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Legislature's budget has big tax cuts Spending plan is nearly $2 billion higher than one Pataki proposed

Property owners, families with school-age children and clothing purchasers would be the major recipients of $2.1 billion in tax cuts this year under an agreement hammered out Tuesday night by an election-bound State Legislature.

The $112.4 billion budget proposal crafted by the Senate and Assembly, up nearly $2 billion from the fiscal plan by Gov. George E. Pataki, will permanently eliminate the state sales tax on certain clothing purchases and provide a record $1.1 billion increase in aid to public schools.

The tax cut package came together only hours before the midnight deadline. It includes a rebate -- with checks going out just before the November elections -- worth 30 percent of a property owner's STAR property tax break, ranging from $300 to $800 per household.

A bid by religious and private schools for a tax credit for educational expenses, including non-public school tuition, was rejected, and replaced with a tax credit, up to $330, for every child between ages 4 and 17 in a family earning less than $170,000 a year.

Lawmakers also turned back an effort by Pataki to delay the scheduled end of the state's 4 percent sales tax on clothing purchases under $110. The end of the tax is set to begin this weekend.

The cut is worth $600 million this year.

Other tax cuts include elimination of the state's so-called income tax marriage penalty; tax breaks for companies in Empire Zones, film companies and volunteer firefighters; a cost-of-living adjustment for seniors in the STAR program; and the elimination of sales tax on amusement park admissions.

"We have a $4 billion-plus surplus. We believe the overburdened taxpayers of our state need to get that back," said Senate Majority Leader Joseph Bruno, R-Brunswick.

With lawmakers needing to introduce bills by midnight to have them ready for passage by Friday's deadline for an on-time 2006 budget, the Legislature agreed to cast aside a series of reforms Pataki wanted to help control school and Medicaid costs.

This morning, though, the governor's office claimed the Legislature failed to print all the bills necessary by midnight Tuesday night in order for them to be acted upon by Friday's deadline for an on-time budget.

"It's either spite or jealousy," John McArdle, a spokesman for Republican Senate Majority Leader Joseph Bruno, said of the claims.

McArdle and an Assembly spokeswoman insisted the bills were printed and put on lawmakers' desks by midnight.

In the budget, lawmakers denied the governor's attempt to delay collection of taxes on sales of cigarettes sold by Indian retailers, though it remains uncertain how the Legislature will force the reluctant governor to go after what legislators say is hundreds of millions of dollars in lost tax revenues. A $1 per pack cigarette tax hike by Pataki was also rejected.

The agreement includes extra money for school construction projects, especially districts like Buffalo, and millions more for programs pushed by a powerful teachers union.

>Help for school districts

The extra school funding lawmakers agreed to will especially assist poorer districts such as Buffalo, though precise district funding levels will not be released until Friday.

It does include, according to Assemblywoman Crystal Peoples, D-Buffalo, enough money to ensure every school in the city has a full-time nurse starting next September.

Lawmakers also rejected $466 million in Pataki revenue raisers, including $300 million for the higher cigarette tax and $38 million by placing cameras in highway work zones to catch speeders.

The budget package leaves many questions unanswered, such as how much borrowing is added.

Chief among the mysteries is how Pataki, who must approve the package, will react. One possible path is the veto route, a step that could drag the budget debate well into the spring.

Also unclear is whether the school plan will create a constitutional showdown. An appeals court last week said the state needed to pump at least $4.7 billion more to New York City schools over the next four years to settle a 2003 court case. Lawmakers have said any such aid hike for New York City would translate into more money for other high-needs districts, such as Buffalo.

On the surface, the deal Tuesday falls short of the operating aid demands in the court ruling.

But Assembly Speaker Sheldon Silver, D-Manhattan, said the ruling "provides no enforcement mechanism to force the issue." He said Senate Republicans would "not under any circumstances" add more money to resolve the lawsuit now. He insisted Tuesday's deal serves as a down payment to meet the court's conditions.

On the pact to hike school-based health services, Pataki proposed a $5.7 million fund to help pay for school nurses in Buffalo and three other cities, enough to only continue existing part-time services, Peoples said.

"Students in Buffalo deserve to have a nurse in school all day just like every other district, so principals don't have to administer medicine and so teachers don't have to deal with bloody noses," Peoples said.

>Tax-free sales

The budget deal will raise new tensions over the state's bid to collect the $1.50 per pack excise tax on cigarettes and gasoline sales by Indian retailers to non-Indians.

The Legislature last year, again, ordered the tax collections to begin March 1. Pataki, though, had his tax department delay it to give him time to work out a deal to delay collection until after he leaves office at the end of the year. Tuesday's deal rejected that attempt.

Tax Department officials did not return calls for comment.

The Senate, however, rejected an Assembly plan to require tobacco wholesalers in June to turn in their licenses, which they would not get back unless they could prove no tax-free cigarette sales were made.

"What makes them think he's going to collect it unless they do something?" said Russell Sciandra, director of the Center for a Tobacco Free New York.

Lawmakers said they are still devising a measure to force Pataki to collect.

"It's clear the existing mechanism doesn't work," Silver said.

e-mail: tprecious@buffnews.com

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