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Budget bill seeks common ground Includes Property Tax Cap Also restores $300 million of proposed school aid cuts

Gov. David A. Paterson has unveiled the last emergency budget bill that lawmakers will have to consider Monday, a hodgepodge of spending and tax hikes with a number of items intended to entice rank-and-file lawmakers to end the protracted budget wrangling.

The bill introduced Friday includes a cap on future local property tax hikes, partial restoration of cuts in school aid, authority for the state university system to increase tuition annually and increased revenues coming from everything from higher taxes on clothing purchases to allowing wine sales in grocery stores.

The State Legislature is left with few options: negotiate changes with Paterson before Monday's deadline or pass his bill. If no legislation is approved Monday, a partial shutdown of the state government would begin the following day.

Administration officials insist Paterson did not jam up the bill with "poison pill" provisions. Instead, he moved toward the Legislature on several key fronts, including aid to school districts, new or higher taxes and cuts of an additional $250 million to his own agencies, which could mean some layoffs. His plan includes no borrowing to cover the deficit. "This is pretty close to the stuff that privately they said they wanted to do," said Robert Megna, the governor's budget director.

The legislation would close out the 2010 budget, nearly 70 percent of which has already been adopted through weekly emergency measures.

In all, the emergency bill is intended to erase the $9.2 billion deficit. It also creates a new account -- holding payments from other parts of the budget -- to set aside money if the federal government does not come through with an expected $1 billion in additional Medicaid aid.

> Education proposals

The Paterson bill restores $300 million in school aid cuts he proposed in January, when he called for a $1.4 billion reduction to the state's 700 districts. The Assembly and Senate privately agreed to a $425 million restoration, so Paterson has moved considerably in their direction.

Still on the table is what districts can do with the extra money. Most districts already have adopted their budgets, based on Paterson's cuts. State law permits any additional money to go to reserves or property tax relief, though for the biggest five districts, including Buffalo, there would be no such limits.

Outside those five districts, Paterson and Senate Democrats want the extra funds to go primarily for tax relief, while Assembly Democrats are pushing to let schools spend the money to restore teacher layoffs and other programs. Individual district numbers were not released.

The governor also has revised his plan for the State University of New York system, which wanted to be able to increase tuition annually based on a college inflation index and to keep the revenues instead of having the money go to Albany. The plan is a priority for the University at Buffalo, which says it is needed to fund its ambitious growth agenda for the coming decade. Critics, though, say the tuition hikes will hurt low-income students.

The new plan would permit a half-dozen SUNY campuses that grant doctoral level degrees, like UB, to raise tuition a maximum of 8 percent annually over the next four years beginning in 2011. At campuses without doctoral programs, the tuition hike would be capped at 5 percent annually. Officials say tuition has increased over the past 30 years at about 6 percent annually.

The governor also proposes an increase to the Tuition Assistance Program. If UB, for instance, raised its tuition 8 percent, TAP awards -- now a maximum of $5,000 a year -- would go up 4 percent.

Critics said that is not enough. "Poor college students are taking savage hits," said Blair Horner, a lobbyist for the New York Public Interest Research Group, who said students on TAP would have to pay $900 out of pocket in 2013.

The Paterson bill also includes authority for SUNY schools to enter into partnerships with private companies, which UB wants to expand to help grow its downtown Buffalo campus.

Supporters say the campuses need the higher tuition and to keep the revenues in order to better plan future spending levels. They say the "spike" system of tuition hikes over the years has hurt students' ability to plan for college costs.

The Paterson budget also calls for $180 million in cuts to SUNY and the City University of New York this year. SUNY schools would be able to raise tuition by 2 percent in the coming school year.

> Raising revenue

The Paterson plan includes tax hikes and other "revenue raisers" worth about $1.2 billion. The governor accepts a deal with legislative leaders to eliminate on Oct. 1 the current 4 percent state sales tax exemption on clothing and shoe purchases. That will raise $330 million for the state.

Additionally, those with incomes over $10 million a year would see their state deduction on charitable contributions cut in half, which will be worth about $100 million to the state this year. There are about 3,500 such millionaires in the state.

The governor also wants to let grocery stores sell wine, something legislators have opposed. The state will make about $150 million this year off the licensing plan.

Paterson, however, did not include his proposed tax on sugar-flavored beverages. Opponents said the idea would destroy the beverage industry in the state, while the governor said it would reduce obesity levels and raise money for Albany. The governor also backed down on his plan to hike taxes on hospitals and nursing homes.

Paterson warned lawmakers to either strike a final budget deal with him by Monday or be forced to act on his emergency spending plan. Megna warned of "chaos" in state operations if nothing is passed Monday.

"Of course I'm concerned about what's going to be in there because, remember, I have to get 32 votes," Senate Democratic Conference Leader John Sampson said before Paterson released the bill. The Senate has 32 Democrats and 30 Republicans; it takes 32 votes to pass a bill, and GOP senators say they will not support any tax hikes.

Megna said in an interview that the governor's emergency plan does not represent the kind of doomsday confrontation with the Legislature that many predicted. "We believe that this is a proposal that's consistent with what a lot of legislators have wanted to do," he said.

For instance, he said the governor agreed to take on another $250 million in cuts to state agencies, bringing the amount he will have to close on his own to $950 million. Megna said it will require "very aggressive" actions involving work force issues, outside contracts and overtime. He said the layoff question will be resolved when it is clear how many workers leave the payroll under an early-retirement program.

The Paterson bill also includes some fiscal maneuvering. For instance, it banks on an additional $250 million in higher-than-expected tax receipts since April and $100 million in lower debt service payments. And it permits more than $500 million in "sweeps," which are transfers from off-budget accounts to the state's deficit-riddled general fund.


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