State’s financial situation.
Prior to the session the Governor announced that he was cutting over $630 million by administrative action from this year’s budget, but that he would need the Legislature’s help to close the projected gap. After the whole day, and late into the night session, the Governor, along with Senate Majority Leader Dean Skelos (R-Nassau County) and Assembly Speaker Sheldon Silver (D-Manhattan) announced that they had reached an agreement on a $1 billion plus, two-year savings plan that does not include any tax or fee increases. After enactment of the agreement fiscal year 08/09 spending will now total $120.9 billion, an increase of 4.2%, which is equal to inflation.
The Governor said that this agreement was an important first step in addressing the State’s expected budget shortfalls for the upcoming years, but that more needs to be done. He noted that the, “Looming deficit we face next year will demand even more difficult choices. And given the significant, continued uncertainty within the economy, there are no guarantees that we can avoid additional current-year spending reductions if revenues plummet even further.”
The administrative savings come from instituting a hard hiring freeze and making other across the board cuts in agency spending. The spending cuts enacted by the Legislature were also varied with a large portion coming from the State and City University budgets, aid to local governments, and from Legislative member items. Health care was not spared although the $127 million cuts in hospital and nursing home spending was not nearly as much as some had feared. There are also several million dollars in cuts to higher education spending. There were no additional cuts to the Empire State Stem Cell Fund.
While the Governor and Legislature were able to reach an agreement on this spending reduction package, they could not come to terms on tax policy. The Governor and State Senate support a cap on increases in local property taxes while the Assembly would like to see incomes taxes raised for those earning over $1 million. Another special session may be necessary this fall to resolve this and other budget issues.
Lawmakers did agree to place a moratorium on liability premiums between July 1, 2008 and June 30, 2009. This freeze gives relief to doctors in New York diverting an impeding crisis and sets the stage to discuss and address the escalating cost of Medical malpractice insurance. The legislation also prohibits the state’s Insurance Superintendent from imposing a surcharge on premiums to make up for deficits facing insurance companies.
Governor Paterson Announces Plans to Cut Spending Calls
Legislature Back for Special Session
The day after making a rare statewide televised address saying that New York has entered a recession and that tough times were ahead, Governor David Paterson announced plans to reduce spending both this year and next in order to address plummeting state revenues and impending budget shortfalls. His first step was to order executive state agencies to reduce spending by $630 million in the current fiscal year, a roughly 7% reduction in state agency spending on top of the 3.35% reduction already included in the 2008-09 Enacted Budget. He also announced plans to implement a hard hiring freeze; and called the Legislature back to Albany for a special session to reduce spending by an additional $600 million in the current year. Combined, these actions will produce savings of $1.2 billion and eliminate the potential current year shortfall.
“With the economy deteriorating and revenues plummeting, I have ordered state agencies to take immediate action to reduce spending and control hiring, but that is just the first step,” the Governor said. “We must and we will go further. I am meeting the Legislature halfway to our savings goal, and calling them back to work with me to find ways to reduce our spending, just as millions of New York families are being forced to do.”
Governor Paterson made his remarks following the release of the Division of the Budget's (DOB) First Quarterly Update to its 2008-09 Financial Plan, which included revised budgetary projections for the 2008-09 through 2011-12 fiscal years. Highlights of the report include:
- Revenue Declines: This new report detailed a potential General Fund shortfall of $630 million in the current fiscal year, which Governor Paterson has immediately addressed with his order to cut agency spending by that same amount. This potential $630 million shortfall reflects a revenue decline of $615 million, primarily in business taxes, and a marginal spending increase of $15 million. In total, the State has now revised its revenue estimates downward for 2008-09 by $2.3 billion since April 2007.Increased Budget Gaps: The out-year deficit facing the State in 2009-10 has grown from $5.0 billion at the time of budget enactment to $6.4 billion. The cumulative budget deficit over the next three fiscal years has increased from $21.5 billion to $26.2 billion – up $4.7 billion in less than 90 days.
- Overall spending: State operating spending for the 2008-09 fiscal year is now projected to be $80.5 billion, a $356 million decrease from the Enacted Budget. The proposed $630 million in reductions are offset by additional spending of $261 million for labor settlements by two independent entities (the Judiciary and CUNY) and a marginal net increase of $13 million in other programmatic areas.
Governor Paterson said that these rising deficits are due in large part to a faltering economy, which has severely impacted state revenues. Since the budget was enacted in April, New York’s economy – particularly on Wall Street, a sector that accounts for 20% of state revenues – has deteriorated even further than initially projected, now reaching levels last seen during the period following the September 11, 2001 attacks. According to the DOB, State economists are now, for the first time since 2003, forecasting that New York has officially entered a recession. They also said that there are a number of troubling indicators across the State's economy:
- Bear Market/Subprime Fallout: The financial services industry has not recovered from the subprime mortgage crisis as quickly as initially expected. In fact, Wall Street has now officially entered a bear market across all three major indexes (defined as a twenty percent drop in stock prices).Bank Failures: The FDIC’s takeover of Indymac Bank represents the largest bank failure in a quarter of a century. Additionally, Fannie Mae and Freddie Mac, the lifeblood of the mortgage industry, continue to struggle to avoid collapse.Wall Street Losses and Layoffs: The New York securities industry has reported $42 billion in losses since the third quarter of 2007 ($22.8 billion in the first quarter of 2007 alone). Even in the three quarters following September 11, 2001, these firms posted a cumulative profit of $6.5 billion. Moreover, layoffs in that sector are expected to total 35,000 or six percent of their overall workforce. This is commensurate with the seven percent drop in Wall Street’s workforce that occurred after September 11, 2001.Plummeting Bonuses and Capital Gains: As a result of these problems on Wall Street, state economists have reduced their forecasts for financial services sector bonuses and capital gains – both of which are critical drivers of state revenue – compared to the time when the budget was enacted. Wall Street bonuses are now projected to decline by 20.5 percent – nearly double the 11.1 percent decline that was initially projected in April. Capital gains tax collections are forecast to fall by 24 percent, down from a 16 percent decline in April.Rising Inflation: Inflation in 2008-09 is now expected to total 4.2 percent, compared to 3.1 percent at the time of budget enactment. This represents the highest level of inflation in nearly two decades (since 1990-91) and, given the current slow rate of economic growth, raises the specter of stagflation.
- Slowing Wage Growth: New York wage growth for 2008 has been reduced by more than half from 2.0 percent to an anemic 0.8 percent.
Governor and Legislature Reach Budget Agreement
Having taken office less than a month earlier, Governor David A. Paterson announced that he and the State Legislature had reached a consensus budget for the 2008/2009 fiscal year. According to the Governor’s press release, the agreement enacts “significant savings initiatives, while also making targeted investments in education, economic development, and health care for children.” Passed nine days after the April 1st deadline, the Enacted Budget actually spends less than was originally called for by the Executive Budget released in January. State agency operations spending growth will be limited to 1%. In addition to having to deal with a chain of events involving the previous Governor that is still hard to fathom, the Governor and the Legislature also had to face the issue of Mayor Michael Bloomberg’s congestion pricing initiative, which ultimately did not pass.
Preliminary analysis of the budget indicates that State Operating Funds spending will total $80.5 billion, a 4.5% increase from last year. The All Funds budget, which includes the operating budget plus pass through money from the federal government, will total $121.7 billion, an increase of 4.9%.
