New York Budget Madness:Higher taxes, fees and borrowing will pay for record state aid

The Buffalo News reports:

Despite a national economic slowdown that is forcing sharp spending cuts in other states, New York’s budget negotiators appear to be in agreement that new taxes, fees and borrowing will be used to help fund a record increase in aid to public schools and other popular spending programs this election year.

Among those in the cross hairs for higher levies are banks, health insurers, smokers and possibly people who drink bottled water.

Escaping a tax increase are residents making over $1 million, who were facing a big hit under an Assembly plan that the State Senate and Gov. David A. Paterson rejected.

Legislators and the Paterson administration are not looking to reduce spending levels from last year. Instead, negotiators appear willing to fund at lower levels than former Gov. Eliot L. Spitzer proposed two months ago in his inflation-busting budget for the fiscal year that begins Tuesday.

Details of the new state budget, expected to total $124 billion and which lawmakers hope to approve on Monday, slowly trickled out Friday.

Among the biggest beneficiaries are public schools, which are in line for a $1.8 billion aid hike that lawmakers hope will bring most schools at least a 3 percent increase in revenues from Albany. Specific school numbers won’t be out until Monday.

While Paterson and legislative leaders announced the “framework” of a budget deal, there is considerable work to be done in nailing down a final fiscal plan, which is facing a $4.6 billion deficit. Special interests are out in force this weekend at the Capitol, knowing their time is waning to add more spending or block more than $1 billion in potential tax and fee increases.

Among those changes is an increase — up to $1.50 per pack — in the state’s cigarette tax. Coupled with that is $150 million in projected revenue from a plan to make it a crime for tobacco manufacturers to sell cigarettes to wholesalers who in turn supply tax-free outlets, such as the Seneca Nation’s retailers.

Banks also are looking at a tax increase involving credit card processing, which would bring in from $90 million to as much as $300 million, according to Senate Majority Leader Joseph Bruno. The bank tax would require out-of-state credit card companies to pay a New York tax, but business lobbyists say it would sharply hit many big state banks that have out-of-state credit card subsidiaries, such as HSBC. Critics say it would give banks another reason to move operations to other states.

Health insurers would be hit with higher assessments, which they would pass on to consumers. Environmentalists say there also are discussions under way to impose a redemption fee on bottled water containers; an earlier Spitzer plan called for deposits on all noncarbonated beverages.

Critics point to other states, also mired in souring financial climates, turning to spending cuts to balance budgets. In New York, they say, the emerging budget still relies on Albany’s usual penchant — in both good and bad times — of turning to taxes and fees to feed more spending.

“The economy stinks. State revenues are shrinking by the day,” said Kenneth Adams, president of the Business Council of New York State. “When logic demands they reduce spending, Albany instead decides to choke the private sector by hammering New York businesses with more taxes and fees.”

Spending would rise about 4.5 percent over last year — a level lawmakers and the Paterson administration were hailing because the final budget will be about $300 million less than Spitzer’s initial plan.

Some people think it's never a good time to cut government spending.Ever.New York really is in decline.