Center Moriches Taxpayers Community Discussion Forum

A deal has been reached on the 2009-10 budget that maintains school aid at this year's level, eliminates the popular STAR property-tax rebate checks and temporarily raises income taxes on households earning more than $300,000.

Gov. David A. Paterson and leaders of the legislative majorities are rushing to meet Wednesday's start of the fiscal year. Nine budget bills now must pass the State Senate and Assembly, with voting to start Tuesday.

The spending plan totals a record $131.8 billion, up 8.7 percent from this year. The increase, far above the inflation rate, is mainly driven by federal stimulus money that must be spent immediately.

Because details remained murky, it could not be determined last night whether the 2009-10 budget reduces spending to a sustainable level once the stimulus cash is gone in two years and with diminished revenue from Wall Street. In December, Paterson warned that school aid and the Medicaid program, which account for more than half of state expenditures, must be pared back. Yet, many of his proposed cuts aren't in the new budget.

More than $6 billion in aid from Washington forestalled much of Paterson's proposed reductions to schools, hospitals, nursing homes and other health care institutions. But $6.5 billion in cuts and $4 billion from increasing taxes on the rich were required to close a two-year deficit of $17.7 billion.

The budget "closes the largest deficit in state history, stabilizes our finances and institutes critical reforms that will help eliminate waste and inefficiency in our government," Paterson said in a statement.

The plan boosts myriad taxes and fees on everything from driver's licenses to marine fishing licenses.

Still, elimination of the popular STAR rebate checks is sure to anger hard-pressed homeowners. The checks sent $1.4 billion back to taxpayers statewide - $370 million to Nassau and Suffolk residents - helping offset ever higher school levies.

The basic STAR and enhanced STAR exemptions - which reduce tax bills - are unaffected.

School taxes may rise in some districts despite the restoration of $1.1 billion in cuts proposed by Paterson. Superintendents said they were disappointed that education aid would grow by just $405 million, with the Island receiving 5 percent instead of its traditional 13 percent share.

"I give this budget an F," Senate Minority Leader Dean Skelos (R- Rockville Centre) said. "It's a failure of the three Democrats from New York City to understand the challenging economic times on Long Island. This type of budget hurts families and leads to property tax increases."

Senate Majority Leader Malcolm Smith (D- St. Albans) responded that he was committed to passing by late June a "circuit breaker" that targets tax relief to low- and middle-income homeowners. "We will address skyrocketing property taxes," he said in a statement.

Smith, Paterson and Assembly Speaker Sheldon Silver (D- Manhattan) negotiated the budget entirely behind closed doors and excluded Republicans. The secrecy continued Sunday with the trio unavailable for comment.

Business groups criticized the hike in personal income taxes on the wealthy, which expires in three years. The surcharge mirrors one enacted for millionaires after the Sept. 11, 2001, terrorist attacks when state revenue plummeted.

Married couples filing jointly with income above $300,000 but below $500,000 would see their tax rate grow 1 percent to 7.85 percent. Those earning more than $500,000 would pay 8.97 percent, up 2.12 percent. The highest tax rate now is 6.85 percent.

The income-tax surcharge is expected to generate $4 billion annually, helping stave off cuts to social programs.

"The legislature has avoided a real catastrophe by asking the wealthy to pay more in taxes," said Dan Cantor of the Working Families Party, which, along with other liberal groups, lobbied for taxing the rich.

Kenneth Adams of the Business Council of New York State disagreed, saying the budget's increased taxes and spending would "guarantee that this state is the last to recover from the recession. . . . They have defied economic common sense."

Staff writer John Hildebrand contributed to this story.