Education

Last year, during a time of recovery from one of the most devastating events in our nation's history, we found ourselves re-evaluating what was significant in our lives. This year we again face a changed landscape that will cause us to identify what is critical to our future. Giving our children a strong educational foundation is an American ideal that is unwavering. Maybe more so than in the years prior to September 11th, New Yorkers, like most Americans, understand that an educated citizenry is an essential cornerstone to our democratic way of life.

The Assembly Majority is committed to preserving these values for all New Yorkers. We are determined to ensure the provision of a sound basic education for all our children in New York State. Parents and their children have the right to expect the leaders of our State to provide exemplary leadership, especially during challenging economic times. Dismantling what has been built as a foundation for educational progress is tantamount to permitting the State to balance its fiscal needs on the backs of our children.

Unfortunately, the Governor's proposed budget for the 2003-04 school years allows for no educational vision. The Executive budget cuts aid to education by $1.24 billion, or 8.5 percent. It eliminates virtually all early childhood programs including prekindergarten, K-3 class size reduction, and full day kindergarten. The Executive budget also chooses to treat other vulnerable populations with disregard. The budget cuts $70 million in support of schools serving only severely disabled children and eliminates distinct financial support for all children with disabilities. The Governor's budget also eliminates aid for after school programs, consolidates resources for students with limited English proficiency and reduces aid for professional development programs. Nearly every aid category specifically targeted to high need children, or designed to help students increase their achievement has been wiped out. That is the educational future that this budget envisions, and that is the wrong choice that this Governor makes.

In fact, the Governor's record on investing in aid to education has been dismal. From the first year of his administration through the current 2002-03 school year, the aggregate amount that he has been willing to increase educational expenditures for our kids, their teachers, and our communities has been a total of $1.7 billion. The Assembly's intervention and insistence on education as a priority has driven the enacted increases in education to a total of $4.6 billion, a financial commitment that is truly meaningful for our children and their future.

For nearly a decade, the Regents have provided the leadership for implementing standards based reform. In fact, it is only within this past year, with the passage of the No Child Left Behind (NCLB) Act, that the nation has begun to catch up. By raising the bar, we have changed the landscape forever. We have raised expectations for each of New York's children, but, they cannot do it alone and they cannot do it without resources.

The Assembly Majority has always realized that when we invest consistently, adequately and wisely in education, we are also investing in the State's future economic wealth and human capital. A first class, high quality education for our children is a priority we must continue to adhere to. Our multi-year LADDER program has provided many children with the strong, sound start for the challenges of higher standards and improved student achievement by focusing on priorities such as early childhood education, reduced class size, and afterschool programs.

The Universal Prekindergarten program has served more than 200,000 four year olds. The Class Size Reduction program has supported the creation of nearly 2,500 additional classrooms, providing a more individualized classroom for nearly 50,000 children in this year alone. Full day kindergarten has gotten an estimated 27,000 five year olds off to a good start and extended day programs are currently providing a safe environment for approximately 80,000 children after every school day. We must not abandon our children during times of uncertainty, and must instead provide an equitable distribution of resources necessary to support all children reach their full potential. Unless we act to mitigate the wrong choices reflected in the Executive budget, school districts will be forced to shoulder the shift of the financial burden, and local taxpayers will bear the brunt of these extraordinary cuts.

The Federal government's recent passage of the No Child Left Behind Act (NCLB) will challenge us to focus our attention and resources on those students who have the greatest needs in order to ensure that all children will succeed. In fact, Federal money that New York State receives will be at risk if we fail to craft a sound, forward thinking, future directed education for our children. We cannot afford to let our education system crumble. Our children are worth it, and it is essential to a bright and promising future.

Continuing the Assembly LADDER Program

Universal Prekindergarten

The Assembly majority has worked diligently to develop and maintain sound policies that promote school readiness and early intervention for all New York's preschool age children. Based on these premises, in 1997, the Legislature enacted LADDER's Universal Prekindergarten program, a multi-year plan to provide for universal access and appropriate resources for the establishment of prekindergarten programs in all school districts. This legislation provided New York's public school districts and private early childhood providers with the ability to build a supportive and nurturing community network, thereby providing all youngsters with an educational head start. The prerequisite skills learned in an exemplary prekindergarten program set the path for young children to benefit from the rigors of higher standards for grades K-3.

