The 2009 state budget process has been the most secretive in a generation. Early information on the most crucial issues, encapsulated here, indicates that leaders have walked away from an opportunity when reform seemed vital and possible. Instead, lawmakers are applying the Band-Aids of higher income taxes and federal stimulus money, temporary measures that can't hide their overspending habits. Funding for the Metropolitan Transportation Authority remains elusive.
Income taxes
Already No. 1 in state and local taxes, New York raises rates for the highest
earners
Bet on some version of a state income tax hike. The most likely scenario is the creation of three new tax brackets for those making more than $300,000, $500,000 and $1 million. Highest-earners could be on the hook for close to 9 percent, up from 6.85 percent.
New York has the highest combined state and local taxes in the nation, and these measures will surely make the state less attractive to residents and businesses. Both the governor and Senate Majority Leader Malcolm Smith had vowed to use an income tax hike only as a last resort. But with economic disaster in the air - including an additional $2.2 billion drop in revenue projections for 2009 - it has rapidly gained political ground. Still, while adjusting the tax brackets makes sense, an additional increase for higher earners is palatable only after lawmakers cut built-in waste and overspending from state government.
School aid
Long Island should get the same as 2008, but layoffs are likely and poorer schools lose
School aid, the most divisive spending category, is the last settled each year. Regional interests always wrestle over school funding - and this year, there is the added element of federal stimulus money. Nearly $1.2 billion must be spent for education, plus another $275 million that school advocates are fighting to use.
There's pressure to give more to New York City schools. Even if funding is restored to 2008 levels for each district, Long Island schools will likely have to lay off hundreds and close programs, since they have contracted increases for benefits and salaries. But the Obama administration says federal funds should prevent layoffs. Superintendents are reluctant to ask for money in higher property taxes, given the economy. That's good, but fundamental cost restructuring that would have limited property taxes appears to be out the window. Expect debates over tax caps and consolidation to continue.
Special districts
Cutting off special district commissioners' salaries would end system of waste and abuse
Key reforms of wasteful and outdated special districts are likely to be dropped from the state budget. The measures would have eliminated commissioners' salaries for overseeing services such as water, sewer and sanitation - essentially draining the lifeblood from districts that in most cases were funded to reward cronies. They now waste millions in tax dollars. Nassau alone could save more than $14 million by merging sanitation districts with towns' trash collection.
Newsday spent months last year documenting these little-noticed districts and other political back-scratching, leading to sweeping pension change. But the districts have resisted consolidation and other fixes - a testament to their continuing political sway in Albany. These reforms - with a push from Attorney General Andrew Cuomo - should reappear later in the legislative session as stand-alone bills.
Health care
With spending cuts colliding with the need for reform, something has to give
Unfortunately, it appears that reform of health care provider reimbursements may have dropped off the table.
If changes in reimbursement systems for hospitals and nursing homes are postponed, officials should use the time to refine the modifications, to reduce the chance of destructive, unintended consequences.
As for health care spending, Medicaid is such a big piece of the state's budget that hospitals couldn't be left unscathed. But Albany should rethink the proposal to tax hospitals. On Long Island, most of them operate so close to the red that they can ill afford the $42 million the tax would drain from their coffers.
Rockefeller Drug Laws
The world has changed since 1973, so drug laws enacted back then should, too
Albany did get one thing right, eliminating many of the often unjust, mandatory prison sentences imposed by the Rockefeller Drug Laws. Reforms announced Friday would give judges the discretion to decide the most appropriate sentence - treatment for many addicted defendants, prison for some others.
The agreement will also provide money to expand the use of specialized drug courts and to make more treatment slots available. While the specifics aren't yet clear, the reforms are expected to reduce drug-fueled crime, and save taxpayers' money by diverting addicts from costly prison cells into less costly treatment.
Pension reform
Skyrocketing retirement benefits for public employees remain a time bomb for the state
Gov. David A. Paterson's proposal could have saved the state, school districts and local governments billions. A "Tier 5" pension category for new hires was simply a return to the eligibility rules before the stock market boom: a minimum retirement age of 62 and 3 percent salary contribution spanning the length of service. Now, the minimum for most is age 55, and contributions stop after 10 years.
But public employee unions refused to negotiate, and the legislature cowered. So the cost of future benefits will explode. Since all public pensions are guaranteed, and taxpayers must replenish the funds when the markets go down, taxes will go boom!
The environment
An expanded bottle bill fails - so much for the idea that a Democratic Senate would pass it
The budget could have reaped more than $100 million if it included an expansion of the bottle bill, to require deposits on bottled water, tea and juice. Environmentally, it would remove litter from the landscape. Fiscally, it would take back for the state the nickels that bottlers now keep when people don't return bottles to claim their deposits back. We supported it, but not the plan to use uncertain bottle bill revenue to fund most of the Environmental Protection Fund, instead of the more reliable real estate transfer tax. With the bottle bill dead, will the EPF be permanently underfunded?
Wine sales
Unfortunately, liquor stores have once again killed a plan to allow sales in grocery
stores
Grocery stores should be able to sell wine, but the liquor lobby once again kneecapped the idea, which would have garnered the state $100 million or so in franchise fees. Liquor stores, which have an official monopoly on sales, insist on protectionism. The truck drivers who deliver the goods provided the lobbying muscle. Expanding the market for wine would have allowed Long Island's wineries to thrive and consumers to get lower prices. In return, the state could have eased the impact on liquor stores. Prohibition's legacy remains intact.
Empire Zones
The state's chief economic development program still needs a major overhaul
It's crazy that in these times, state leaders cannot summon the political will to take New York's job-creation program from muddling to effective. Lawmakers removed most of the changes Paterson proposed, including a requirement that companies invest $20 for every $1 of state tax incentives. That would have disqualified 2,000 companies currently in the program. Instead, companies will be held to a ridiculously low $1-to-$1 standard. Why not give this money to businesses with more ambition?
