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Paterson's budget agenda is rejected ; Legislators will try to pass their own bills

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So went the latest move by the Democratic-controlled Legislature in its game of fiscal chess with Gov. David Paterson, as lawmakers Sunday night ignored his special session agenda amid a last-ditch push today to adopt their own final portions of the stalled 2010 budget.

Lawmakers late Sunday refused to let Paterson submit his emergency appropriation bill, leaving only their plan for a vote today, despite the governor's threat to veto hundreds of millions of dollars in their added spending. Their plan includes more money for public schools and rejects his plan to let the state university system raise tuition on an annual basis.

The Legislature, insisting its plan will complete the final components of a $136 billion budget, also rejected Paterson's plans to cap annual property tax growth, permit wine sales in grocery stores and bolster gubernatorial powers during financial emergencies.

"There is no shutdown," Assembly Speaker Sheldon Silver said, insisting the Legislature's plan ends talk of a government closure Tuesday.

The legislative plan calls for about $1 billion in higher taxes, fees and other revenue raisers, including cuts in tax credits for historic rehabilitation projects.

And, in a brief clause automatically reducing the upstate population by thousands of residents, which could affect everything from government aid to political representation, the Democratic legislative bill prohibits inmates in upstate prisons from being counted during the census as residents of the counties in which the facilities are located.

Paterson warned he will veto $519 million in added spending and $200 million for 6,800 legislative pork barrel items if lawmakers do not, at a minimum, come up with a contingency plan to factor in as much as $1 billion in lower federal aid possible for the Medicaid health insurance program. He agreed the state will not shut down Tuesday with either approach the Legislature takes, but that the legislative plan is short at least $500 million in addressing the $9.2 billion deficit.

Paterson said the Democratic legislative plan includes "irrational spending that's not paid for."

Despite all the drama, much of the legislative plan embraces many of Paterson's ideas, though it spends considerably more on public schools and state universities.

The uncertainty of the whole process was only further deepened by the rhetoric from Democratic leaders, who were not on the same page Sunday night.

Silver used a defiant tone, saying the legislative budget plan will pass today; Senate Democratic Conference Leader John Sampson sought to play peacemaker.

"There's no confrontation. We will continue to negotiate with the governor," Sampson said.

Legislators hailed their plan as a sound alternative, though it is uncertain how much of the state's $9.2 billion deficit is closed by their effort. Lawmakers, for instance, count on $1 billion in extra federal Medicaid money, which is in jeopardy.

The fiscal brinkmanship erupted in earnest on Friday, when Paterson proposed what he said would be the final weekly emergency appropriation bill to adopt the last 30 percent of so of the budget. (Most of the budget has been adopted in the weekly bills since the fiscal year began April 1.)

Paterson on Friday gave lawmakers a choice: pass his bill or the government closes. Lawmakers responded with their own plan. Paterson late Saturday then ordered lawmakers back to Albany Sunday night into a special session; they gaveled in, but took no action.

Democratic legislative leaders accused Paterson of loading up his plan with poison pills. Chief among them was a cap on local property taxes -- at 4 percent or 120 percent of the inflation rate, whichever is lower -- and the plan to give the state university authority to raise tuition each year and to more easily enter into private/public partnerships. The University at Buffalo has said the effort is crucial to its UB 2020 plan.

"The governor had to do what he had to do," Sampson said. "I had to do what we had to do -- to make sure that we negotiate not from a position of weakness but from a position of strength."

Republicans say the plan by Democratic lawmakers disproportionately hits upstate. They note, for instance, the deferral of a slew of business tax credits heavily used by upstate companies. The deferral of $100 million in tax credits this year will hit a range of programs, including low income housing efforts, the Power for Jobs energy program and the hundreds of companies in local Empire Zones.

In Buffalo, critics say deferring commercial tax credits for taxpayers who claim more than $2 million in tax breaks will slow or kill a number of historic rehabilitation efforts in Buffalo. Lawmakers approved the tax credit deferral two weeks ago.

But the Legislature gives the film industry -- chiefly in New York City -- an extra $2.1 billion in tax breaks over the next five years.

The legislative budget restores $420 million from the about $1.4 billion Paterson originally sought to cut from the state's 700 school districts. Most districts have already passed their 2010-11 budgets, so by law they could only use extra funding from Albany for reserves or property tax relief, not for hiring back laid off teachers or classroom programs.

The Legislature would change those restrictions. Their bill gives low-income school districts, such as Buffalo, the option to use the extra money for property tax relief, reserves or to spend it on programs. The wealthiest districts would have to use 100 percent of any new money for property tax relief, while average-wealth districts -- as determined by poverty levels -- must direct at half for property tax relief.

On the revenue side, the Legislature's plan ends the 4 percent state sales tax exemption on clothing and shoe purchases valued under $110 -- worth $330 million for Albany this year.

Legislators also hit the wealthy, including certain personal income tax breaks and charitable donation deduction limits. Lawmakers will bank on more gambling: they envision $45 million by expanding from 16 to 20 the number of hours racetrack casinos, such as one in Hamburg, can be open in a day.

Democratic lawmakers said Paterson's emergency bill left them no choice but to strike out on their own. "He gave us the impetus to sit down ourselves and see how we can do a budget," Silver said.

"It is basically the same fiscal plan the governor has, basically the same balance the governor has, basically the same spending plan that the governor has and it is, therefore, a balanced budget," Silver said.

e-mail: tprecious@buffnews.com

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