1998-99 Budget Summary Prepared by the staff of The Business Council April 17, 1998

Issue Areas:

Taxation

Alcoholic Beverage Tax — Article 18

  • Reduced the Beer Excise Tax from 16 to 13.5 per gallon on 1/1/99.

Bank Tax — Article 32

  • Created an Investment Tax Credit (at identical rates to the existent Article 9-a ITC rates) for property placed in service between 10/1/98 and 9/30/03 that is used to conduct securities transactions by brokers, dealers, regulated investment companies, and registered national securities exchanges/boards of trade; permits this ITC also where the taxpayer leases the property to an affiliated regulated broker, dealer, national securities exchange, or board of trade.
  • Created a one-time deferral of capital gains from the sale of an investment in a Qualified Emerging Technology Company (as defined in Public Authorities Law 3102-e) if that investment is reinvested on or after 3/12/98 in another such qualified emerging technology company or in a venture capital fund that invests in such companies.

Corporation Franchise Tax — Article 9-a

  • Reduced the corporate tax rate from the current 9% in three steps to 7.5% as follows:
9-A tax rate tax yr starting between calendar yr. Taxpayer, e.g.
9% 1/1/87 and 6/30/99 1987 - 1999
8.5% 7/1/99 and 6/30/00 2000
8% 7/1/00 and 6/30/01 2001
7.5% 7/1/01 and thereafter 2002 & thereafter
  • Reduced the tax rate for firms with net income under $200,000 from the current 8% in one step to 7.5% as follows:
under $200K
9-A tax rate		 tax yr starting between calendar yr. taxpayer, e.g.
8% 1/1/87 and 6/30/99 1987 - 1999
7.5% 7/1/99 and thereafter 2000 and thereafter
  • Reduced the Minimum Income Tax rate from the current 3.5% in two steps to 3% as follows:
Min. Tax Rate tax yr starting between calendar yr. taxpayer, e.g.
3.5% 1/1/95 and 6/30/98 1995-1998
3.25% 7/1/98 and 6/30/99 1999
3% 7/1/99 and thereafter 2000 and thereafter
  • Expanded the Investment Tax Credit to include property placed in service between 10/1/98 and 9/30/03 that is used to conduct securities transactions by brokers, dealers, regulated investment companies, and registered national securities exchanges/boards of trade. Permits this expanded ITC use even where the taxpayer leases the property to an affiliated regulated broker, dealer, national securities exchange, or board of trade.
  • Reduced the subchapter S Differential Tax for firms with net income over $290,000 in three steps from the current 1.125% to 0.65% for tax years starting on or after 7/1/01 and for firms with net income below $200,000 from the current 0.125% to 0.05% for tax years starting on or after 7/1/01. It is noted that the 0.05% rate produces a tax amount below the Fixed Dollar Minimum Tax and thus is inoperative. Further, the Differential Tax for firms with net income between $200K and $290K is a blend of the two calculations.
  • Reduced the Fixed Dollar Minimum Tax for firms with a payroll of $250K or less from $325 to $100 for tax years starting on or after 1/1/98 and for firms with a payroll greater than $250K but no greater than $500K from $325 to $225 for tax years starting on or after 7/1/99.
  • Created a Qualified Emerging Technology Company Employment Credit for such firms (as defined in Public Authorities Law 3102-e) for tax years starting on or after 1/1/99 of $1,000 per employee in excess of 100% of the number of employees previously employed; the credit may be taken for an additional two years after the first year taken. The credit is refundable for new businesses defined as those that have been subject to tax for not more than 6 years or 8 years if the business requires federal regulatory approval.
  • Created a Qualified Emerging Technology Company Capital Investment Credit for such firms for tax years starting on or after 1/1/99 for qualified investments resulting in an ownership interest in emerging technology companies equal to 10% of the investment, up to $150K, provided the taxpayer certifies that the investment will be retained for at least 4 years, and 20% of the investment, up to $300K, provided the taxpayer certifies that the investment will be retained for a minimum of 9 years; recapture provisions for investments which are sold or transferred before the 4 or 9-year commitment transpires.
  • Created a one-time deferral of capital gains from the sale of an investment in such qualified emerging technology company if that investment is reinvested on or after 3/12/98 in another such qualified emerging technology company or in a venture capital fund that invests in such companies.
  • Accelerated the Agricultural Property Tax Credit base acreage amount of 250 acres scheduled for taxable years beginning in 1999 and thereafter into taxable years beginning in 1998 (thereby supplanting the base acreage amount of 175 acres originally scheduled for 1998).