Universal Prekindergarten has an undeniable educational benefit for participating children, which must be maintained. It is clear that investing in high quality prekindergarten experiences for children defrays costs of more expensive interventions in the future, such as special education, and remediation.

One of the most prominent studies on the benefits of participating in a prekindergarten program is the High/Scope Educational Research Foundation study. This study documented the effects of preschool child development programs on children from poor communities in the Ypsilanti Public Schools in Michigan. The study followed these children for three decades and concluded that the investment in high quality preschool education far outweighed any costs the community would face had these same children not had access to pre-k. More recently, the studies of prekindergarten programs have found shorter term effects that underscore the High/Scope research. In the Michigan School Readiness Program, a State funded initiative serving about 24,000 four-year-olds each year who were considered at risk, students were found to be better prepared for school intellectually and socially; more likely to achieve greater school success; and demonstrated higher passage of the State's reading and mathematics tests (Highscope Educational Research Foundation, Schweinhart, June 2002).

New York's Universal Prekindergarten program has also experienced similar success. Children in these districts begin kindergarten with more of the basic skills needed to succeed and a broader conceptual foundation upon which to build future learning. When, in addition, districts offer full day kindergarten, the children have an even greater advantage in meeting the rigorous demands of the Regents higher learning standards. In fact, many school districts where children have the opportunity to attend prekindergarten have shifted their level of kindergarten instruction to accommodate the advanced level of their incoming students.

New York State school districts have overwhelmingly responded to implementing and expanding a Universal Prekindergarten program. In 1998, the Universal Prekindergarten program served 18,200 children at a cost of $56.3 million. In the 2002-03 school year, nearly 60,000 children are being served at a cost of just over $200 million. Over these past four years, more than 200,000 four year olds have had the advantage of a prekindergarten program. As an indication of the recognition of the value of prekindergarten to a child's ongoing educational experience, it is important to note that participation has increased even from the 2001-02 to this school year in spite of fiscal constraints in many school districts. New York State is now regarded nationally as a model program (see Figure 1). However, the Executive budget has chosen to recommend complete elimination of Universal Prekindergarten, which is a step backwards - clearly a wrong choice.

Figure 1

Class Size Reduction

In 1997, as an integral part of the LADDER plan, the Assembly majority was successful in ensuring the passage of a groundbreaking initiative authorizing a class size reduction program in grades K through 3. Districts were provided with funds for teacher salaries and startup costs for each new classroom. The Assembly majority believed that this investment in smaller classes would provide children with a more personal, individualized environment in which to set the foundation of their education. Smaller class size allows teachers to provide a more effective instructional program which results in improved learning. In fact, more than 200 districts participate in this program, serving nearly 50,000 children in smaller classes, thereby providing a more individualized instructional approach.

According to the Quality Counts 2003 Report by Education Week, 32 states have implemented a class size reduction program. In fact, during the 2000 school year, states spent an additional $2.3 billion on their own class size reduction programs, thereby supplementing Federal funds received to help school districts hire new teachers to reduce class sizes in the elementary grades. The public as well as experienced educators know that smaller class size is an important support to our children's obtaining the higher standards expected of them (see Figure 2).

Figure 2

The support of class size reduction programs by the states, experienced educators, and the public continues to be bolstered by the results achieved by our children. These programs are based on sound research and many experts point to the Tennessee Project STAR study as evidence. This study included a four-year, large scale, longitudinal study of reduced class sizes in 79 schools in 42 systems and included schools in inner city, rural, urban and suburban localities. It was found that in each K-3 grade level tested, and across all school locations, the pupils in the smaller classes had the highest scores on both the norm referenced Standard Achievement Test and the criterion-based Basic Skills First Test.