The Enacted Budget does not include a personal income tax increase as some had been calling for, and reflects $1.8 billion in recurring spending cuts and $1.5 billion in recurring revenue actions. The State financial plan utilizes $1.3 billion in non-recurring revenues, which is comparable to historical levels, and $400 million in labor reserves. It does not utilize any of the State’s $1.2 billion in rainy day reserves. Governor Paterson, who had originally hoped to cut roughly $800 million in spending, displayed mixed feeling about the budget. He noted, “In the face of two crises – one in government and one in our economy – we came together to produce a responsible budget for the people of New York. This was by no means a perfect process, nor is it a perfect product. But we were able to achieve the programmatic reforms and cost controls needed to move forward and confront the challenges ahead.”
The budget continues funding for stem cell research, a priority for the Governor, and creates a new $15 million Doctors Across New York program to provide loan forgiveness to physicians who agree to practice in a rural or underserved urban area. As in previous years, the budget also includes funding for the Columbia dental clinic subsidy and the New York State Psychiatric Institute.
Governor Paterson Takes Office and Gets Right to Work on the Budget
Proclaiming, “Today is Monday. There’s work to be done,” on March 17th, David A. Paterson, a Columbia College alumnus, took the oath of office as New York State’s fifty-fifth Governor. Taking note of the trouble in the fiscal markets and the tough economic times ahead, the new Governor noted that there is a budget that needs to be passed and that the Executive and Legislative branches need to work together to come up with a plan to put New Yorkers back to work.
The next day, Governor Paterson proposed $800 million in spending reductions, reductions which he felt were necessary to protect the State's finances in an increasingly difficult economic and fiscal climate. He noted that recent economic developments, including three consecutive months of private sector job losses totaling 141,000, have led the State Division of the Budget to determine that the nation is now in a recession.
The reductions he proposed would bring total spending reductions proposed since the Executive Budget was released to $1.2 billion. In addition to the 5% cut in non-personal services proposed in the Executive Budget, Governor Paterson today proposed an across-the-board 2% reduction in operating spending for all state agencies and a 2% reduction for all local assistance spending excluding education as well as entitlement programs in the areas of health, public assistance, and others.
With these cuts State all funds budget would be $123.5 billion if the 08/09 fiscal year, up $5.1 billion or 4.4% form last year. The cuts would decrease the state's structural deficit by a total of $1.6 billion over the next four years.
Governor Spitzer Delivers State of the State Address
Legislators, staff, advocates, press, and others filled the Assembly Chamber on January 9th to hear Governor Eliot Spitzer deliver his annual State of the State Address. The second such speech he has given, the State of the State is an opportunity for the Governor to lay out his agenda for the upcoming year. Among the items mentioned in the speech were the State’s continued commitment to stem cell research, plans to invest in overall research at the State’s college and universities, both public and private, and a plan to provide loan forgiveness to physicians who agree to practice in underserved areas. The State of the State deals only with broad ideas and goals. The details of his proposals will be unveiled in coming weeks when the Administration releases its budget request and other legislative proposals.
State Budget Process Begins
Although barely a bit more than halfway through the current fiscal year, the New York State Division of the Budget (DOB) has already begun working on next year’s budget. New York’s fiscal year runs from April 1st through March 31st of the following year. Under the State Constitution the Governor must submit a budget proposal in January and the State Legislature must theoretically act on it and pass a final budget by the end of March. In previous years there had been a long history of the Legislature not completing a budget by the beginning of the fiscal year; however, in more recent years they have managed to complete their work on time.
Governor Eliot Spitzer took office only a month before submitting his budget request for this fiscal year so the budget for the upcoming year will really be the first one that his Administration is totally responsible for crafting from start to finish. Starting this month, the various state agencies will submit their proposed budget for the 2008/09 fiscal year to DOB for their review. In an effort to make the process more transparent, DOB will be holding public hearings on the agency presentations and a series of regional town hall meetings across the state. This is a new step in the process. In previous years, the Administration, be it Republican or Democrat, had never openly discussed the specifics of the budget before releasing it in January.
Concerns about the housing market and Wall Street have lead DOB to less optimistic forecasts for the budget. In a recent speech at the Rockefeller Institute of Government in Albany, State Budget Director Paul Francis said that DOB has set benchmark for budget growth at 5.3%. This, he argued would allow the State to build up enough reserves to create the cushion it would need in the event of future difficult years.
Budget Process Moves Forward Some Healthcare Cuts Restored
March 26, 2007 - On March 12, both the New York State Assembly and Senate unveiled their budgets for the 2007/2008 fiscal year. Governor Eliot Spitzer had submitted his budget request on January 31st. Unlike the Assembly, which provided full legislative language and budget numbers, the Senate passed only a budget report, so many of the details are not yet known.
The Governor’s budget had cut close to $1billion in state support for hospitals and nursing homes. This lead to a rather intense public debate between the Governor and those opposed to the planned cuts, most notably the Greater New York Hospital Association and Local 1199, the hospital workers union, as well as several members of the Legislature and other elected officials.
The Assembly plan restores $427 million of the proposed cuts and adds an additional $55 million for Medicaid and other public health initiative. The Senate claims that their bill, again details are still not known, restores $544 million for hospitals and nursing homes.
On the research front, neither house adopted Governor Spitzer’s plan to fund stem cell research, but both houses did include support for biomedical research in their budget. Governor Spitzer had proposed spending $2.1 billion over ten years on stem cell research and other emerging technologies. The Assembly plan is to spend $500 million over ten years for just stem cell research, but funding would not start until next year. The Senate proposes spending $1 billion over ten years, starting this year, for all biomedical research. The Senate plan does not limit funding to stem cell research but funding can be used for that purpose, even research involving human embryonic stem cells.
Between now and the end of March, the Governor and both Houses will need to hash out their differences on these and all other issues. The state fiscal year begins April 1st and all parties want to get the budget completed by then.
State Leaders Agree to Reform Budget Process
(Excerpted from HANYS)
January 18, 2007 - Governor Eliot Spitzer, Senate Majority Leader Joseph Bruno (R-Brunswick), and Assembly Speaker Sheldon Silver (D-Manhattan) announced agreement on a series of budget reform measures aimed at ensuring a timely and open budget process. Under the agreement:
- The State Legislature will be required to enact a balanced budget; currently, this is required only of the Executive’s proposed budget. It is not clear if the reform package addresses any actions to be taken in the event a Legislative budget is not balanced.
- The budget will disclose all spending, ending the practice of lump-sum appropriations historically set aside for individual legislator interests (member items). Discretionary spending for state agencies will be continued, but will also need to be specified.
- The Legislature will be required to assign fiscal impacts to any of the changes made to the Executive budget.
- The Governor and the Legislature will be required to reach a revenue consensus by March 1st; otherwise the State Comptroller will set a figure by March 5th that will be binding.
- The Governor will have twenty-one days, rather than thirty, to submit budget amendments after the budget is initially proposed.
- The Legislature and Governor will hold quarterly budget meetings.
- Multi-year financial plans will be required, detailing the long-term impact of the budget on local governments.