Estate & Gift Tax — Article 26

  • Conformed the tax to the Federal exemption level of $1.3M of the value of a family-owned farm or business from the gross value of the estate.

Highway Use Tax — Article 21

  • Reduced the supplemental Truck Mileage Tax by 50% on 1/1/99 thereby reducing the overall Truck Mileage Tax by 25%.

Insurance Tax — Article 33

  • Created a one-time deferral of capital gains from the sale of an investment in a Qualified Emerging Technology Company (as defined in Public Authorities Law 3102-e) if that investment is reinvested on or after 3/12/98 in another such qualified emerging technology company or in a venture capital fund that invests in such companies.

Motor Vehicle Fees — Article 14 (Vehicle and Traffic Law)

  • Reduced the biennial registration fees on passenger motor vehicles by 25% on 7/1/98.
  • Reinstated refunds for the second-year portion of biennial registration fees (less $1) when plates are surrendered before the end of the first year effective 7/1/98, but retroactive to 9/1/97.

Personal Income Tax — Article 22

  • Accelerated the Agricultural Property Tax Credit base acreage amount of 250 acres scheduled for taxable years beginning in 1999 and thereafter into taxable years beginning in 1998 (thereby supplanting the base acreage amount of 175 acres originally scheduled for 1998).
  • Raised the income threshold for receiving the full amount of the Federal Dependent Care Credit from the current $17K to $35K beginning 1/1/99; for families with income between $35K and $50K the credit will be phased down from 100% to 20% of the Federal credit beginning 1/1/99.
  • Created a one-time deferral of capital gains from the sale of an investment in a Qualified Emerging Technology Company (as defined in Public Authorities Law 3102-e) if that investment is reinvested on or after 3/12/98 in another such qualified emerging technology company or in a venture capital fund that invests in such companies.

Sales and Use Tax — Articles 28 and 29

  • Exempted computer system hardware used in designing and developing computer software for sale effective 6/1/98.
  • Exempted telephone central office equipment or station apparatus used in receiving, amplifying, processing, transmitting, and retransmitting telephone or telegraph signals effective 9/1/98.
  • Added footwear to the definition of exempt clothing during the sales tax-free week of 9/1/98 to 9/7/98 and to the permanent clothing exemption which commences 12/1/99; increased the threshold for the sales tax-free week of 9/1/98 to 9/7/98 from items costing less than $100 to items costing less than $500; increased the threshold for the permanent clothing exemption which commences 12/1/99 from items costing less than $100 to items costing less than $110; an additional eight-day sales tax-free period was created for 1/17/99 to 1/24/99 for clothing (including footwear) costing less than $500.
  • Increased the threshold for the exemption on coin-operated telephone calls from 10 to 25 effective 9/1/98.
  • Exempted textbooks (limited to those books specifically written for educational, instructional, or pedagogical purposes) required by a higher education institution for a course taken by a college student when purchased by that college student effective 6/1/98.

School Tax Reduction (STAR) Program

  • Accelerated the schedule for phasing in the STAR exemption available to senior citizens from the original four-year period to full availability in the 1998-99 school year (and each year thereafter); property tax exemption is at least $50K from the property's full value and for City of New York senior citizens the NYC Personal Income Tax credit is $125 for joint filers and $62.50 for unmarried filers; excluded IRA distributions from the Federal AGI definition; enhanced confidentiality provisions.

Economic Development

  • Jobs Now Program: $70 million
    Governor proposed $45 million. 1997 appropriation was $25 million. 25% of funding will be allocated for projects that create at least 100 - instead of 300 - new jobs. This program funds large economic development projects which create at least 300 new jobs (exclusive of the 25 percent set aside mentioned above).
  • Empire State Development Fund: $40 million
    The governor proposed $45 million. 1997 appropriation was $45 million. This program provides loans and grants primarily for smaller and mid-size economic development projects.
  • Economic Development Zones: $1.9 million
    12 new zones - instead of 7 as proposed by Governor Pataki - will be created, and administrative funding provided for each.
  • Strategic Training Alliance Program: $10 million
    This is a new program promoted by the Assembly Majority that will allow consortiums of employer organizations to apply to ESDC to fund training programs to upgrade skills of existing workers. NYSEDC and The Business Council strongly supported this initiative.
  • Industrial Access Program: $5 million
    The Governor had proposed increasing funding from $5 million to $20 million, making rail access eligible, and moving the program to ESD. The program will remain at DOT, but rail access will be an eligible project.