As one of the cornerstones of LADDER, New York's class size reduction program provides our children with an opportunity to learn and teachers an opportunity to teach at the higher levels of cognitive and affective learning. Unfortunately, the Executive has once again made the wrong choice by proposing the elimination of a program which provides an improved learning environment and benefits thousands of children in high need schools.

Full Day Kindergarten Program

The LADDER program emphasizes the benefits of a strong early education experience. Building upon a quality prekindergarten program, LADDER provides a financial incentive for districts looking to expand their kindergarten program into a full day educational program. For many children, the foundation is laid through participation in a quality prekindergarten program and then reinforced through the provision of a full day kindergarten program, where the positive academic and social effects for these young children are multiplied. Providing financial support which encourages districts to develop a full day program is consistent with the goals of districts looking to solidify early learning patterns.

The long term educational value of full day kindergarten is well documented. The benefits to children who have participated in full day programs have included improved independent thinking and socialization. Several studies document the need for full day kindergarten and the new Federal legislation addresses the importance of early education as well. Within the NCLB legislation, Congress emphasizes reading for primary students and requires States to provide instruction grounded in scientifically based research during the first years of schooling, including prekindergarten.

New York State has committed more than $47 million for full day kindergarten over the past four years serving more than 27,000 children. In fact, this program has been one of the most well regarded provisions of the LADDER initiative (see Figure 3). The Governor has chosen to eliminate support for full day programs - another wrong choice.

Figure 3

Extended School Day and School Violence Prevention

A vital part of the LADDER program are the funds for Extended School Day and School Violence Prevention grants. The Assembly is deeply committed to providing not only a safe place for youth to go after the school day is over, but, even more importantly, to providing one that yields educational and social benefits. This time can be spent productively with additional educational support, as well as simply providing a safe harbor for positive recreational activities.

Unfortunately, there is a growing need for after school programs which is not being met. A poll conducted by the Afterschool Alliance (June 2000) and reported by the National Institute on Out-of-School Time, noted the difficulty in finding after school programs. The U.S. General Accounting Office estimates that the current number of after school programs will meet as little as 25 percent of the demand in some urban areas. The U.S. Bureau of Labor Statistics in 2000 reported that in 59 percent of all married couple families with children 6-17 years of age, both parents work outside the home; these numbers are much higher for single parent mothers and fathers. It is extremely troubling to note that there are approximately eight million children ages 5-14 nationwide, that have no supervision on a regular basis at some point during the day. According to a 1999 report by James et al, children spend time alone after school for up to 25 hours per week (The Future of Children, 1999; Miller, et al, 1997).

Children who do not have adult supervision are at a greater risk for truancy, stress, poor grades, risky behavior and substance abuse. The younger a child is when he or she begins to be left alone, the greater the risk (Dwyer, et al, 1990; Pettit, et al, 1997). Additionally, between 3 and 6 p.m. the occurrence of violent crimes - murders, sexual assaults, robberies and assaults - on juveniles triples (Sickmund, et al., 1997). The safety issue is a growing concern for a variety of reasons. According to researchers at the University of Wisconsin (1999), children who attended more supervised after school programs were rated by their teachers as having better work habits and interpersonal skills, as well as improved school attendance and better response to conflict.

Currently, students who are in Extended School Day and School Violence programs in New York State benefit from activities such as academic tutoring and remediation. Bringing students up to speed academically is especially crucial at this point when graduation requirements for all students are now at their most rigorous level statewide. In addition, activities such as conflict resolution/violence prevention, and other recreational and alternative education programs are undertaken throughout the State.

To date, New York has spent $125 million for these after school and school safety programs and is currently serving approximately 80,000 youngsters with an appropriation of $30.2 million. Again, the Governor has made the wrong choice by eliminating this important program. The Assembly remains committed to providing optimal after school programs, activities and settings for our youth in safe, supportive and educationally stimulating environments.