- Going forward 5%, as opposed to 2%, of the general fund will be set aside for the state’s “rainy day” fund in case of economic troubles or a disaster.
Governor Eliot Spitzer Delivers First State of the State Address
January 12, 2007 - Just two days after being sworn in as New York State’s fifty fourth Governor, Eliot Spitzer delivered his first State of the State address. Before a packed Assembly Chamber that included Members of the Legislature, the Judiciary, state and local government leaders, the press, and hundreds of others, Governor Spitzer laid out his agenda for the first year of his term. The State of the State serves as a vision or blueprint with many of the details of how the Governor plans to pursue his agenda revealed when the Governor releases his budget request for the next fiscal year. The budget is normally unveiled on January 18th but the deadline has been pushed back two weeks this year as it is whenever any new Governor takes office.
Most of the speech focused on ethics and reforming the way business is done in Albany. The Governor outlined several steps that he has already taken, which include refusing to appear in state sponsored advertising and limiting donations to his campaign well below the $50,000 maximum currently allowed. He also noted that the Legislature has already agreed to list the recipients of so called “member items” in the budget. Perhaps his most controversial proposed reform was the creation of a non partisan redistricting commission to set lines for both congressional and state legislative seats.
Much of the rest of the speech was devoted to economic development with a focus on helping upstate New York. His plans include $2 billion bond act to create an innovation fund to promote high tech research and business opportunities. This would include a substantial component devoted to stem cell and other biomedical research. He also mentioned several other health care related items, including support of Berger Commission recommendations and a pledge to fight Medicaid fraud.
Berger Commission Recommends the Closure of Nine Hospitals, Restructuring of Many Others
December 28, 2006 - The Commission on Health Care Facilities in the 21st Century, often referred to as the “Berger Commission” after is Chairman Stephen Berger, is a body created by the New York State Legislature and Governor George Pataki to conduct an overview of New York’s health care facilities and to make recommendations for closing, rightsizing, and reorganizing hospitals, nursing homes, and other health care facilities across the State. Under the terms of the authorizing legislation, the Commission’s recommendation would go before the Legislature who would have to accept or reject them in total. If they did not act, all the recommendations would be put into effect.
The Berger Commission final report recommended closing nine hospitals, five in New City – Parkway Hospital in Queens, Westchester Square Hospital in the Bronx, Cabrini Hospital in Manhattan, St. Vincent’s midtown in Manhattan, and Victory Memorial Hospital in Brooklyn. Westchester Square is part of the New York Presbyterian system as is New York Methodist Hospital in Brooklyn, which the Commission recommended merge with New York Community Hospital. The other hospitals slated for closure are Community Hospital in Westchester County, Bellevue Hospital in Schenectady, and Millard Fillmore and Saint Joseph’s Hospital in the Buffalo area. The Commission also recommended that an additional fifty health care facilities be downsized, restructured, or merged.
Soon after the report was released, both Governor Pataki and then Governor-elect Eliot Spitzer endorsed the Berger Commission’s recommendations and neither the Greater New York Hospital Association, the Health Care Association of New York State, nor Local 1199, the hospitals workers union came out strongly opposed. The federal government had also promised $1.5 billion to help implement the report’s recommendations. Although the State Legislature did come back for a special session in December, the Berger Commission report was not on their agenda, so as the New Year came and went, the proposals became effective. Not all were prepared to accept this outcome, and already two of the hospitals slated for closure, St. Joseph and Cabrini, have filed a lawsuit seeking to block the Berger Commission’s recommendations from being implemented.
HHS to Provide $1.5 Billion for Health Care Restructuring in New York
|Governor Pataki and Secretary Leavitt (via videoconference) announce the F-SHRP agreement at a press conference in Manhattan.
October 10, 2006 - Governor George Pataki and United States Department of Health and Human Services (HHS) Secretary Michael Leavitt announced a final agreement on the Federal-State Health Reform Partnership (F-SHRP) at an October 3rd press conference. This agreement will provide up to $1.5 billion over the next five years for health care restructuring in New York. In addition to committing funds, the agreement lays out a broad reform agenda that includes “rightsizing” activities, investments in information technology, covering the uninsured, expansion of primary care, and implementation of pay-for-performance activities.
The Health Care Association of New York State (HANYS) welcomed the Federal government’s commitment to making investments to help New York rationally right-size its hospital system without hurting patient care. However, the F-SHRP agreement comes with strict requirements. Chief among these are a requirement that would significantly penalize the State if the Legislature rejects the forthcoming determinations of the Commission on Health Care Facilities in the 21st Century. In addition, substantial penalties are included should the State fail to meet Medicaid fraud, waste, and abuse savings thresholds.
Highlights of the agreement include:
- $1.5 billion in federal funding over five years in annual $300 million increments; the State will be able to claim a federal match on existing State spending to collect the money.
- Funds will be spent on consolidation, restructuring, and rightsizing of hospital and nursing home systems; implementation of information technology that enhances efficiency and quality; long-term care system reforms; and increased use of ambulatory, primary, and community care as alternatives to institutional care.
- The program must generate savings to offset the federal investment.
- The State must substantially increase cash collections from anti-fraud and abuse activities. There will be progressively higher annual targets between now and 2011 such that the annual amount of recoveries by 2011 equals 1.5% percent of the gross Medicaid expenditures in 2005.
- The State must do the following or lose federal F-SHRP funding:
a) Implement a Medicaid preferred drug list;
b) Increase the number of people covered by employer-sponsored health insurance;
c) Implement Medicaid cost containment measures as enacted in the 2005-2006 State budget;
d) Implement one new unspecified Medicaid cost containment initiative in 2007;
e) Implement a long-term care point of entry program in at least one region of the State; and
f) Show there are no statutory impediments to implementing the recommendations of the Commission.
2006 State Legislative Session Comes to a Close
August 20, 2006 - The official “end of session” for 2006 was capped off by a frenzied week of horse trading as Governor George E. Pataki, in his final year in office, battled lawmakers over state spending, tax cuts and education. Notwithstanding public pronouncements of harmony by Senate Majority Leader Joseph Bruno, a series of nasty skirmishes caused tempers to flair among Governor Pataki, Bruno and Assembly Speaker Sheldon Silver. Still, when both houses concluded their work, a host of measures were passed by both houses including an early retirement incentive for public employees and a budget clean-up package which will add more than $1 billion to the state budget. The added spending is expected to balloon the size of the state’s budget to $113.4 billion.
While the Governor previously vowed to hold the line on budget spending, using his veto powers to eliminate large parts of the Legislature’s budget in April, he did ultimately agree to restore much of the spending and add some of his own. As a result, lawmakers, who are all seeking re-election this November, were generally in a buoyant mood as they did achieve several of their objectives, including their plan to send out school property tax rebate checks to their constituents, collectively worth $1.6 billion over two years, prior to this year’s election. Hospitals and nursing homes also had $490 million worth of budget cuts made by the Governor restored as part of the end-of-session deals. Last minute agreements also resulted in increased financing for environmental programs and aid to cities.
Not all contentious issues between the Governor and lawmakers were resolved, however. The legislature balked at the Governor’s plan to more than double the number of charter schools in the state. Legislation to reform the state’s Public Authorities Board also faltered during the closing days of session.