Appropriations for other economic development programs include:

  • Community Development Financial Institutions Program: $5 million
  • Minority & Women-Owned Business Loan Program: $1.5 million
  • Urban & Community Partnership Program: $1.5 million
  • Entrepreneurial Assistance Program: $1 million
  • Rome Lab Consolidation Project: $1 million
  • TDOs: $500,000
  • Technology Transfer Grants: $2 million

Education and Job Training

  • Provides an overall $950 million increase in state aid for elementary and secondary education for the 1998/99 school year.
  • Provides $500 million in bonding for school construction and renovation through the Dormitory Authority. Beginning July 1, 1998 school districts will be able to apply for funding under RESCUE (Rebuilding Schools to Uphold Education) for critical capital and maintenance projects. RESCUE will cover a portion of the local costs for school construction projects related to: health and safety, increasing school capacity; enhancing accessibility to public school facilities for individuals with disabilities; emergency construction projects; reducing exposure to environmental hazards; and upgrading technology. Projects must be approved by the voters or Trustees of the Board of Education where voter approval is not required.
  • Besides general support for public schools, among the items included in the $950 million are:
    • Operating Standards Aid: Provides $81.9 million in aid beginning in 98/99 to assist school districts with the cost of helping students achieve the new higher learning standards.

      Minor maintenance and repair: Provides $50 million on a school-year basis for such projects.

      Universal Pre-Kindergarten program: Provides $67 million on a school-year basis (a $17 million increase). Grants for the 1998-99 school year will be a minimum of $2,700 per student to a maximum of $4,000 per student.

      Teacher Resource and Computer Training Centers: Adds $5 million to a total of $30 million in support on a school year basis.

      National Board of Professional Teaching Standards Certification grant program: Provides $1 million for this new program which will give grants of up to $2,500 from the Albert Shanker National Board of Professional Teaching Standards Certification Grant program to eligible teachers in New York State to defray the expenses of certification by the national board.

      Teacher-Mentor Intern program: Restores and increases funding for this program to $20 million on a school year basis.

      Grants for Class Size Reduction: Adopts a class size reduction initiative for kindergarten through grade three. In 1999-00 it would cost $75 million and increase each year thereafter through 2001-02. State grants under this new initiative would assist school districts in reducing class sizes in these early grades to 20 or fewer pupils.

      Advantage Schools: Provides $500,000 (half of what was requested) for this new after-school program proposed by the Governor to bring together schools, parents, and community organizations to provide a secure and enriching environment for children after school ends but before many parents are home from work — 3 p.m.-7 p.m. The funds will be allocated to community-based organizations that provide after-school activities in cooperation with schools, child care, after-school, cultural and other community based providers.

      Extended School Day/School Violence Prevention Program: Adopted the Governor's recommendation to provide an additional $10 million for this program to a total of $15.2 million.

      Magnet School Aid: Adds $1.75 million to bring the 99/98 school-year funding up to $136.42.

      Partners-In-After School Education: Provides $10 million on a school year basis for a new after school program to provide educational enrichment opportunities for students with matching funds provided by certain not-for-profit organizations and other entities to support collaborative programs between community based organizations and school districts.

      Teacher Support Aid: Restored and increased this aid to bring the total up to $77.5 million.