School Facilities

Since 1997, a crucial part of the Assembly LADDER program has been funding for improving school facilities. LADDER provided both an enhancement to the building aid reimbursement formula for the construction and renovation of facilities, as well as a distinct grant program for the upgrade and repair of existing facilities, the Minor Maintenance and Repair Program. To date, the Minor Maintenance program has provided $250 million to upgrade the quality of the school environment statewide. Unfortunately, the Executive has made the wrong choice by proposing to discontinue $50 million in funding for this important initiative. Furthermore, the Executive budget provides for additional changes to building aid calculations, which will serve to act as a disincentive to construction, reconstruction and renovation projects.

A report from the State Comptroller noted unacceptable levels of overcrowding throughout the State. The report points out that changes in educational programs over the past few decades such as growth in special education, remediation, and the need for computer and science labs, have placed a significant demand on the need to upgrade and expand facilities. Compounding the problem of overcrowding, a report issued by the U.S. General Accounting Office found that 90 percent of New York's schools needed to upgrade or repair buildings to achieve good, overall condition.

Few would argue that most, if not all low performing schools could benefit from facility upgrades. The correlation between schools in various stages of disrepair or schools that do not have the appropriate wiring for computers, or space for science labs, and low performance has been well established. The improvement of school buildings in disrepair must remain a priority.

Educational Technology and Instructional Materials

The Assembly LADDER program was unique in its recognition of the full spectrum of student needs. Over and above the aforementioned programs, LADDER also provided additional resources for instructional materials for all students statewide, as well as support for educational technology.

Given the high cost of textbooks, districts are often unable to purchase up-to-date textbooks for all students. Software that changes from year to year cannot be replaced, and hardware is out-of-date almost from the time of purchase. Maintaining relevant and sufficient instructional materials has become a challenge for many districts.

The importance of access to educational technology has also been emphasized with the passage of the No Child Left Behind Act of 2001. The Act clearly states as one of its goals "... to improve student academic achievement through the use of technology in elementary and secondary schools." The Act goes on to say that "every student - regardless of race, ethnicity, income, geographical location, or disability - ... should become technologically literate by the end of eighth grade..."

However, the digital divide persists. Internet access, for example, is far from uniform. Having a piece of possibly out-of-date hardware in the classroom does not mean that students are becoming computer literate or learning to use technology for a variety of educational purposes. Another disparity noted in the Education Week report is that not all schools have the technical support to keep the computers running and the resources necessary to train teachers.

In light of the new Federal legislation, as well as the State's uniform graduation requirements, it is imperative that none of New York State's youth are left on the wrong side of the digital divide. Students must be provided with equal access to educational technology and the opportunities it provides. Every school in the State must be able to give students access and experience with educational technology.

Higher Standards

Education Week, in their "Quality Counts 2003", rates New York State an "A" in their category of Standards and Accountability. Their survey examines testing, tracking and results, along with intervention policies instituted in each of the states. Under the leadership of the Regents, New York State has already made significant efforts to reach higher standards, promote more efficient policies, and provide followup and accountability.

Successfully implementing the new Federal legislation cannot be realized without funding. Simply stating that low performing schools have to improve is not enough. Schools are being pressured to increase performance, but we must provide resources to improve access to successful practices and funding that will enable teachers and administrators to respond to the challenges they face.

The Federal No Child Left Behind Act reinforced the Regents approach for attainment of higher standards. The intent of this law is to hold schools accountable for the achievement of all students, and to close the achievement gap between students from different backgrounds. The NCLB legislation mandates preparing, training, and recruiting high quality teachers and principals; improving the academic achievement of the disadvantaged; providing language instruction for limited English proficient and immigrant students; requiring annual improvement of students and schools on standardized tests; and an increased emphasis on reading, especially for young children. NCLB will require annual assessments to measure our students in reading and math in grades three through eight. These tests will track the performance of every school. The data must be disaggregated for students by poverty levels, race, ethnicity, disability, and limited English proficiency to ensure that no child, regardless of his or her background, is left behind. States must also report on school safety on a school by school basis. All of these requirements are costly.