With a number of items left on the table, it appears that there is a good possibility that both houses of the Legislature will return prior to the end of the year. Senator Bruno has said that his chamber will be called back in September to address a number of the aforementioned outstanding issues including the consideration of various other gubernatorial appointments. Speaker Silver was less committal saying that his chamber may return prior to the end of the year to consider legislation related to services and programs for welfare recipients.
Legislature Heads toward the End of Session
(Excerpted from Weingarten and Reid)
June 20, 2006 - The New York Senate and Assembly were reported to be in talks on a clean up bill to address much of the unfinished business created by Governor. George Pataki's budget vetoes, the subsequent overrides, and the ongoing dispute over the Governor's refusal to spend the money legislators say must go out the door as a result of the overrides.
With the session set to end on June 22nd, both houses set on a mad dash to bring bills to the floor, printing bills over the weekend on issues ranging from pet grooming to the zone pricing of gasoline.
“Senate Republicans hope to restore most of the money Gov. George Pataki cut from this year's legislative budget, and have drafted a bill rewriting areas the governor vetoed as unconstitutional in April," The Albany Times Union reported on Thursday. "The draft of the so-called cleanup bill, circulating among legislative staffs, would essentially undo the bulk of the vetoes and provide a blueprint for a three-way deal with the governor, according to legislative sources. Though the legislation is seen as a long shot, it could produce a compromise and lead to other deals on such things as an early retirement incentive for state employees (and) putting $200 million in the Environmental Protection Fund…."
Governor Pataki said he was hopeful that the Legislature would act on his plan to lift the cap on the number of charter schools permitted to open in New York and a separate measure to require many more criminal suspects and offenders to provide samples to the state DNA databank.
In another development this year, Assembly Democrats killed a bill that would have prevented public employees from collecting disability checks while also suing in court for damages for on the job injuries. The "double dipping" practice is said to cost taxpayers millions of dollars. The bill was ready to be voted out of committee until Assembly Speaker Sheldon Silver added three new members to the panel – Ron Canestrari, Deborah Glick and Cathy Nolan – and rounded up enough votes to kill the measure.
Governor Strenuously Exercises Veto Power Over Legislature’s Budget; Legislature Overrides
For the second straight year, the State Legislature was able to produce an on time budget. In 2005, after twenty years in a row of late budgets the Legislature completed it work by the April 1st deadline, which is the beginning of the new fiscal year for state government. In 2006, they did so once again.
The Legislature’s $112.4 billion budget restored many of the cuts Governor George Pataki had proposed to health and higher education funding. It also included a multibillion capital plan for New York City public schools. It did not include any funding for biomedical or stem cell research. Both the Assembly and Senate had research funding plans in their earlier versions of the budget but disagreement over funding sources and the role of stem cell research prevented an agreement from being reach and so nothing was included.
Governor Pataki was not happy with the Legislature’s budget, arguing it totaled $114 to $115 billion, well above the $112.4 billion Legislative leaders had estimated and far beyond his proposed $110.6 billion Executive Budget plan. Last year’s budget amounted to $106.2 billion. In New York State the Governor has the power of the line item veto and the Governor used it freely, vetoing 208 separate items from the Legislature’s budget. But the Democratic Assembly and Republican Senate overrode all but one of the Governor’s vetoes. While many of the Governor’s vetoes were based on his belief that the Legislature added too much spending to the budget, he also argued that many other provisions the Legislature added, those that would actually change the law as opposed to just affecting spending amounts, were beyond the Legislature’s power and thus unconstitutional. He is saying that he will not recognize veto overrides of those provisions since it was improper for the Legislature to pass them in the first place. Thus many parts of this year’s budget may bend up being settled in court.
Senate and Assembly Move Forward with Budget
On March 13th both the New York State Assembly and Senate passed their own versions of the FY 06/07 budget. Governor George Pataki had submitted his $111 billion budget request back in January and the Legislature has until April 1st, the beginning of the new fiscal year, to act upon it. Both houses added about $1 billion in spending to the Governor’s plan and both plans restored funds for education and health care that the Governor had proposed cutting. Both houses also touted their efforts to reduce taxes.
The Assembly and Senate each put forth a different plan to fund research in New York State. The Assembly’s budget includes $300 million for stem cell research while the Senate plan, which mirrors the Governor’s proposal, includes $160 for biomedical research in general and is silent on weather the money can be used for stem cell research. The Senate plan funds the research from the proceeds of the charitable asset created by the 2002 conversion of the Blue Cross/Blue Shield insurance company from a not for profit to a for profit company. This has caused some controversy as some argue that these funds were intended to help provide access to health insurance for low and middle income New Yorkers, not for research. The Assembly funds stem cell research from general Health Care Reform Act funds.
Both houses and the Governor will try to work out their differences on this and other issues and pass a final budget. Last year, for the first time in twenty years, the Legislature delivered an on time budget to the Governor. In some years completion of the budget had taken until as late as August. Every indication is that once again this year the Legislature will meet or come close to meeting the April 1st deadline.
Governor Delivers his Last State of the State Address
January 4, 2006 - Governor George E. Pataki today delivered his twelfth and last annual Message to the Legislature. The Governor has announced his intention not to run for reelection. The speech was shorter than in past years, coming in at under an hour, and only dealt with a limited number of subjects, among them taxes, energy, and education. Included in the speech was the announcement of a new biotech research challenge grant research initiative, which the Governor says will leverage up to $600 million to fuel innovation, job growth, and economic development within the State. The Governor specifically mentioned Columbia as one to the institutions that could benefit from this program.
One issue which the Governor did not mention was funding for stem cell research in New York State. Research institutions, patient advocates, and the business community had been pushing for a program that will help New York compete with other states which are supporting stem cell research. While the Governor did not specifically mention stem cell research, advocates are still hopeful he will include funding for it in his budget request for FY 06/07. The State Assembly did however pass a bill which will provide for $300 million for stem cell research in New York. The focus now shifts to the Republican controlled Senate where Senator Nick Spano has also introduced a stem cell funding bill.
Tedisco Replaces Nesbitt as Assembly Minority Leader
Republican Assemblyman James Tedisco of Schenectady replaced Charles Nesbitt of Albion as the Assembly Minority Leader. Assemblyman Nesbitt, who had held the leadership post since 2002, recently resigned to become President and Commissioner of the New York State Tax Appeals Tribunal. Republicans hold just forty five of the 150 Assembly seats and Assemblyman Nesbitt had been under pressure to leave the leadership post, surviving an abortive coup attempt in April. Assembly Republicans have lost eleven seats in the last four years as upstate New York continued to depopulate and Democrats gained support from voters statewide. Assemblyman Tedisco has been in office since 1982 and has had unusual success in recent years on several bills in a Legislature where measures sponsored by minority party lawmakers are generally ignored. His district overlaps with portions of Senate Majority Leader Joseph Bruno's Senate District in the same Troy-Saratoga region of upstate that has proven to be one of the state's most potent centers of Republican power in the past decade.
