New York passed a $121.7 billion fiscal 2009 budget yesterday, nine days after the deadline. In a press conference, Gov. David Paterson touted cutting $1 billion in agency costs and $828 million from Medicaid.

"We are happy to say that we have decreased our growth by one-half of 1%, which is the first time that has happened in a decade," Paterson said. Operating funds spending increased 4.5% to $80.5 billion over last year's budget and all funds spending increased by 4.9%.

The budget authorized about $6 billion of capital funding for the State University of New York and the City University of New York. Of that, $5.3 billion will be funded by proceeds of bonds issued by the Dormitory Authority of the State of New York, and the remainder will be funded on a cash basis.

The budget also includes $363 million for the consolidated highway improvement program which will be funded by bonds issued by the New York State Thruway Authority.

Much of the negotiations for the budget took place behind closed doors.

"This budget process was not nearly as transparent as it should have been," Paterson said. "This was a decision that I made and take responsibility for because in the twin storms of economic unsettled activity and the fact that we had a transition government, I wanted to get this budget passed as soon as possible."

The Legislature did not pass a separate capital budget bill, instead tacking capital spending onto other budget bills.

Some capital spending proposals were reduced from the executive budget, which was proposed in January. A proposed $1 billion upstate revitalization plan was cut to $700 million and a $400 million affordable housing plan was cut in half to $200 million. The budget enacted a statewide economic development plan, which includes the upstate revitalization plan, and totals $1.6 billion, of which all but $140 million would be funded with personal income tax bonds.

The New York State Financial Control Board, which has had oversight over New York City's finances since the fiscal crisis of the 1970s, got a lifeline in the budget. The Legislature reauthorized a 1% city sales tax that was due to expire in August that has been both a revenue source for the city and has funded the operations of the control board. The 1% is on top of the city's base 3% sales tax. By statute, the board will continue to exist as long asbonds sold by the Municipal Assistance Corp. remain outstanding, but without the 1% sales tax its operations would not have been funded. MAC debt was refinanced in 2003 and will remain outstanding until 2033.

Paterson said the budget provides an additional $1.4 billion to New York City through increases in education funding, state aid, and the state continuing to pay some of the city's health care costs.

Mayor Michael Bloomberg said the budget was "good news for our city."

"The broken promises on revenue sharing have been mostly repaired," Bloomberg said in a press release. "The state's prior commitment to an increase in operating aid for New York City schools has been kept, building aid has been restored, the proposed eighteen-month lag in funding for school construction has been eliminated, as has the wrong-headed mandate to micromanage the city's school budget."

While the state budget does not increase personal income taxes, it does increase cigarette taxes to $2.75 per pack from $1.50 per pack, which the Division of Budget estimates will generate an $265 million, and it will now require online retailers like to collect sales tax, generating $50 million.

The counties got a mix of good and bad news, said New York State Association of Counties spokesman Mark LaVigne.

"There was a tremendous amount at stake for counties," he said.

The association was relieved that two attempts to shift financial burdens onto counties had failed. The executive budget had changed a fifty-fifty split on certain welfare costs between counties and the state so that the counties would pay 52% and the state 48%, he said. That measure was defeated as was one that would have shifted the burden of the costs of juvenile detention solely onto counties.

However, the budget cut aid to localities by 2% to save the state $270 million. Those funds are used to pay for state-mandated programs.

"We still have to deliver the programs but we have less funds to do so," LaVigne said.


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