Unfortunately, the Governor has made the wrong choice by not making educational attainment and meeting the Regents standards and NCLB requirements his priorities. This Executive budget reduces overall aid by $1.24 billion, including $407 million in unrestricted aid, an estimated $400 million in early education initiatives, and approximately $75 million in professional development programs.

While statewide results on 4th and 8th grade math and English Language Art exams indicate improvement, and some individual schools and districts posted large gains, other schools improved only slightly or even declined. It is clear that there still remain significant numbers of individual children, primarily in high need districts, needing additional help in order to meet both the Regents and NCLB standards. Though the State faces unprecedented fiscal constraints, we must make the right choice by directing our energies and resources toward education as the demands grow ever more stringent. All efforts must be made to provide the needed resources (see Figure 4 and Figure 5).

Figure 4

Figure 5

Teacher Quality and Professional Development

In addition to the requirements mentioned previously, the NCLB Act also mandates that all new teachers hired with Title I funds be "highly qualified" by the current school year and, that all teachers in core academic subjects be "highly qualified" by 2005-2006.

New York State's high need districts have long experienced the challenge of providing certified teachers who are able to teach courses in the disciplines for which they were trained. Data indicates that in New York's high need districts, 17 percent of the teachers are teaching without being properly certified and are in the classroom with waivers from certification requirements. In contrast, the low need districts have four percent of their teachers with waivers. These districts now have two years to solve a persistently difficult and decades old problem.

New York State cannot afford to abandon its current teaching workforce. We must support ongoing, high quality professional development that is achievement focused. Resources are necessary to help teachers enhance their support of student achievement of the Regents higher standards. We must work toward directing and amplifying our resources to programs and initiatives that we know enhance effective, high quality teaching.

Research has clearly shown that teacher quality and student achievement are positively related. In fact, studies using value added student achievement data have found that student achievement gains are influenced by a student's assigned teacher more so than by various other factors. Teacher attributes and experience contribute to student learning, including their general academic and verbal ability, subject matter knowledge, knowledge about teaching and learning, and the combined set of qualifications as measured by teacher certification (Darling-Hammond, 2000).

Goldhaber and Brewer (2000) found strong influences of teacher certification on student achievement in high school math and science. School level analysis provides further support that teacher certification status is strongly related to student achievement. Recent studies in California also found a positive relationship between a teacher's experience level and student achievement (Betts, Rueben, & Dannenberg, 2000; Fetler, 1999; Goe, 2002). Finally, the most significant and strong predictor of student achievement was the proportion of well qualified teachers, defined as holding both full certification and a major in the field being taught (see Figure 6).

Figure 6

Unfortunately, the Executive budget has made the wrong choice by reducing funding for professional development programs by over $70 million. Teacher Support Aid, which acts as a retention tool in the five large city school districts has been cut by $44.9 million. Funding for Teacher Resource Centers and the Mentor-Intern program have been cut by $20 million and $3.33 million respectively. Teachers of Tomorrow, a comprehensive set of programs providing recruitment and professional development opportunities has also been reduced by $5 million. Funding is eliminated for the National Board for Professional Teaching Standards, a reduction of $500,000. The Governor once again provides no funding for Professional Development Grants. This budget would stall, and in many schools, reverse, the remarkable progress that we have made toward attracting and retaining high quality teachers.

Executive Proposal for Aid to Schools

The Executive proposes to decrease General Support for Public Schools by $1.243 billion, or 8.5 percent below School Year (SY) 2002-03 levels. This decrease surpasses the cuts made during the recession of the early 1990s. The wrong choices in his proposed budget will surely hurt the quality of educational programs available in New York State's public schools, further denying many children their constitutional right to a sound basic education.

It is also apparent that the Executive Budget recommendations represent a massive shift in the burden for funding public education from the State to local communities. These cuts would simply transfer the financial burden from the State to individual taxpayers, a shift that would very likely hurt poor areas the most. This will force school districts to choose among raising taxes, staff layoffs, and program elimination.

The Executive proposes the consolidation of nine existing formula-based aids into one aid category entitled Comprehensive Operating Aid. The Governor proposes a $407 million cut in this aid category. Reductions range from 2.00 percent to 8.75 percent for individual districts.

