On Wednesday, December 2^nd, the Legislature passed a deficit reduction plan to achieve $2.7 billion in savings for FYE 2010. In a public statement, Governor Paterson criticized the final plan but is expected to sign it into law. "While the deficit reduction legislation passed by the Legislature provides needed savings, it falls well short of what is necessary to put New York on the road to fiscal and economic recovery. It does not fully address our current-year budget deficit. It does not solve our severe cash-flow crunch. It does not address our long-term structural imbalance. And at $2.7 billion in current-year savings, it does not even achieve the $2.8 billion deficit reduction target that some have touted for two days."

Important to transit is the inclusion of a $120 million sweep from downstate STOA and a 3.36% across the board cut to operating for all systems. The Legislature opted not to include a $5 million sweep of the non-MTA capital account as proposed earlier.

Continue reading this article for a chart detailing the cuts to operating along with an overview of the full deficit reduction plan.

Below you will find an overview of the full deficit reduction plan.

Fact Sheet: $2.7 Billion Enacted Deficit Reduction Legislation

According to Division of the Budget analysis, the enacted deficit reduction legislation is projected to achieve $2.7 billion in current-year savings. Major components of that plan include the following.

Local Assistance Savings (2009-10 Savings: $550 million)
A total of $550 million in local assistance savings are achieved through a combination of a 12.5 percent across-the-board reduction to remaining 2009-10 fiscal year spending in certain programs ($390 million) and other targeted actions ($160 million).

The 12.5 percent across-the-board cuts to certain local assistance programs ($390 million) will have the following fiscal impacts by policy area:

• A $18.1 million reduction to social services programs;
• A $36.9 million reduction to education and arts programs outside of School Aid;
• A $41.2 million reduction to health care and aging programs outside of Medicaid;
• A $112.5 million reduction to mental hygiene programs;
• A $17.4 million reduction to higher education programs;
• A $156.8 million reduction to transit programs; and
• A total of $7 million in other reductions.

The $160 million in targeted local assistance savings include the following actions:

• Reducing Aid and Incentives to Municipalities (AIM) funding for non-calendar year cities through a sliding scale (between 1 and 8 percent) based on the city's overall reliance on that aid. Municipalities with a higher reliance on AIM will receive smaller percentage reductions ($31.6 million State savings).
• Reducing anti-tobacco funding ($10 million State savings).
• Eliminating the 2010 trend (inflation) factor for hospital, nursing home, home care, and personal care providers during the first quarter of the calendar year ($11.5 million State savings).
• Authorizing nurses to increase the supply of prescription medicine for home care patients from 8 days to 15 days, thus lowering the frequency of necessary visits ($2.7 million State savings).
• Administratively reducing Medicaid and EPIC pharmacy reimbursement rates to account for the terms of the First Data Bank litigation settlement ($18.5 million State savings).
• Reflecting a reestimate of expected health care costs ($9.5 million State savings).
• Delaying scheduled HEAL NY spending in the current year ($45 million State savings).
• Lowering the State General Fund subsidies for the cost associated with mental health parity coverage by 30 percent ($10 million State savings).
• Reducing funding for managed care quality incentives ($5.4 million); cervical vaccines ($1.7 million); emergency contraception ($200,000); teacher centers ($4.0 million); mortgage foreclosure assistance ($3.1 million); a disease management demonstration program ($2.8 million); pay-for-performance incentives to health care providers ($3.6 million); and new shared services efficiency grants ($500,000).

Tax Penalty Forgiveness Program (2009-10 Savings: $250 million)
The Department of Taxation and Finance will partially forgive accrued penalty and interest on long-outstanding State tax liabilities in order to encourage individuals to resolve unpaid claims. For assessments between 3 years and 6 years overdue, penalties would be reduced by 50 percent. For assessments overdue more than 6 years, penalties would be reduced by 80 percent. This initiative would provide much-needed revenue to the State, while helping taxpayers repair their credit histories and avoid costly legal action. It is expected that the limited forgiveness period would take place in the last quarter of 2009-10. Local governments would receive a fiscal benefit of approximately $84 million from their share of these previously uncollected taxes.

Regional Greenhouse Gas Initiative (RGGI)/EPF/DASNY Transfers (2009-10 Savings: $126 million)
The DRP includes provisions to transfer $90 million in RGGI proceeds, $10 million from the Environmental Protection Fund (EPF), and $26 million from the Dormitory Authority to the General Fund.

Accelerate Use of Education Stimulus Funding (2009-10 Savings: $391 million)
The Deficit Reduction Plan would accelerate the use of $391 million in American Recovery and Reinvestment Act (ARRA) funding for School Aid from the 2010-11 school year to the 2009-10 school year.

Agency Reductions (2009-10 Savings: $484 million)
Governor Paterson previously ordered an 11 percent reduction in each State agency's non-personnel services budget.

Battery Park City Authority (2009-10 Savings: $200 million)
The DRP authorizes the Battery Park City Authority (BPCA) to contribute $200 million to the General Fund.

VLT Franchise Payment (2009-10 Savings:$200 million)
The DRP assumes that the winning Aqueduct Video Lottery Terminal bidder will make a franchise payment of at least $200 million in the 2009-10 fiscal year.

Medicaid Fraud Targets (2009-10 Savings: $150 million)
More aggressive Medicaid fraud recovery targets will be set for the Office of Medicaid Inspector General (OMIG).

Debt Management (2009-10 Savings: $100 million)
The State will realize savings compared to its debt service estimates from refundings, the use of Build America Bonds ("BABs"), and relatively low interest rates on its variable rate bonds.

18-A Assessment Reestimate/Dormant Funds (2009-10 Savings: $50 million)
Reflects an upward reestimate of the amount of revenue ($45 million) that will be collected from the increased 18-A utility assessment enacted in the 2009-10 budget. Additionally, $5 million in funds held in dormant accounts are expected to be made available to the General Fund.

Workers Compensation Surplus Recapture (2009-10 Savings: $49 million)
Certain insurers have indicated their intention to remit excess funds under legislation enacted as part the 2009-10 budget.

Other Actions (2009-10 Savings: $150 million)
A number of potential actions will be implemented to achieve savings in the current year. Potential actions include the in-sourcing of information technology activities pursuant to legislation to modernize civil service rules; further controls on specific agency activities; the use of funds currently earmarked for debt management purposes; and other initiatives.

In addition to the Deficit Reduction Plan, public authorities reform legislation passed by the Assembly earlier this month was passed by the Senate.

If you have any questions or comments, you can contact us at 518-465-7330 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Weingarten, Reid & McNally, LLC
One Commerce Plaza, Suite 402
Albany, NY 12210
Phone 518-465-7330
Fax 518-465-0273
Visit us on the web at www.lobbywr.com

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