Assembly and Senate Hold Hearings on Medicaid Fraud
Prompted by a series of articles on Medicaid fraud that ran in the New York Times over the summer, the State Senate and Assembly held hearings to look into the matter. Although the witness lineup was very similar, the two Houses chose to hold separate hearings. The State of New York now spends $44.5 billion annually on Medicaid, a joint federal/state program designed to provide health care insurance to low income Americans. Estimates are that as much as 10% of the program costs care lost each year to fraud and the New York Times articles certainly brought attention to this tremendous waste of taxpayer resources. While both Senate Republicans and Assembly Democrats agreed that more needed to be done to combat fraud, they of course differed as to who was at fault, with the Senate grilling a representative of Democratic Attorney General Elliot Spitzer and the Assembly treating the Deputy Commissioner of Health in much the same way. All agreed that more resources were needed to deal with the problem.
State Legislature Completes its Business for the Year
Both houses of the state legislature departed Albany last Friday, one day after its scheduled adjournment of June 23rd. While leaders in both houses of the legislature and Governor George Pataki were proclaiming this past legislative session an overwhelming success, a number of major issues were not addressed when session concluded. Among the unresolved issues were:
- An agreement to settle Indian land claims and a related proposal to expand the number of tribal casinos,
- An agreement to a methodology to share a multi-million dollar pot of money to help pay nursing home wages and benefits; and
- A deal to expand Megan’s Law, a statute aimed at protecting people from sexual predators.
There were deals, however, to set up a $75 million grant for a new Met stadium in Queens, create a number of new judgeships, enact the Public Authori-ties Accountability Act of 2005 and create a four-member committee which will take control of the New York Racing Association oversight.
The legislature failed to pass legislation to promote stem cell research in New York State; however Senator Nick Spano (R-Yonkers) did introduce pro re-search legislation in the Senate. Having a bill, which did include funding, intro-duced in the Republican controlled Senate was a big step forward. Also, the Court of Appeals ruled that the plan to convert Empire Blue Cross/Blue Shield to a private company could go forward. The conversion of not for profit insurance companies to for profit status is a potential source of funding for stem cell re-search.
New York State Passes on Time Budget
The cicadas have come and gone, but for the first time in twenty years, the New York State Legislature passed an on time budget. Every January the Governor submits a proposed budget and theoretically the Governor and the Legislature are supposed to have agreed on a final budget by April 1st, the beginning of the State fiscal year, but since 1984, the final budget has been late. In some years, the Governor and the Legislature were not able to reach an agreement until August, four months past due.
This year however, the Legislature made a commitment to get the budget done on time. The normally complicated process, both substantively and politically, was made even more so by a recent court decision which limited the Legislature’s role in the budget process. Nonetheless, negotiations took place throughout March, and on the last day of the month, the Legislature sent the Governor a budget for the 2005/06 fiscal year.
Governor George Pataki threatened to veto several parts of the bill. Unlike the President of the United States, the Governor of New York has a line item veto. Ten days of frantic negotiations brought the all sides closer together and late in the evening on April 12th, the last day the Governor had to veto bills, all parties came to a budget agreement.
The $105 billion plus budget does not include the cuts that Governor Pataki had proposed for higher education assistance nor the Medicaid program. It does however include a .35% bed tax, less than the .7% the Governor had proposed, but significant nonetheless. The budget also includes $150 million for capital projects for the State’s institutions of higher learning and $250 million for the Healthcare Efficiency and Affordability Law for New Yorkers (HEAL-NY) to allow hospitals to pay off debt and support information technology and other health care projects.
One area which the budget did not address was the conversion of the Health Insurance Plan of New York (HIP) from a not for profit to a for profit company. Funding from this conversion could go to fund programs under the Health Care Reform Act (HCRA) and possibly to promote stem cell research in New York. The legislature hopes to address this issue and the rest of HCRA before adjourning in June.
Governor Presents Budget to Legislature
On January 18th Governor George E. Pataki unveiled his 2005-06 Executive Budget proposal which contained a number of initiatives designed to curb Medicaid and stabilize property taxes in the state. In presenting his $105.5 billion spending plan, the Governor called for $526 million more in educational aid along with $1 billion in fee increases, substantial new assessments, and a continuation of clothing sales taxes that were supposed to end after this year. The Governor’s budget raises spending by 5.4% and attempts to undertake the task of closing a $4.2 billion shortfall to balance next year’s budget. Governor Pataki is aiming to fill the gap mostly by reducing spending and using money the State gained from the conversion of Empire Blue Cross/Blue Shield into a stock company. He is also proposing a one time adjustment of pushing pension costs into the future to save local governments $621 million and the state $321 million. This plan does not have the endorsement of the State Comptroller, Alan Hevesi, the sole trustee of the pension fund. The Executive Budget also includes a $36.6 billion five-year transportation plan which would be financed partly by an added 1% real estate recording tax for twelve counties in the New York City area. The recording tax is expected to raise $100 million. A host of Department of Motor Vehicle increases are also on the table including a 33% hike in registration fees for most vehicles, and an increase of 75% more for heavy trucks. The registration increase would add $29 million this year and nearly four times that figure in future years. In reacting to the Executive Budget, Senator Majority Leader Joseph Bruno, along with Assembly Speaker Sheldon Silver said that they both dislike the tax and fee plans and suggested that the Governor’s education budget is inadequate.
Under the Governor’s budget, the State’s school aid commitment would rise to $15.9 billion. That growth is smaller than the Senate and Assembly proposed last year in separate packages which attempted to deal with a Court of Appeals order to provide more money for New York City public schools. The Governor is also proposing $201 million more in traditional school aid and $325 million from the state’s video lottery casinos from a special “sound, basic, education” fund for 270 needy school districts. The Court panel however, has recommended a $1.4 billion increase just for New York City for next year.
The Governor’s plan to cap county Medicaid expenses would save local governments $7 billion over five years, but the Health Care Association of New York reacted strongly to what it calculated as $1.3 billion in taxes and cuts, “If enacted, these taxes and cuts would devastate the health care system.” Given that Speaker Silver and Senator Bruno both have problems with the taxes proposed on hospitals and nursing homes, many are already predicting lengthy budget negotiations with the possibility of the state missing the April 1st deadline for the 21st year in a row.
The budget negotiations are complicated even further this year but the issuance of a Court of Appeals decision in December. The decision limited the Legislature’s ability to influence the outcome of the budget process.
Not included in the budget, or in the State of the State for that matter, was any reference to Stem Cell research. Many in the biomedical research community and patient advocates had hoped that the Governor would announce a New York Stem Cell initiative. Also among those calling for such action was New York City Mayor Michael Bloomberg.
The Assembly and Senate have begun holding hearings on the budget. The Governor has until February 17th to introduce any amendments.
Governor Pataki Delivers State of the State. How Many More?
On January 5th, Governor George E. Pataki delivered his 11th State of the State address. His address to a joint session of the state legislature was reminiscent of his first address in 1995. The similarity in themes can be attributed to the fact that the State, at that time, was facing a $5 billion budget deficit, or roughly the same as today’s gap.
In addition to the usual cast of political dignitaries on hand to listen to the Governor’s speech, Olympic swimmer Janet Evans and retired professional football player, Jim Kelly were on hand to lend their support for the Governor’s proposals to advance a series of health care initiatives aimed at helping the state’s children.
Among the highlights included were:
- An announcement that IBM, SONY, Toshiba, Samsung and other companies have committed to investing $2.7 billion in Hudson Valley high-tech research and development ventures, including the Center for Excellence and Nanoelectronics in Albany.
