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LAST-MINUTE PACTS FORESTALL PATAKI VETOES
MEDICAID CAP, MORE AID FOR PUBLIC SCHOOLS IN FINAL BUDGET DEAL OF GOVERNOR, LAWMAKERS

Gov. George E. Pataki and legislators reached deals Tuesday night on the final parameters of a new 2005 state budget -- an agreement that paves the way for counties to get a cap on future Medicaid costs, freezes tuition at public colleges and drives more than $800 million more to public schools.

In return for getting additional savings in the Medicaid program and deals on economic development initiatives, the governor kept his veto pen largely capped. Tuesday was his deadline to act.

The governor was prepared to push through a large stack of vetoes, but backed off when the last-minute pacts came together on a budget that will total about $106.5 billion.

"Today I am able to say it is a good budget," Pataki said Tuesday night.

An hour later, lawmakers remet to begin passing measures before midnight -- despite their vow to pass budget bills only during daylight hours and to let any agreements "age" in public for three days. Lawmakers blamed Pataki for the rushed atmosphere and Pataki acknowledged he wanted them to act before midnight or face a larger veto package.

The deals mean that the budget lawmakers passed on March 31 -- the first on-time budget since 1984 -- remains largely intact, with Pataki vetoing less than $10 million in spending and lawmakers agreeing to spend about $300 million less than the budget approved March 31.

The enacted budget includes enough money to cut the the projected deficit for Buffalo's schools in half, to about $17 million. It also rolls back Pataki's cuts to the state higher education programs, including a public college tuition hike, and rejects deep health-care cuts Pataki had proposed.

Though legally on time, the budget approved March 31 did not include about $1.5 billion worth of programs that lawmakers said they couldn't approve without Pataki's OK; that required them to negotiate with Pataki over the past 10 days. The unresolved issues included about $1.1 billion in various programs designed to help get people off welfare and into jobs, $150 million in an environmental protection fund and a new, $150 million program for private college construction efforts. Those were all approved Tuesday.

The governor also insisted lawmakers further restrain the costs of Medicaid. Pataki proposed $1.1 billion in Medicaid cost savings, a plan largely rejected by lawmakers. He threatened that lawmakers jeopardized the cap on future county government costs of Medicaid, which insures about 4 million disabled, poor and elderly New Yorkers; counties pay nearly 20 percent of Medicaid's costs.

In Erie County, Medicaid's costs have been a sizable part of its fiscal problems. The cap and another cost-saving measure will save Erie County an estimated $214 million over the next five years; by 2008, Medicaid costs for counties will not be allowed to grow more than 3 percent a year, far less than its double-digit growth rate in recent years.

In making their deal with Pataki, lawmakers agreed to cut back some benefits of one Medicaid plan for low-income families. The deal requires some higher co-payments and restrictions on services, like vision care and dental visits.

Additionally, lawmakers agreed to raise a state tax on nursing homes. Together, the changes are worth an extra $91 million to Albany.

The Legislature also agreed to establish a commission charged with "right-sizing" the state's health care system that officials say is bloated and underutilized. At issue is whether to have one statewide panel or a group of regional panels to decide the health system's future.

On Tuesday, the sides agreed to both. The deal creates a central group, composed of 18 members, 12 of whom will be appointed by Pataki and the rest by lawmakers. In addition, six regional panels -- including one from Western New York -- will have six members to recommend local health facility matters. Decisions are due next year.

The deal Tuesday also killed the $80 million in raises for front-line health care workers at upstate nursing homes. Industry and government sources said the money was put into the March 31 budget at the request of Local 1199 of the Service Employees International Union, an influential health-care union that has pumped millions of dollars in political donations in recent years. Also intact is a plan to hike aid to cities. Buffalo, for instance, will see its state aid go to $116 million in 2005, from $102.7 million last year. Pataki wanted $39 million over two years, but only if the city kept its spending below 3.5 percent. Lawmakers eased some of the restrictions Pataki tried to impose on how the city could spend the extra money.

The changes to the budget, which include putting off for another year a scheduled end to state sales taxes on clothing purchases of less than $110, have been negotiated in secret over the past week between Pataki, Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno.

"We're not happy we're doing it this way,"' said Assembly Majority Leader Paul Tokasz, D-Cheektowaga. "But we were faced with the option of wholesale vetoes for programs for education that we fought for, and this was the only option the governor afforded us."

The Legislature backed off on some reforms to take away control from the governor of a key economic development program known as Empire Zones. But they won a concession from the governor that will allow lawmakers to have veto power over the creation of new Empire Zones; 12 new ones around the state will be permitted and lawmakers won key reforms to punish businesses trying to cheat the much-criticized program.

e-mail: tprecious@buffnews.com