      Although charter school legislation has not yet been passed, the budget does include the Executive's recommendation for a $2 million Federal appropriation for charter school start-up grant

Higher Education

  • Adds $5.25 million for full-time faculty for CUNY community and senior colleges.
  • Adds $7.8 million for full-time faculty at SUNY community and senior colleges.
  • Provides for a five-year $3 billion capital investment plan for SUNY and CUNY. However, fiscal year spending for 1998/99 is limited to $205 million as proposed by the Governor.
  • Includes $7.23 million for a new $65 per year textbook credit for full-time undergraduates at SUNY Senior Colleges and $3.3 million for the same credit for CUNY full-time undergraduate senior college students.
  • Base aid to CUNY and SUNY community colleges is increased by $19.4 million which brings base aid per FTE from $1,900 to $2,050.
  • Adds $2.9 million on an academic year basis for the CUNY Search for Education Evaluation & Knowledge program (SEEK) to bring to total program cost to $14.4 million.
  • Adds $750,000 for Small Business Development Centers at senior colleges, increasing total funding to $1.1 million.
  • Increases the maximum Tuition Assistance Program (TAP) award from $3,900 to $4,125 which increases TAP by $18 million.
  • Increases aid to Part-Time Study by $5 million to a total of $19.63 million.
  • Adds $5 million for BUNDY Aid (unrestricted aid to independent colleges and universities) bring it to $49.25 million.

Job Training

  • Provides $10 million to the Empire State Development Corporation for the establishment of strategic training alliances involving business and industry associations and private industry councils in order to provide industry-based skills upgrade training for employed and unemployed workers.
  • Provides $1.5 million for the creation of Business Assistance Teams at Community Colleges. The Commissioner of Education will issue Requests for Proposals to community colleges for grants to implement a program of technical, managerial and training assistance for businesses. Proposals must include a student internship program. Businesses may enter into agreements with the community college to receive assistance through the program.
  • Provides $750,000 for contract courses at CUNY.
  • Provides $105,000 for On-the-Job Training programs administered through the Department of Labor.
  • Provides $1.57 million for Jobs-for-Youth, also administered through the Department of Labor.
  • Up to $1 million of $4 million in additional funds for juvenile delinquency prevention is set aside for the Youth Enterprise Program to develop entrepreneurial skills through youth employment, training and involvement in business-related activities.
  • Provides $3.75 million for economic development and job training programs at SUNY community colleges.

Environment

  • The DEC received a $352 million operational budget, an increase of about 3.2 percent from last year, but $1.2 million less than originally requested in the Executive Budget. The legislature increased the DEC total budget by more than $45 million, to $953 million. Most of this increase represents an acceleration of capital spending from the 1996 Clean Water/Clean Air bond act.
  • The legislature approved the proposed $16.3 million Title V program budget, but rejected the proposed increase in the Title V fee cap to $45 per ton. Without an increase in the fee cap, it is projected that the Title V "operating permit account" will end the fiscal year with a $3 million deficit. It is yet to be seen whether the Administration will seek an increase in the fee cap as a post-budget issue.
  • For the first time ever, the legislature approved state funding for the cleanup of "hazardous substance sites" — contaminated sites that are not eligible for remediation under state "superfund," the oil spill fund, or the 1996 bond act. Under this limited program, funding is only available for investigations and cleanups at the 26 properties identified by the DEC as posing a "significant threat to the environment" in their 1995 hazardous substance site assessment. The program will be financed with $15 million in bonds issued by the Environmental Facilities Corporation, and it will "sunset" once these funds are fully expended.
  • The legislature increased the proposed budget for environmental enforcement by $800,000, with the additional funds dedicated to the hiring and training of new conservation officers and forest rangers.
  • The legislature made $1 million available to the Department of Health for "additional support services for the cancer registry and epidemiological health studies based upon the use of computer mapping." This proposal, which originated in the State Assembly, is intended to help evaluate the impact of environmental stressors on cancer rates. The design and implementation of the "cancer mapping program" have been left up to the DOH's Divisions of Environmental Health Assessment and Occupational Health/Environmental Epidemiology.
  • The legislature approved $112 million for the Environmental Protection Fund. This fund, established in 1994, receives income from the real property transfer tax, and is used to finance a variety of environmental programs including state land acquisition, local recycling efforts, and state parks and recreation infrastructure projects.
  • The legislature reduced fees on petroleum that is imported to major storage terminals and then exported for sale outside of New York State. Specifically, the legislature exempted these shipments from the $.04 per barrel licence fee, and reduced the $.04 per barrel surcharge to $.015 per barrel. These fees — imposed under the Navigation Law — support the state's oil spill cleanup fund and the state's "superfund" program.
  • The legislature approved a $6.3 million funding request for the state pesticide sales and use data base, a pesticide/water quality monitoring program, and the investigation of links between environmental risk factors and breast cancer. These programs were established as part of the 1996 pesticide use reporting law.
  • The legislature created a dedicated fund that will use current mining permit fees to finance the DEC's oversight of the mined land reclamation program — a $1.6 million program. This change did not affect pre-existing fee levels.
  • The legislature authorized $200,000 in grant money to assist municipalities in implementing integrated pest management programs. The Assembly had proposed a draconian phase-out of pesticide use by state agencies in their one-house budget
  • .
  • The legislature authorized $85,000 in grant money to prepare a comprehensive map of oil pipelines.
  • The legislature rejected a proposal — included in the Assembly's one-house budget — to expand SEQRA to address "disproportionate" impacts on minority and low-income communities.

