Taxes, some spending cuts in state budget

PHOTOGRAPHER: The Associated Press

Millions of dollars in union-paid ads, an influential left wing of the Democratic Party and the loss of Republican control of the state Senate contributed to an overhaul of Reagan-era income tax brackets under a 2009-10 budget totaling $131.8 billion to be adopted Tuesday.

The budget is $10.5 billion more than the current budget, or about 8.7 percent at a time with minimal inflation. Most of that, however, is use of $7.2 billion in federal economic stimulus funds.

General fund spending, which excludes federal money, is projected to increase no more than 1 percent, to about $54 billion.

“We made the tough choices necessary to address that challenge through shared sacrifice and responsible budgeting,” Gov. David Paterson said in a written statement issued with legislative leaders. “The agreement we are announcing today closes the largest deficit in state history, stabilizes our finances and institutes critical reforms that will help eliminate waste and inefficiency in our government.”

The secretive process that locked out Republicans was intended to get an on-time budget, but even that is in doubt because some bills couldn’t be printed by the midnight deadline Saturday. By law, that means they couldn’t be voted on until Wednesday without a special order by Paterson that Republicans have threatened to try to block. Senate GOP spokesman John McArdle said Sunday that Republicans won’t provide a necessary quorum to accept any special order. Between that threat and plans to offer many amendments, an on-time budget could be impossible.

Broadly, the Legislature used federal stimulus money to restore about half of the more than $1 billion in cuts Paterson proposed in his December budget. Schools would get only slight increases in aid, although Paterson’s proposed cut of 3.3 percent — or about $700 million — was fully restored. With some adds under a complex aid formula, schools would get about $1.1 billion added to their aid, now at about $21 billion.

Paterson had said the cuts were essential to deal with declining revenue in a recession and to end years of overspending by Albany.

Gone will be the STAR rebate checks taxpayers have been receiving. But $170 million in spending for legislators’ pet projects back home, often announced in re-election years like 2010 will be, was untouched.

Saturday night’s budget deal overhauls the state’s income tax rates to get $4 billion from wealthier residents who have been paying about the same rate as a family making $40,000 a year. The agreement will increase the current top rate of 6.85 percent. Residents making more than $300,000 but less than $500,000 would face an income tax rate of 7.85 percent. Those making more than $500,000 would see a rate of 8.97 percent.

The complex code also would increase the tax rate for earners making as little as $200,000 a year if they are single heads of households, according to the hundreds of pages of dense budget bills provided Sunday.

The overhaul doesn’t include using $1 billion for a relief program to reduce middle-class families’ tax bills. However, the television and film industry, a big contributor to Democrats, will get $350 million in tax credits to help trim the cost of production in the state and give breaks to investors.

Dan Cantor, executive director of the Working Families Party, a union-allied party of left-leaning Democrats with increasing influence in the Democratic Party, said a catastrophe had been averted.

“The Legislature and the governor deserve some credit for having the courage to ask the wealthy to pay their fair share and turn a potential catastrophe into a manageable problem,” he said.

He credited a concerted effort by unions representing teachers and other public employees for TV and radio campaigns costing millions of dollars and their personal contact with lawmakers for making “this historic breakthrough.”

“What this really shows is we were justified in our belief that it was really right for us to help the Democrats take the Senate,” Cantor said Sunday.

Democrats took the Senate majority from Republicans in November’s elections, ending the last power base for Republicans and giving Democrats control of the governor’s office, Assembly and Senate for the first time in decades.

Republican Assemblyman George Amedore Jr. of Rotterdam said that while an on-time budget would be good news, he disagreed with the way it was created, with three of the state’s Democratic leaders and “absolutely no input from all the Legislature.”

“I’m really concerned with the amount of tax increases, fees and fines that this budget is going to impose on all New Yorkers,” Amedore said Sunday evening.

Amedore said another piece of good news is that funding for education is staying at last year’s levels, but he disagreed with cuts to health care and the elimination of the middle class STAR rebate program, which Amedore said he is “100 percent opposed to.”

“Once again the politicians in Albany just increased property taxes on all upstate property owners,” he said.

Senator Hugh T. Farley, R-Niskayuna, decried the increase in the spending plan with essentially no increase in education funding.

“We’re taking all this stimulus money and instead of reducing our debt, we’re worsening it,” he said.

Farley also said he is unhappy with the way the budget was done, with “three men from New York City and no input from anyone else.”

He said the Republic caucus in the Senate will be offering various amendments to the proposed budget. “The Republican minority in the Senate is 30 out of the 62 votes and I don’t see anyone voting for this,” he said.

E.J. McMahon, director of the fiscally conservative Empire Center for New York State Policy, said the income tax overhaul will hurt state residents for years.

“This looks like the biggest tax increase in the state’s history,” McMahon said.

He found the tax break for the multibillion-dollar television and film industry, still strong in the recession, particularly galling. “Apparently, they believe taxes only matter to one industry — the television and film industry — and not anyone else,” McMahon said Sunday.