This consolidation includes aid categories specifically targeted toward students with disabilities. By eliminating targeted aid for students with disabilities under Public Excess Cost Aid, as well as aid which prevents the referral of students to special education provided through ERSSA, the Executive provides no additional funds to districts which may experience additional placements of children into special education programs and services. The Governor also proposes funding changes in private special education. The State share of the cost for placements in private special education settings will be reduced from 85 percent to 49 percent. This reduces funding for Private Excess Cost Aid by $70.68 million. Placements in these private settings are for the most severely disabled children and are largely driven by Federal requirements.

The Executive appropriates $1.11 billion for Building Aid, a decrease of $144 million below 2002-03 levels. The Governor also proposes that prospective Building Aid be paid out of a $130 million priority pool where local districts would be forced to compete for severely limited construction funding. Additional limitations include restrictions on the use of existing incentives, choice of building aid ratio and a simplification in the way the building cost allowance is calculated, all designed to reduce the State level of reimbursement.

BOCES funding is cut by $129 million or 25 percent below present law levels. Beginning in the 2004-05 school year, the Executive proposes to prospectively consolidate BOCES Aid into Operating Aid. BOCES is a proven vehicle for providing cost effective quality services to component school districts.

School Aid Litigation

Litigation was commenced in May of 1993 in State Supreme Court challenging New York State's funding structure for New York City public schools. The lawsuit was filed on the grounds that the current system violated the Education Clause of the New York State Constitution, the Equal Protection Clause of the State and Federal Constitutions, and Title VI of the Civil Rights Act of 1964 and its implementing regulations.

On January 10, 2001, the Court ruled in favor of the plaintiff on both the State Constitutional claim and the claim involving the implementing regulations of Title VI of the Civil Rights Act. The Court held that New York State has consistently violated the Education Article of the State Constitution by failing to provide the opportunity for a sound basic education to New York City's public school students. In addition, the Court found that the school financing system has an adverse unjustified disparate impact on minority public school students in violation of Federal Civil Rights regulations.

The Appellate Division, First Department issued a split decision on June 25, 2002 reversing the State Supreme Court's findings on both the inadequacy of the school financing system and the disparate impact on minority public school students. The Appellate Division majority opinion held that a minimal opportunity for a sound basic education (not "more than a ninth-grade education") had been provided to public school students in New York City because there were minimally adequate educational facilities, minimally adequate instrumentalities of learning and minimally adequate teaching so as to enable students to have an opportunity to be prepared for some potential employment and to meet certain basic civic obligations (serving on a jury and voting in elections). In essence, the Appellate Division disagreed with both the trial Court's assessment of the evidence submitted and the criteria employed by the trial Court in assessing "adequacy".

The plaintiffs have appealed this decision to the Court of Appeals and oral arguments are scheduled for May, 2003. Both the Mayor of New York City and the City itself are filing briefs in support of the plaintiff's appeal.

Higher Education

In light of the current budget crisis confronting New York it remains imperative to recognize that a strong higher education system provides a crucial foundation for economic growth and the development of a highly trained workforce. In addition, the public universities of New York have historically assumed increased importance during times of economic uncertainty. As the number of students seeking a higher education at public universities increases, the need to maintain the quality and value of the public university system of New York has never been more critical (see Figure 7).

Figure 7

Unfortunately, the 2003-04 Executive Budget Proposal makes the wrong choice by ignoring the needed investment by the State of New York in higher education. In fact, the Governor's proposed cuts to higher education programs exceed $660 million in SFY 2003-04. Including this massive cut, higher education has been the target of a cumulative total proposed reductions totaling approximately $2.4 billion since the beginning of the "Pataki-Era". The Assembly has stood firm in its commitment to working families from across the State and has fought to restore these proposed reductions. While the Governor continues to promote the research and discoveries of New York's colleges and universities, he regrettably has yet to embrace the concept that their greatest contribution as "engines of economic growth" are the skills provided to students pursuing a college degree in New York State.