Construction

  • Investment in capital construction saw huge increases in this year's budget. The Legislature accepted the Governor's proposal for the Five Year $3 billion Capital Investment Plan for CUNY and SUNY. The Legislature provides five years of SUNY capital projects totaling $2 billion in appropriations, with fiscal year spending for 1998-1999 limited to $400 million, and five years of CUNY capital projects totaling $1 billion in appropriations, with fiscal year spending for 1998-99 limited to $205 million. A list of projects for the five year plan is available from The Business Council.
  • The Legislature also adds $500 million for the new Aid for Rebuilding Schools to Uphold Education (RESCUE) program. This program will provide funding for critical school capital and maintenance projects. RESCUE will provide a portion of local costs for school construction projects related to: health and safety; increasing school capacity; enhancing accessibility to public schools for individuals with disabilities; emergency construction projects; reducing exposure to environmental hazards, and upgrading technology. Monies will not be available until on or after April 1, 1999, and in order to be eligible for an appropriation, voters must approve the project between July 1, 1998 and July 1, 2002.
  • The Legislature increased the following bond cap authorizations: the Urban Development Corporation's Correctional Facilities Improvement bonds by $395 million; the UDC's Youth Facilities Improvement bonds by approximately $16 million; the Dormitory Authority's State University Educational Facilities bonds by $900 million, the Dormitory Authority's City University Community College facilities bonds by approximately $660 million.

Contract Procurement

  • Requires the Office for Technology to coordinate a review of all state agencies that utilize the services of consultants relating to computer technology, programming or software and develop a plan to reduce the utilization of such consultants through the employment of personnel employed by the state. A plan must be submitted by the office for technology to the Governor, Senate and Assembly by October 1, 1998.

Governor's Office of Regulatory Reform

  • The legislature approved $2.74 million in funding for the Governor's Office of Regulatory Reform — as proposed in the Executive Budget. The Assembly had eliminated funding for GORR in its one-house budget.

Health

  • The Legislature re-estimated the Executive budget's Medicaid projections and agreed that Medicaid spending will be $220 million less than what the Governor had projected. The legislature used part of this money to add expenditures to mental hygiene ($60.5 million), the Department of Health ($95.8 million) and criminal justice ($33.8 million).
  • The budget restores $48 million in prior year Medicaid cost containment including, $20 million for nursing homes, $20 million for home care providers and $8 million for hospitals.
  • The budget accelerates the phase-out of the gross receipts tax on hospitals and nursing homes.
  • $4 million was provided for enhancement of dental fees under the Medicaid program.
  • $5 million was provided for the Elderly Pharmaceutical Insurance Coverage Program.
  • Nothing was included in the budget relating to using new federal money on children's health insurance. This will be a post-budget issue for the Governor and the Legislature.

Human Rights

  • The Legislature reduced the Executive budget proposal by $681,000. The Governor had originally increased the Division of Human Rights budget by $859,000 to continue the reduction of its caseload.

Labor & Human Resources

The Legislature increased the Executive budget proposal by $6.1 million for programs such as:

  • $350,000 for Empire State Advantage Excellence at Work program.
  • $300,000 for private sector job development demonstration programs.
  • $708,000 for the Displaced Homemaker program.
  • $105,000 for the On-The-Job Training program.