- A proposal to move the planned phase-out of the 2003 income tax surcharge from 2006 to 2005.
- The announcement of an Executive Order requiring state agencies and authorities to use non-toxic cleaning products. The Governor also promised to submit legislation that would require school districts throughout the state to follow suit.
- A promise to include in his Executive Budget details of a plan to reduce the cost of Medicaid and to provide relief to taxpayers in New York City and the counties outside of the City. The Governor will present his Executive Budget to the legislature on January 18th.
- A promise to advance a plan to improve high-need school districts across the state, not just New York City schools. This promise was seen as a response to a court mandate that will more than likely provide more education funding for New York City.
- An announcement that the Governor will lead a delegation of executives to drum up new business for New York companies in Japan and China.
- A promise to propose legislation banning all gifts from lobbyists to state officials and implement a “smart and effective” ban on lobbying of agencies and authorities for state contracts.
- The elimination or consolidation of commissions, task forces, boards and authorities that have been created over time and appointment of a commission to establish “better openness and accountability” of public authorities.
The Governor also mentioned the ongoing work by the Syracuse Center of Excellence to establish two new ethanol facilities. One will be constructed at the old Miller brewery in Fulton, New York. It will become the largest producer of ethanol in the east, according to the Governor. He also claimed that many of the economic accomplishments that occurred over the last ten years were due, in part, to the success of the state’s high-tech and Center of Excellence programs along with the establishments of Empire Zones throughout the state.
The Governor also pointed to the success that the state has had in attracting investment from around the globe and transforming the state’s economy to meet the challenges of the 21st century. He also pledged that he will help fight to keep New York’s eleven military facilities operational and as vital assets to their local economies and the U.S. military. Pataki’s Executive Budget will also outline a seven-point plan that will marshal resources to SPUR communities. Operation SPUR, the Strategic Partnership for Upstate Revitalization, will be designed to target upstate communities where additional economic growth and job creation is needed. SPUR will also target those areas that rely heavily on farming and agri-business as an important component of their economy.
In addition to his new Executive Order mandating the use of non-toxic cleaning products, the Governor has also pledged to sign an Executive Order requiring that state agencies begin phasing in the use of biofuels to heat state buildings and power state trucks. He will also ask NYSERDA to work with the state’s transportation agencies to install hydrogen refueling stations from New York City to Buffalo over the next ten years.
The loudest ovation received during the almost 90-minute speech was in response to the Governor’s pledge to enact real budget reform. The promise to submit legislation that would open up the process and empower individual legislators and ensure balanced and on time budgets.
Already, people are speculating as to what the Governor’s plans are. Will he run in 2006? To date, the Governor has not given any indication which way he is leaning, but as could be expected, those who heard the speech were looking for clues as to what his plans are. Surely there will be more to follow.
Legislature Returns for Special Session
Both houses of the New York State Legislature returned to Albany for a Special Session designed to address a number of issues left undone at the con-clusion of the 2004 regular legislative session. Included among the measures addressed this week were a decision by the state Senate to override Governor George Pataki’s veto of a measure to boost the state’s minimum wage, approval of a $1.4 billion expansion of the Jacob K. Javits Convention Center in New York City, consideration of a veto override which would overhaul the budget process that has yielded late budgets for twenty years in a row, and passage of legislation to soften the so-called Rockefeller Drug laws.
On Monday, December 6th the Senate approved an override of the Gov-ernor’s veto of a minimum wage hike surpassing the two-thirds vote necessary for such action. The wage hike will take place incrementally rising from $5.15 an hour to $6.00 on January 1st; $6.75 on January 1, 2006; and $7.15 on January 1, 2007. The state Assembly previously overrode the Governor during a special session in August.
On Tuesday, the legislature approved funding for the $1.2 billion expan-sion of the Javit’s Center which is expected to attract millions of dollars in reve-nue for the state and the city. Under the Javit’s bill, there is also a $350 million appropriation for projects outside of New York that will be divvied up by Governor Pataki, Senate Majority Leader Joseph Bruno and Assembly Speaker, Sheldon Silver.
Lawmakers were also expected to overhaul the notorious dysfunctional state budget process. In November, Governor George Pataki vetoed a proposal which previously passed both houses and included a new budget deadline of May 1st with the imposition of a contingency budget in the event that lawmakers fail to pass a new spending plan on time. State Senate leaders had vowed that, “as a last resort”, the upper house would move forward in overriding the Gover-nor’s veto, in the event that a three-way agreement was not reached. The two-day Special Session came and went with no action on either an agreement on the budget reform or a veto override.
The legislature, with the support of Governor Pataki, also passed meas-ures to reduce some of the mandatory sentences established in 1973 under Governor Nelson Rockefeller which require lengthy terms or life imprisonment for people convicted of possessing or selling relatively small amounts of drugs.
Campaign for Fiscal Equity Panel Calls for Big Increase in School Aid
The three-member panel of court-appointed special masters in the Campaign for Fiscal Equity (CFE) case this week recommended that New York City schools receive an extra $23.4 billion over the next five years so that they can provide a "basic education." The panel's recommendations totaled $14.1 billion in new aid over four years and an additional $9.2 billion in capital spending for New York City school construction and renovation.
The call for added school spending comes as the state faces a $6 billion budget deficit next year. The New York Times' Al Baker reported that the confluence of CFE and the deficit may mean a "day of reckoning" is near for Governor George Pataki and state legislators who may have to impose spending cuts and tax increases. "All the ingredients are there for a really big mess," E. J. McMahon of the Manhattan Institute, a former top Pataki aide, told the Times. "I think it is easily building up to one of the worst situations we have seen in recent history. We're looking at a bad situation in a growing economy, which is really pathetic."
Assembly Democrats said tax increases could not be ruled out. "All options are on the table," Assembly Education Committee Chairman Steven Sanders (D-Manhattan) told the New York Post. Assembly Speaker Sheldon Silver (D-Manhattan), who has emphasized the need for more school spending regardless of where the money comes from, urged "an immediate education funding reform summit of the executive, legislative leaders, representatives from the state Board of Regents and Mayor of the City of New York."
Mayor Michael Bloomberg said he would oppose any attempt to make New York City pay the extra costs mandated by the court. He argued that the situation now faced was created by the fact city schools have been shortchanged by the state for decades. “We already have a projected $3 billion deficit for the next Fiscal Year as a result of uncontrollable, mandated expenses such as Medicaid, health care and pension costs," Mayor Bloomberg said in a press release. "For the City to fund even a portion of this $5.63 billion would require us to cut after-school programs, close libraries and make severe cuts to essential City services, even in the area of public safety. Such actions would harm the very children this lawsuit is designed to help."
Senate Republicans concerned about the impact on upstate and suburban school districts did not commit to any course of action. Majority Leader Joseph Bruno issued a brief statement that summarized the Senate's past actions. As for the special masters' call for $23 billion in new spending, "We will review it closely and continue to discuss the issue of school aid," Senator Bruno said without elaborating.
Governor Pataki did not issue a statement on the report and would not talk to reporters about it when questioned later in the week. His communications director Kevin Quinn issued a statement in his name saying that the Governor was concerned that the spending was not linked to school reforms. “We continue to believe a statewide solution is needed and that these decisions should not be left to the court, but should be made by elected representatives of the people, " Quinn said. "To that end, we continue to aggressively negotiate with all interested parties and we are confident that this approach is the only avenue to achieve true and timely reform.”
