State budget eliminates $10 billion deficit, includes sweeping reforms and efficiencies
Albany, NY (March 31, 2011)
Governor Andrew M. Cuomo today announced the passage of the 2011-2012 budget that eliminates a $10 billion deficit. The budget includes historic reforms that redesign state government, create efficiencies through consolidation, cap spending increases for education and Medicaid, and transform the future budgeting process.
The approximately $132.5 billion budget reduces spending overall by more than 2 percent from the previous year, eliminates 3,700 prison beds, establishes Regional Economic Development Councils, brings performance funding to education, redesigns Medicaid, and caps next year's education and Medicaid spending.
This budget reaches its fiscal goals with no new taxes and no borrowing, and will also cut the 2012-13 projected budget deficit from $15 billion to about $2 billion. Combined four-year gaps are reduced from $63 billion to less than $10 billion.
Based on preliminary estimates, all funds spending will total approximately $132.5 billion, a decrease of $3.6 billion from the previous year. State operating spending will total $88 billion, an increase of $1.2 billion or 1.4 percent. The budget closes the current gap with $9.3 billion in spending reductions or nearly 90 percent of the plan.
"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," Governor Cuomo 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."
Senate Majority Leader Dean G. Skelos said, "This budget is a responsible budget that meets our goals of cutting spending, reducing taxes, and empowering the private sector to create jobs. By passing this budget on-time, we have shown that Albany can be functional and accountable once again. I congratulate Speaker Silver, and all of the members of the Senate and Assembly, and I thank our Governor for providing the leadership to get a sound bipartisan budget in place for New York."
Assembly Speaker Sheldon Silver said, "We are confident that this will be the first of many agreements the Legislature will reach in concert with the Governor; agreements that will restore New Yorkers' faith in our government, make it more efficient and more productive, and help to make our great state a better and more prosperous place in which to live, to work, and to do business. The final product, the 2011/2012 state budget, is a sobering one. Difficult and painful decisions had to be made to address the fiscal reality facing our state. The Assembly Majority, working with the Governor, was able to achieve some critical restorations that will soften the cuts affecting working families, students, senior citizens and or most vulnerable populations."
Senate Democratic Leader John L. Sampson said, "With the passage of this budget, Governor Cuomo has taken us through the crossroads and closer to a government that works better and costs less for taxpayers. I believe this budget sets the table for the kind of state government Middle Class families deserve. I commend Governor Cuomo for his leadership and for his commitment to restoring New York's standing as the Empire State."
Assembly Minority Leader Brian M. Kolb said, "This is not a perfect budget, but a realistic one. It involves tough choices that begin a long overdue – and painful – process of reducing spending, rightsizing state government and reforming Albany's culture of tax-and-spend. The budget contains important victories including defeat of a 'Success Tax' extension, closure of the state's $10 billion budget deficit, enactment of Power for Jobs, decreased spending, along with no new borrowing or tax increases, all of which are priorities our Assembly Minority Conference has long championed."
The budget reflects significant initiatives proposed by Governor Cuomo to transform the state budget and control spending growth while redesigning programs in every area of state government.
The budget closes a $10 billion shortfall and puts in place mechanisms to control future spending. The budget puts the state on a sustainable path that will lead to an 85 percent reduction in projected out-year gaps.
Putting the State's Fiscal House in Order
The 2011-2012 state budget contains no new taxes, includes 2-year appropriations for education and Medicaid, caps the growth of both education and Medicaid spending, closes unneeded and outdated state-run facilities and includes no new funding for member items.
Redesigning and Rightsizing Government
The budget contains several wide sweeping measures to redesign and right-size New York's government, including:
- State operations: The budget reflects Governor Cuomo's proposed 10 percent year-to-year general fund reductions for all state agency operations, with comparable reductions for the State and City University Systems. State operations reductions will total $1.4 billion for 2011-12. This includes workforce cost reductions by $450 million. Negotiations are ongoing with unions to avoid the last-resort option of up to 9,800 layoffs.
- Mergers and consolidations: The budget reflects the consolidation of eight agencies or authorities into four, saving more than $50 million in 2011-12. These include merging:
• Department of Insurance and Department of Banking into the new Department of Financial Services
• The Foundation for Science, Technology and Innovation into the Department of Economic Development
• Department of Correctional Services and Division of Parole into the new Department of Corrections and Community Supervision
• The Consumer Protection Board into the Department of State
- Executive Reorganization Act of 2011: The budget authorizes the Executive Reorganization Act of 2011, which will provide broad authority to reduce the number of agencies, authorities, and commissions. The legislation will allow for sweeping reorganization of state government, providing savings over many years and more efficient government services. The reorganization will be accomplished through the Governor's Spending and Government Efficiency Commission (SAGE).