Small Business

(Note: see Taxation section for more details)

Fixed Dollar Minimum Tax Reduction:

  • Reduced for firms with a payroll of $250K or less from $325 to $100 for tax years starting on or after 1/1/98 and for firms with a payroll greater than $250K but no greater than $500K from $325 to $225 for tax years starting on or after 7/1/99.
  • Subchapter S Differential:
    Reduces the tax imposed under Article 9-a on Subchapter-S corporations over a three year period.
  • Small Business Estate Tax Reform:
    Amends the Tax Law to update the references to provisions of the U.S. Internal Revenue Code.
  • Qualified Emerging Technology Company Employment Credit: Provides a $1000 corporate franchise tax credit for each new employee hired by qualifying firms.
  • Qualified Emerging Technology Company Capital Investment Tax Credit:
    Provides a corporate franchise tax credit of 10%, up to $150,000 for qualified investments resulting in an ownership interest in an emerging technology company.
  • Capital Gain Deferral:
    Provides a one-time deferral of capital gains from the sale of an investment in a qualified emerging technology business if that investment is reinvested in another qualified emerging technology business or in a venture capital fund that invests in such businesses.
  • Computer System Hardware Sales Exemption: Computer system software used mainly in developing computer software will be exempt from sales tax, effective June 1998.

Transportation

  • State Roads & Bridges Program:

    Total spending agreed to by the Senate and Assembly for the Roads and Bridges program equals $1.52 billion, including appropriations and reappropriations. Significant spending items for this fiscal year include:

    $65 million for state roads and bridges construction and repair.
    $5 million designated for high speed rail projects.
    $30 million for Multi-Modal projects, to be divided equally in discretionary funding by the Senate and the Assembly.
     
  • Local Roads and Bridges Program:
    The legislature agreed to increase the Consolidated Highway Improvement Program (CHIPS) capital funding by $18 million over the Governor's original budget proposal for a total of $235,900,000. Operating and maintenance funds were also increased by $4 million over the Governor's original budget proposal for a total of $60,197,000. The CHIPS program provides state and federal capital to assist localities in funding the repair and construction of roads and bridges. If approved by the Governor, this will be the largest CHIPS program ever.

The Legislature also agreed to $39,700,000 in "Marchiselli funding", an increase of $1.5 million over the Governor's original budget proposal. This program assists localities in leveraging financing for the repair and construction of roads and bridge infrastructure projects.

  • Multi-Modal Programs:
    Total funding for the Multi-Modal program is expanded to $135 million with $30 million in additional funding for state fiscal year 1998-1999 to be split evenly by the Senate and Assembly. The Multi-Modal program, established in 1996, provides state capital assistance for rail freight, upstate ports, and non-state airports projects.
  • The budget agreement between the Senate and the Assembly also includes funding of $5 million for the MTA for the elimination of one person train operation and unstaffed commuter rail stations;
    a $4.6 million increase in Upstate Transit Aid for service enhancements;
    a $7 million increase in MTA Transit Aid for service enhancements;
    a $1.5 million increase in Downstate non-MTA Transit Aid for service enhancements; nd $5 million for Rail Freight Industrial Access projects to be administered by the Department of Transportation.
  • Reduced the supplemental Truck Mileage Tax by 50% on 1/1/99 thereby reducing the overall Truck Mileage Tax by 25%.

Worker's Compensation

  • The Legislature's 1998-99 budget bill accepts the Governor's funding proposal to overhaul the operation of the Workers' Compensation Board. The proposal increases funding by $24.4 million for: conversion to a paperless electronic case folder ($18.2 million); restructuring and streamlining the claim process and responsibilities of the Board staff ($800,000); consolidation of the Board's administrative offices in Menands and Brooklyn in Albany: and the opening of new district offices in Peekskill in Westchester County and Hauppauge in Suffolk county ($6.1 million). The relocation of the Buffalo and Syracuse district offices to larger more accessible locations is included as well. The proposal will speed the settling of workers' compensation claims and improve the Board's responsiveness to business and injured workers.

     

  • The budget bill requires the Workers' Compensation Board to issue two reports concerning the system modernization project to the Governor and Legislative Leaders. The reports are to include: 1) an interim update (by 2/15/99), describing the status and future implementation phases and expected outcomes from implementation and 2) a final summary (by 12/31/99) of the actual outcome.