It was unclear how the situation would be resolved, but many here expect a final solution may only come after protracted litigation that would also address state aid to schools in the rest of the state and a revamping of the highly complex school aid formula now in place.
Tim Kremer of the New York State School Boards Associations said there was little doubt the CFE recommendations would have to be adopted. "The new funding that the masters recommend is significant, but they acknowledge the need for a phase-in. More importantly, our constitution’s mandate is unambiguous. In meeting that mandate, the masters note “…the importance of having the requisite financial resources cannot be overstated.” School boards agree completely … The Governor and the Legislature must begin today to plan for implementation of a court order along the lines of what has been recommended by the masters. To delay further would only compound the injustice to school children throughout the state."
CFE supporters framed the issue in constitutional terms. The sweeping recommendation for the state to spend a minimum of $23 million more is the "most quintessential of judicial functions – protecting the constitutional rights of the citizenry," CFE's Michael Rebell said. He said the right to a basic education that is now being denied to many poor children in New York City schools is guaranteed by the state Constitution and has been upheld by the Court of Appeals, so the Legislature has no alternative other than to act swiftly.
Legislature Passes Budget, Governor Vetoes Much of It
Putting an end to the longest delay in passing a budget in State history, on August 11th, the New York State legislature passed its budget for the 2004/2005 fiscal year. The fiscal year began April 1st and theoretically the Assembly and Senate were supposed to have reached an agreement by then, but for the twentieth straight year, there was no budget in place. The Legislature adjourned in June but came back in August to finally finish work on this year’s budget.
The $101.6 billion dollar budget that the legislature agreed upon was $1.9 billion higher than the proposed budget that Governor Pataki introduced in January, and did not include several savings measures that the Governor had recommended. Among these were a plan to institute a bed tax on all hospital stays and plans to cut adult dental care from Child Health Plus and private adult dental care from Medicaid.
The New York State Constitution gives the Governor a line item veto which Governor Pataki used extensively, 195 times to be exact, cutting spending by $1.8 billion according to the State Division of the Budget. Among the items vetoed were a $250 million plan to fund capital improvements at hospitals and a $350 million plan to pay for capital projects at the State’s colleges and universities. The Governor did not veto the Legislature plan for economic development funding. Assembly Speaker Silver has promised to override many of the Governor’s vetoes, but as of yet, Senate Majority Leader Joe Bruno has not said whether he will follow suit.
The 2004 session of the New York State Legislature ended in June as scheduled, despite legislators not having agreed upon a budget for the 2004/05 fiscal year (which began April 1st). Also left undone was passage of several important bills, among them anti-terrorism legislation, Rockefeller Drug Law reform, federally mandated changes to state election law, and home rule action needed to permit New York City to lower its property taxes. By law, Legislators and Senators have not been getting paid since the beginning of April.
The debate is being held against the backdrop of the Campaign for Fiscal Equity decision in which the courts have ordered the State to provide increased funding to New York City public schools and have given the Legislature until July 30th to devise a method to do so. Failing that, a Special Master will take over and develop a plan. Earlier this month, Governor George Pataki called the Legislature back to Albany for a special session to consider education reform legislation that his administration drafted. No progress was made, however, as the Senate simply amended the Governor’s language which the Assembly Education Committee then voted down.
When the budget is complete, the hope is that the Legislature will restore much of the cut in funding for the Tuition Assistance Plan that the Governor included in his budget proposal. The final budget is also likely to include some sort of capital funding for colleges and universities, both public and private, and may also include additional capital funding for clinical facilities and biotechnology related economic development projects.
In recent months, the Senate and Assembly have arguably made more news with resignations and scandals than with legislative accomplishments. In May, Senator Guy Vellela and Assemblyman Roger Greene, who plead guilty to accepting bribes and filing false travel reports, respectively, both resigned their seats. Assemblyman Greene intends to run again for his old seat in the fall, but Senator Vellela is now in prison. There were also reports of Assembly Speaker Sheldon Silver receiving large discounts at a hotel in Las Vegas and members of both Houses getting highly discounted rates on rental cars. The controversy was not limited to financial issues, as one member of the Assembly, Adam Clayton Powell, was accused of sexually assaulting a young female Assembly staff person. No charges have been filed, but the investigation is ongoing. Earlier this year, Speaker Silver’s former Counsel, J. Michael Boxley, plead guilty to sexual assault . This was his second brush with the law, and the accuser from the first case is now suing Speaker Silver.
CUMC Professor Discusses Aging with Members of the Assembly
Dr. Steven Albert, Associate Professor of Clinical Sociomedical Sciences, presented recent research on the prevention of frailty in old age to the New York State Assembly Roundtable on "Preparing for the Future Elderly." This Roundtable was organized by Assemblywoman Joan Millman and Assemblyman Steve Englebright as part of New York State's effort to prepare for an increasingly older and more diverse elderly population. Researchers from Cornell University and the University of Rochester also presented. A follow-up meeting in Brooklyn, Assemblywoman Millman's home district, is currently being planned.
Twenty Years and Counting
April 1st has come and gone, and yet again there was no state Budget. New York State’s fiscal year runs from April 1st through March 31st of the next year. For the twentieth straight year though, the Governor and the State Legislature have not been able to reach an agreement on time. There had been hopes that this year would be different and that the budget would be done on time, but alas it was not to be.
Governor George Pataki’s 2004/05 budget proposal sets spending at $99.8 billion. It includes a series of revenue enhancements and spending cuts needed to close an expected $6 billion gap. The main sticking point in the budget negotiation is how the State will fund elementary and secondary education in New York City, for which the State is under court order to increase support. The Governor, Assembly, and Senate also need to agree on exactly how much revenue is available. This dispute over the “avails” number is always a major problem in State budget negotiations. Although the budget was once again late, everybody hopes to be able to wrap up negotiations in late April or early May.
Governor Delivers State of the State Address, Unveils Budget
In January, New York Governor George E. Pataki set forth his vision for the State for 2004 and detailed his spending plans for the upcoming fiscal year. On January 7th the Governor delivered his annual State of the State address to the Legislature, his tenth since he assumed office in 1995. In it he recounted many of the events of the past year and laid out his agenda for the coming year.
The speech touched on a number of topics from homeland security to education to the economy. The Governor did not go into great detail but he did make it clear that he is opposed to any new taxes. He also stated that he would like to see changes to the State’s Medicaid program, a program that has grown to over $40 billion annually and is putting a tremendous burden on county governments across the State.
The Governor reiterated his commitment to biotechnology development and announced that his budget would include funding for construction of laboratory facilities. He also announced the formation of a High Tech Council to advise his administration on issues related to technology development. Harold Varmus, President of Memorial Sloan Kettering Hospital, will chair this council. Of special note to the State higher education community was his announcement of a plan to provide $250 million in state support for capital projects at the over one hundred private colleges and universities in New York. Columbia is amongst this group eligible for funding.
