Brooklyn's Progress Express
April 2009

BY JILL D'AMICO

New York State's $131.8 billion 2009/10 budget is currently sitting on Governor David Paterson’s desk, and while it took a lot of finagling to get there, it is expected to be signed into law this week.

Governor Paterson is not expected to make any changes to the bill, which was reached in agreement with Senate Majority Leader Malcolm Smith (D-Queens) and Assembly Speaker Sheldon Silver (D-Manhattan).

The Brooklyn Chamber of Commerce met with state legislators, including Assembly Speaker Silver and representatives of Governor Paterson and Senate Majority Leader Smith on its annual trip to Albany last month. The trip serves as an opportunity to present the 2009 Brooklyn Agenda for Recovery and Growth, culled from surveys taken throughout the year with input from Brooklyn Chamber Members.

The budget comes with news both good and bad for the business community – including a nearly $600 million utility tax.

One positive move the Brooklyn Chamber lobbied for was an income tax increase on the state’s wealthiest residents, which should generate up to $4 billion this year alone. Sixty-three percent of respondents to a February budget survey by the Brooklyn Chamber supported this move in a bid to build revenue and head off other taxes.

The 2009 Brooklyn Agenda for Recovery and Growth reported the same problems that have dogged borough businesses for years are still there – the affordability of health insurance and energy costs. Unfortunately, businesses won’t find any relief in the coming year’s budget.

A Taxing Time
The Chamber pressed hard for legislators to take Governor Paterson’s “Proposal for Additional Utility Taxes (18a)” off the table, following the February budget survey that found 60% of respondents opposed the tax.

While nearly $100 million lower than originally estimated, the taxes were included in the budget, an unwelcome move for business consumers and utilities alike.

The tax will be increased to nearly two percent from its current .33 percent on utility bills, which is expected to be passed onto customers. The move is expected to raise $577 million to help close the state’s $18 billion budget deficit.

The state is also looking to make up ground by raising its personal income tax levels for single filers making over $250,000. They will now go from a 6.84 percent tax bracket to 7.85 percent (for those making over $250,000) and 8.97 percent (for those making over $500,000). Brooklyn Chamber Members supported this move.

While the tax is set to expire after three years and only impacts four percent of the state's population, it is expected to raise $4 billion this year.

Health Insurance Increases
Health insurance will also cost more in the coming year. The budget calls for taxes to be levied on both HMOs and premiums, including those written by out-of-state insurers, who were previously exempt.

The Brooklyn Chamber opposed these increases, which add up to over $110 million, and will make premiums for small businesses and workers more expensive and less affordable.

There was some good news on the healthcare front, however – lawmakers budgeted for the Fair Allocation of Federal Stimulus Dollars (FMAP).  The City of New York alone will receive an estimated total of $2.7 billion in fiscal relief through increased FMAP reimbursements for Medicaid over 27 months as part of the American Reinvestment and Recovery Act. These funds should help prevent further increases in New York’s property tax burden, which is already among the highest in the nation.

The Chamber urged its local legislators to ensure that Brooklyn received its fair share of federal stimulus dollars to be applied directly to the Medicaid budget, as opposed to being used to close the deficit.

Other healthcare cuts were lessened, though not totally prevented: From the $1 billion originally proposed by Governor Paterson in December, the legislature restored about 69 percent of funding to hospitals, 73 percent to pharmacies, 60 percent to home care programs and 43 percent to nursing homes. 

Aid to hospitals will still be cut by $300 million and home care agencies will pay about $14.2 million in taxes on their revenues.

Economic Development Stalled?
One question mark loomed for the future of the Empire Zone program, which the Brooklyn Chamber maintains is successful as a performance-based program, and businesses do not receive any benefits until a company invests and spends money or creates jobs.

Due to criticism, the state is seeking to revamp the program, which cost $600 million to administer last year. 

While a detailed plan is not yet available, the budget agreement calls for the program to sunset on June 30, 2010, a year earlier than originally planned.

On the workforce development front, the state estimates up to 86,000 new jobs will be created, in part because of green technology. They have also set aside $40 million in job programs for low-income New Yorkers, including green jobs, health access jobs and subsidized employment.

To read the 2009 Brooklyn Agenda for Recovery and Growth, CLICK HERE. [Link opens a PDF file]