- Citizen Empowerment Tax Credits: Funding would be available to incentivize local government consolidation or dissolution, providing a bonus to the newly combined local government's tax levy where at least 70 percent of the state bonus must be used for property tax relief.
Realigning School Aid
The budget realigns education financing to meet New York's fiscal reality and provide sustainable and predictable funding while reaffirming the commitment to improve educational outcomes in the classroom. Prior to this budget, education spending was projected to grow at an unaffordable rate of 13 percent for the 2011-12 school year.
The budget includes school aid of $19.6 billion for the 2011-12 school year. This reflects a reduction of $1.3 billion or 6.1 percent from 2010-11 including state operating funds and $608 million of federal Jobs Bill funding. This reduction represents an average of 2.5 percent of school districts' total spending.
Without consideration of the Federal Jobs bill funding given to districts last year, the year-to-year reduction in state funding is $698 million or 3.5 percent. This represents 1.3 percent of school districts' total spending.
The budget provides a two-year appropriation and reflects permanent law changes to limit future school aid increases to growth in the New York state personal income rate. This action will help reduce the state's large out-year gap between spending and revenues. Even after this year's reduction, New York's schools will continue to have among the highest spending per pupil in the nation.
The budget creates new education performance and efficiency grants with $500 million in total appropriations for districts that demonstrate significant student performance improvements or that undertake long-term structural changes to reduce costs and improve efficiency.
The budget continues state support for summer school special education programs at current levels, and maintains the commitment to children who attend schools for the blind and deaf (4201 schools).
Redesigning Medicaid and Health Care
Total Medicaid spending including federal, state and local spending of $52.6 billion represents a decrease of $337 million, or minus 1 percent. Future growth in Medicaid will be limited to the 10-year rolling average of the Medical CPI, currently 4 percent. As with education, the budget includes a two-year appropriation.
The budget includes a cap of $15.3 billion on Department of Health Medicaid state expenditures, which represent the largest and one of the fastest growing component of state spending.
The budget process brought together health care providers, labor, government and other Medicaid stakeholders to form Governor Cuomo's Medicaid Redesign Team (MRT). Tasked with identifying ways to provide critical health care services at lower costs and control unsustainable growth, the MRT recommended a series of proposals to fundamentally restructure and reform New York extensive Medicaid program.
Overall, the budget implements a majority of the MRT recommendations. The budget reflects $2.375 billion in spending reductions supplemented by $475 million in lower-than-expected expenditures to achieve the Governor's original savings target of $2.85 billion.
The budget implements significant reforms including a major expansion of patient-centered medical homes, better control of home health care services, and care management for individuals with complex and continuing health care needs. New models of integrated care, such as Accountable Care Organizations, will help assure long-term control of health care spending.
Savings will be assured by an overall spending cap, enabling the Commissioner of Health to make additional savings actions during the year, if necessary.
Promoting Real Economic Development
By refocusing economic development efforts to incorporate regional decision-making, the budget will reform the delivery of economic development programs and make results-oriented investments to create jobs. The budget:
- Provides Funding for Regional Economic Development Councils: The budget will provide resources to support efforts of the 10 Regional Economic Development Councils, to be chaired by Lieutenant Governor Robert Duffy. They will act as one-stop shop for all state-supported economic development and business assistance programs in each region.
- Improves the Excelsior Jobs Program: The budget strengthens the Excelsior Jobs Program, which was created in 2010 to provide job creation and investment tax credit incentives to businesses in targeted industries. A total of $500 million will now be available annually to provide enhanced tax credits that will produce better results for New York's economy. Businesses will be able to benefit from this program over a 10-year period. The Governor will make $70 million of these enhanced tax credits available to support the efforts of Regional Economic Development Councils.
- Creates the Recharge NY Power Program: Recharge New York will enhance and make permanent the current Power for Jobs Program. It will create and maintain hundreds of thousands of jobs by allocating a blend of stable, low-cost hydropower and market power for use by businesses that seek to grow and create jobs in New York state.
