Spitzer proposes harder times budget

Would include sales taxes on online purchases
January 23, 2008 7:20:24 AM PST
Gov. Eliot Spitzer, seeking to resurrect his fiscal conservative image, couldn't have picked a better day to present a budget proposal calling for tough choices for hard times. Just as the Democrat's proposed 2008-09 state budget was released, Wall Street was shuddering on its way to an early fall of 465 points in the Dow Jones Industrial average before a bit of a recovery. Still, the worldwide concern of a recession over the last few days hit home hard, just as Spitzer warned of "challenging times" statewide.

"These challenging economic times require us to make tough, but necessary choices and set clear priorities for state spending," Spitzer said. "If we control government spending, then we will have long-term balance."

Then Spitzer released his $124.3 billion budget proposal that contained a 5-percent increase in spending. Not an austerity budget by any means, but a spending increase that would be about half of what state budgets have been in recent years. Even his first budget last year grew by about 8 percent after he negotiated increases with the Legislature.

On Tuesday, he called on the Legislature to balance its additional spending with equal spending cuts or revenue. But he also didn't draw a line in the sand. He learned the hard way last year that backing the Legislature into a corner just strengthens its resolve.

But will it be enough? Spitzer's budget, crafted over several months when economic forecasts weren't so dire, doesn't plan for a recession. But he said his plan is good enough to weather what's coming. If it isn't, revenue forecasts could force further spending cuts or a painful midyear correction.

Spitzer said that if the state can stick to increases of about 5.3 percent in spending long term, the revenues from good times will pay for the deficits in the bad times.

To do it, Spitzer proposes a combination of reducing spending increases for education, $1 billion in health care cuts, delaying part of promised property tax relief, and increasing various fees. He also proposed unconventional measures such as redefining "little cigars" and malt liquor to generate more tax revenue and creating a "tax stamp" on illegal drugs, to be paid after convictions.

Spitzer insists actions like these and a proposal to force Internet giants like Amazon.com to collect state sales taxes on purchases aren't tax increases. Instead, he called them loophole closers and fee increases because they don't touch "broad-based taxes" like those on income and retail sales.

His spending increases would include $400 million more to pay for upstate economic programs and to provide health care for 400,000 uninsured children; free public college tuition for combat veterans returning from Iraq and Afghanistan; statewide broadband Internet service; and affordable housing credits in the New York City area.

"We will be more efficient," Spitzer said in proposing $2.3 billion in savings. "We will examine our own house, the way businesses do."

Spitzer's proposed 2008-09 budget would include $81.8 billion in state spending alone, before federal aid is included. The current budget increased spending nearly 8 percent over the 2006-07 budget and recent years' budgets, by the time they were adopted by the Legislature, swelled to about 10 percent annually.

For New York City, Spitzer proposes a 7.3 percent increase in school aid worth $547 million; a 1.4 percent decrease in property tax aid worth $18.7 million; a huge increase in municipal aid to $143 million; and $40 million to improve and repair parks.

The city will also get millions less than the $1.25 billion promised in a multiyear plan. Spitzer says the shortfall will be made up in subsequent years.

Statewide, school districts would receive an average increase of 7.5 percent as part of a $1.46 billion increase statewide, to $21 billion in school aid.

Long Island schools, most represented by members of the Senate's Republican majority, will see an annual increase in aid of about 8 percent, less than the 12 percent they expected.

The school aid and reduced spending proposals are expected to set up fights this election year with the Senate and the Democrat-controlled Assembly. Spitzer said he told lawmakers he expects them to balance any additional spending with equal cuts or revenue, but the he won't draw "a line in the sand" by threatening vetoes now.

"It's kind of a disappointment, generally, that we don't see major changes," Senate Republican leader Joseph Bruno said of Spitzer's overall plan. "I believe the governor has missed addressing the real priorities of the people of New York state. The overburdened taxpayer wants relief. The governor doesn't address that."

"We have clearly concerns about the executive budget," said Democratic Assembly Speaker Sheldon Silver. He said he is concerned about Spitzer's plan to delay some promised increases in school aid and for public universities.

In most years, the Legislature adds about $1 billion to the governor's proposal. The deadline for the Legislature's adoption of a budget is the April 1 start of the fiscal year.

Lawmakers will have support from the powerful public employees unions.

"In tough economic times, there's an understandable inclination to cut back on investment," said New York State United Teachers union President Richard C. Iannuzzi. "But that's precisely when we need to move steadily forward, investing in education as the engine to the state's economy and our children's future."

Spitzer's budget would:

  • Delay some of the subsidy to relieve local property taxes. Spitzer and the Legislature had promised to provide $1.8 billion in subsidies to schools, local governments and in rebate checks to taxpayers. But on Tuesday, Spitzer proposed $1.25 billion, with 40 percent more directed to senior citizens. The state now subsidizes local school and government taxes with about $5 billion a year, but Spitzer is calling for a cap on local taxes because he's dissatisfied with local efforts to curb spending.
  • Exact a 2.5 percent cut in the growth of funding for state agencies, the State University of New York and the City University of New York. The reduction isn't a true cut, but a lower rate of increase.
  • Close facilities such as underused prisons, and reduce energy costs.
  • Save $980 million in health care by encouraging more preventive care and primary care through the state reimbursement system, and reducing reimbursement for avoidable treatment now done in hospital emergency rooms.
  • Raise $304.5 million by increasing 46 fees, including those on insurance policies to help pay for state police.
  • Close $434 million worth of corporate tax loopholes, including requiring big Internet firms like Amazon.com to withhold sales tax on purchases by customers who are now on the honor system to pay state sales tax.