The Executive Proposal would increase tuition supported appropriations by $318.3 million at SUNY and CUNY. Unstated in their appropriations is a tuition increase of up to $1,200. This would increase tuition at SUNY by 35% from $3,400 per year to $4,600 per year; and would increase tuition at CUNY by 38 percent from $3,200 per year to $4,400 per year. Unfortunately, in the same instant that the Governor proposes raising tuition, he uses this measure to lower state support for SUNY and CUNY by roughly $279.2 million from 2002-03 levels (see Figure 8).

Figure 8

Cost of Pursuing a College Degree Increases in New York State

In 2000-01, tuition and fee costs for attending a community college in New York State was the 5th highest in the nation, roughly 88 percent higher than the national average (2002-03 Almanac of Higher Education). At a time when a significant investment is being directed toward large research institutions, the needs of the State's community colleges should not be ignored. Community colleges serve as a gateway to the pursuit of a higher education and train a significant portion of the workers needed in the new economy.

Throughout much of the "Pataki Era" New York State has trailed the rest of the nation in support for higher education. According to a recent survey issued by the Center for Higher Education & Educational Finance, New York currently ranks 47th in state support for higher education per $1,000 of personal income. In fact, New York ranks 44th in the nation, or roughly 55 percent below the national average in the percent change in State support for higher education over the ten-year period from 1992-2002.

Due to the lack of adequate State support for New York's public universities, the costs incurred by college students has increased in recent years. In 1995, the average cost of tuition and fees for students attending public four-year institutions in New York State was approximately $2,921. Since 1995 this figure has increased by approximately $1,141 or 39 percent to $4,062 (1995-96 and 2002-03 Almanac of Higher Education). As a result, even without the Governor's proposed $1,200 tuition increase, the average cost of tuition and fees for a student attending a public four-year institution in New York State today is roughly 16 percent greater than the national average (2002-03 Almanac of Higher Education).

The Governor's proposal also provides $317.4 million for SUNY-operated community colleges and $108 million for CUNY community colleges. This reflects an overall reduction in State support of $49.4 million for community colleges. This consists of a net reduction of $41.4 million resulting from the lowering of State Base Aid support for community colleges by $345 per full time equivalent (fte) student, lowering State support by 15 percent from $2,300 per fte to $1,955 per fte. In addition the Governor would eliminate $7.9 million in support for contract courses, rental aid, and the College Discovery Program at the State's community colleges. Unfortunately, the Governor has made the wrong choice by proposing to reduce State support for these campuses in a moment when increased demands are being placed on the educational services that they provide.

Access to Student Aid and Student Support Programs

The 2003-04 Executive budget proposal would also reduce the Tuition Assistance Program (TAP) awards for all eligible students by one-third. The proposed 2003-04 Executive budget includes $567.5 million for the Tuition Assistance Program (TAP). This represents a $161.1 million reduction from the 2002-03 Academic Year which would translate into an overall reduction of $279 million in estimated TAP expenditures in the 2003-04 Academic Year. Unfortunately, the Governor fails to provide the necessary resources to support TAP even at such lower funding level. Instead, the Governor proposes to fund $225 million, or 40 percent of the costs of TAP in 2003-04, through a transfer of funds from the Federal Temporary Assistance for Needy Families (TANF) Program. TAP has all too often been the target of proposed reductions. In fact, since 1995-96, the Governor has proposed cutting the TAP Program on six different occasions.

This across-the-board, regressive measure would directly add to the financial burden that college students across the State would bear in pursuit of a higher education. In fact, a second component of the Governor's TAP proposal is the provision of incentives that directly encourage students to fall further into debt in order to fund their educational costs. Governor Pataki proposes the creation of a new TAP Performance Award that would require students to self-finance their college education via additional student loans. Upon the completion of a degree, students would be eligible to receive a TAP Performance Award equal to the amount that their TAP award has been reduced, plus accrued interest. Finally, the Governor also proposes the creation of a new $11.6 million TAP Loan Program to support the additional student loan borrowing for students who have exhausted their Federal student loan eligibility. In 2002-03, the Executive proposed an overall reduction of $212 million in estimated TAP expenditures and advanced similar dramatic modifications that would have threatened the long-term viability of the Program. However, the Assembly fought to restore the proposed cuts to the Tuition Assistance Program.