- Expands Fresh Food into Urban Centers: The budget includes funding to support the expansion of farmers' markets in urban areas, providing a great opportunity for New York farmers and consumers. There are currently approximately 450 farmers markets in New York State, 130 of which are located in New York City. The budget also creates a new "Share NY Food" Community Supported Agriculture ("CSA") program, which reduces the farmers' need to borrow money at the beginning of the season in order to purchase equipment, seeds, fertilizer and other necessary items for production.
- Creates New Market Tax Credits: Authorizes the Empire State Development Corporation to finance up to $30 million in federal New Market Tax Credits to support job creation and development efforts in low-income communities through the state.
- Increases the Limit of the Excelsior Linked Deposit: The budget increases the lifetime limit on low-interest loans permitted by the Linked Deposit Program from $1 million to $2 million, making more dollars available for small businesses to grow and create jobs.
- Creates Economic Transformation and Facility Redevelopment Program: To off-set the impact of local prison and juvenile justice facility closures the budget includes a new tax credit program that will incentivize the creation of new businesses in those communities where the closures occur.
Recognizing the potential economic development impact of the University of Buffalo for the city of Buffalo, Governor Cuomo will hold a summit with stakeholders to discuss how to make UB 2020 a reality.
Streamlining and Improving Human Services
The state will provide $9.4 billion for human services programs in 2011-12. The budget reforms the state's juvenile justice system to encourage greater use of community-based alternatives, while downsizing the state juvenile facilities system by more than 30 percent and investing in enhanced services for juveniles that remain in OCFS custody. While continuing to ensure that core services are available for needy populations, the budget recalibrates spending in all areas of social services including housing, youth delinquency prevention and other services.
The budget also extends the low-income housing tax credit by $4 million in aggregate credit awards to taxpayers that develop qualifying housing projects for low-income New Yorkers. The total amount of credits to be awarded becomes $40 million.
Making Public Protection Efficient and Effective
The budget supports public protection at lower cost though right-sizing initiatives that reduce excess prison capacity, improve the management of offenders as they move from prison into civilian life, and reduce bureaucracy.
To realign the prison system's capacity with its significantly reduced offender population and achieve real and recurring savings for state taxpayers, Governor Cuomo, in consultation with the Legislature, will reduce the number of beds in medium and minimum security facilities by 3,700. Economic development capital funding of $50 million will be made available to communities impacted by prison closures or consolidations, in addition to tax credits to spur new business.
Preserving the Environment
The budget maintains the Environmental Protection Fund at the 2010-11 funding level of $134 million, and delivers on the Governor's promise to use the Fund only for the purposes for which it was created.
The budget also eliminates the requirement of a state license to fish in salt water.
Ensuring Affordable Higher Education
The budget funds SUNY and CUNY senior colleges at more than $2 billion in operating assistance and $1.3 billion in new capital appropriations. The budget also extends provisions for the Tuition Assistance Program to allow an increase of $19 million, or 2.3 percent.
The budget enables SUNY and CUNY to streamline procurement processes to allow them to generate efficiencies.
Other budget actions include funding for Community College at $2,122 per full-time equivalent, and funding for SUNY hospitals at $60 million.
Improving Delivery of Mental Hygiene Services
The budget includes mental hygiene system funding of $8.2 billion in 2011-12. By preserving critical direct care services, the budget develops a more efficient system that directs the most help to those with the greatest needs.
Maintaining Transportation Infrastructure
The budget provides operating support to transit systems totaling $4.2 billion. The MTA will receive $3.8 billion and other transit systems will receive $401 million. Cash support for both MTA and non-MTA programs will increase year-to-year.
The budget supports the adopted two-year DOT transportation capital plan that balances core infrastructure preservation with fiscal necessity and continues prior year funding levels for the core transportation programs supported by the Dedicated Highway and Bridge Trust Fund, including:
- $501 million of Dedicated Funding for State roads and bridge construction (part of a $1.8 billion construction program)
- $363.1 million for the Consolidated Highway Improvement Program (CHIPS)
- $39.7 million for the Marchiselli program for local governments
- $16.9 million for Amtrak services and additional rail capital investments
Transportation spending from all sources will total $8.5 billion under this budget.
Recalibrating Local Aid
The budget reduces Aid and Incentives to Municipalities (AIM) to all cities, towns and villages by 2 percent from current year levels, far less than the 10 percent reductions to the state's operations.