Later that month, the Governor presented his 2004/05 budget. Total spending is set at $99.8 billion and in the budget the Governor outlined his plan to close the expected $6 billion gap. This will be done by a series of revenue enhancements and spending cuts. This includes imposing an .7% fee on all hospital stays, an idea that the Governor tried last year but the Legislature successfully resisted. Also included in the budget are plans to reinstate the sales tax on clothing purchases under $100 (creates four tax free weeks), cut funding for private practice adult dental Medicaid (institutional providers like Columbia are not directly affected), and cut the Tuition Assistance Program by one third.
Later in February, the Governor will submit his amended budget and the Legislature has already begun budget hearings. Although there is hope that the Legislature will complete its work by the April 1st beginning of the fiscal year, odds are that the budget will not be completed until some time in late spring or early summer.
Governor Signs Dental Medicaid Managed Care Bill
On November 19th, Governor George Pataki signed Assembly bill 5582, a bill that will exclude academic dental centers like Columbia from Medicaid Managed Care. The onset of managed care in the Medicaid program has threatened to lead to a sharp decrease in the payment rate that Columbia's dental clinics receive from Medicaid and in many cases would cut off payment altogether. Originally introduced by Assembly Richard Gottfried, the bill passed both houses of the legislature in June thanks to a strong push from Assemblyman Herman "Denny" Farrell.
Enactment of the legislation was a top priority of the New York State Academic Dental Centers and the Columbia University School of Dental and Oral Surgery. It would not have been possible without the dedication of Dean Ira Lamster and other dental school staff who made several visits to Albany and lobbied very hard for the bill. President Lee Bollinger also played an important role by placing a well-timed call to the Governor asking him to sign the bill.
It is estimated that enactment of 5582 will save the dental school almost $2 million over the next eighteen months, but more importantly will the allow the school to continue to meet the oral health care needs of Northern Manhattan residents.
Columbia Continues to Push for Enactment of Dental Medicaid Managed Care Legislation.
On September 6th, Ira Lamster, Dean of the School of Dental and Oral Surgery, traveled to Albany to lobby on behalf of Assembly Bill 5582. This bill, which passed the State Legislature in June, would protect New York’s five academic dental centers from the effects of the onset of Medicaid Managed Care. The bill will now go to Governor George Pataki who must decide whether to sign or veto it. Joined by Associate Deans Stephen Marshall and Sara Patterson, as well as representatives from New York University and the New York State Academic Dental Centers, Dean Lamster met with officials from the Department of Health and the Division of the Budget and with staff from Assemblyman Richard Gottfried’s office. Assemblyman Gottfried was the original sponsor of A. 5582. Dean Lamster also had a chance to chat again with David Wollner, Governor Pataki’s chief health care advisor. The Governor has not yet determined how he will proceed on this bill.
Legislature Passes Dental Medicaid Managed Care Bill
Just prior to adjourning, the State Legislature passed Assembly Bill 5582. This bill will allow Medicaid recipients who are members of a managed care plan to continue to receive their dental care from Columbia and other Academic Dental Centers. The bill now goes before the Governor who must decide whether to sign or veto it. Dean Ira Lamster recently wrote to Governor Pataki urging him to sign the bill.
2003 Session of the State Legislature Comes to a Close
The New York State Legislature adjourned on Friday, June 20th, bringing an end to this year's session. As has happened for the past nineteen years, the budget was not completed by the April 1st start of the state fiscal year, but in May, the Legislature, overriding the Governor's veto, passed the budget for 2003/2004. With the budget out of the way, Members of the Assembly and Senate spent the last month working on a myriad of bills and trying to deal with such controversial issues as Rent Control and Repeal of the Rockefeller drug laws.
In January, the Governor submitted his Executive Budget for the fiscal year. The $90.8 billion budget contained deep cuts in a wide variety of State programs in order to close the $12.5 billion budget gap. Among the largest cuts were a decrease of $1.25 billion in State support for Elementary and Secondary Education. Higher Education and Medicaid were also hit hard.
After intense lobbying by students, hospital workers, and others, the Republican Senate and the Democratic Assembly came together to develop their own budget. Their package restored $1.9 billion in spending cuts recommended by the Governor. The Legislature paid for these restorations by increasing the sales tax and income tax on high earners. The package also authorized New York City to increase its sales tax. Restorations included $700 million for school aid, $170 million for higher education, $782 million for health care, $30 million for mental health, $27 million for employee benefits and $200 million for member items. In addition, the budget bills included a two-year extension of the Health Care Reform Act.
Of special note to Columbia was that the budget included full funding for the New York State Psychiatric Institute ("NYSPI"). Many NYSPI researchers hold Health Sciences faculty appointments, and the institution was facing a potential loss of up to eighty researchers and a possible merger with the Nathan Klein Institute in Rockland County.
Governor Pataki vetoed the Legislature's budget, but in a rare showing of Assembly/Senate cooperation, and a rift between the Governor and Senate Republicans, the Legislature overrode his veto. Senate Democrats joined with their Republican colleagues in a near unanimous vote. In the Assembly the vote was closer, but the Assembly is more than two thirds Democrat, so Assembly Speaker Sheldon Silver was able to get enough votes to pass the override. The last time that the State Legislature overrode a Governor's veto was over twenty years ago when Hugh Carey was Governor.
Before adjourning, the Legislature did pass a bill that would create a carve-out in Medicaid Managed Care for Academic Dental Centers. Under the State Medicaid Managed Care system, many patients continued to visit the Columbia Dental clinic, even though their managed care company directed them to another dentist, thus creating a large increase in the amount of uncompensated care the clinic was performing. The Governor has not determined whether or not he will sign this bill.
State Budget: Deep Cuts in Medicaid, Higher Education and Aid for Public Schools for FY 2003/2004
On January 29th, as required by the New York State Constitution, Governor George E. Pataki introduced his Executive budget for FY 2003/2004 (April 1st, 2003 to March 31st, 2004). The $90.8 billion budget contains deep cuts in a wide variety of State programs in order to close the two-year budget gap of $20 billion. Among the largest cuts will be a decrease of $1.25 billion in State support for Elementary and Secondary Education. Higher and Education and Medicaid were also hit hard. Below is a summary of some of the budget cuts for higher education and Medicaid.
Tuition Assistance Program (TAP): The Governor is again proposing a restructuring of TAP. The proposal would postpone 1/3 of the recipient's award until degree completion.
Higher Education Opportunity Program (HEOP): The Governor proposes cutting the HEOP program by 50% -- eliminating the financial aid component of the program and funding only the support services (tutoring, mentoring etc).
Direct Institutional Bundy Aid: The Governor proposes to reduce Bundy aid by $18.7 million. Last year, Bundy was funded at approximately $44 million. Bundy funding is allocated based on the number of degrees conferred by an institution. The Governor proposes eliminating masters and doctoral degrees from the Bundy formula.
STEP and C-STEP: These programs, designed to encourage historically underrepresented populations to pursue careers in science and technology at the high school and post-secondary level, are eliminated in the Governors budget.
Graduate Medical Education: GME payments are to be restructured to be consistent with the scheduled decline in Medicare payments, saving $104 million in 2003 and $183 million in 2004.
Medicaid: Payment for Medicaid will be restructured; the Federal government will pay 50% and the State will pick up the remaining 50% for pharmaceutical costs. For inpatient and clinic costs the State will pay 13%, local governments will pay 37% and the Federal government will pay 50% of the costs.
For information on the State Budget, go to http://www.budget.state.ny.us.
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