In addition to recommending the one-third reduction of TAP, the Executive Proposal targets programs focused on improving the access and affordability of a college education in New York State. This includes a proposal to reduce funding for college opportunity programs by $26.9 million, or 50 percent. This reduction reflects an Executive Proposal to eliminate supplemental student assistance to economically disadvantaged students that participate in college opportunity programs. In addition, the Executive recommends reducing support for Aid to Independent Colleges and Universities (Bundy Aid) by $18.7 million or 42.3 percent. This reflects an Executive Proposal to eliminate funding for graduate degrees conferred at New York's independent colleges and universities. Finally, the Executive Proposal recommends the complete elimination of $10 million in funding for the Science and Technology Entry Program (STEP) and its collegiate counterpart (CSTEP). These programs have proven to be extremely successful at increasing the participation rate of underrepresented and disadvantaged students in mathematics, science, technology, health-related fields.

SUNY and CUNY Capital Plans

The Executive proposal includes a request to provide authorization for $3.7 billion to support a multi-year plan for SUNY and CUNY capital projects. This includes $2.5 billion in bonding authorization to support a second multi-year plan for SUNY capital projects. Within this figure $1.64 billion would be directed toward academic facilities, $350 million for the SUNY Health Science Centers, $210 million for community colleges and $335 million for residence halls.

In addition, the Executive includes $1.2 billion in authorization to support a second multi-year plan for CUNY capital projects. Within this figure $1.1 billion would be directed toward CUNY senior colleges and $130 million would be directed toward CUNY community colleges. Funded projects encompass critical health and safety, preservation and handicapped access projects as well as the completion of on-going projects at John Jay College and the construction of a new academic building at Medgar Evers College. Finally, the Executive proposal would provide CUNY with authorization necessary to begin planning efforts for the development of Governor's Island.

Health

Medicaid

Again this year, as he has done nearly every year of his past two terms of office, the Governor is making the wrong choice by proposing massive cuts to the State's Medicaid Program in his Executive budget. These cuts and new taxes will impose a severe financial hardship on the State's ailing health care industry -- an industry that is already reeling from previous cuts, new Medicare cuts, workforce shortages, new technology costs, disaster preparedness activities, and meeting the needs of the thousands of New Yorkers who still remain uninsured.

As anticipated, the State Fiscal Year (SFY) 2003-04 Executive budget proposes reinstating nearly $1 billion (all funds) in old cost containment actions that were slated to expire in March 2003. The Executive proposes new actions that would save the State over $640 million through the implementation of new cuts and the re-imposition of provider assessments (taxes) which had been eliminated in 2000. However, such action would precipitate the loss of nearly $1.6 billion in combined Federal, State, and local reimbursement to health care providers. Revenue loss of this magnitude would not only severely impact the health care industry, but ultimately would be detrimental to the "health" of New York's already faltering economy.

The health care industry has a major presence in New York State, being either the first or second largest employer in nearly all of the counties in this State. Committee staff estimates that these proposed Medicaid cuts could result in a total loss of up to 38,000 jobs in New York State at a time when unemployment is already on the rise. Moreover, this job loss would result in a serious reduction in services in an industry already plagued by workforce shortages and other revenue shortfalls that have impacted the service delivery system, as demonstrated by emergency room closedowns or inordinately long waits for emergency care, as well as by the denial of home care services to many elderly Upstate New Yorkers. New cuts will only exacerbate this situation, having the potential to impact not only access to care but also the quality of such care as providers are forced to cut staff or rely on less trained staff to deliver services. Consequently, the deleterious effects of the Governor's proposals reach beyond New York's poor, elderly, and disabled citizens who rely on Medicaid for their health care benefits, having the potential to affect adversely the quality and availability of health care for all New Yorkers.

Health Care Reform Act

The Health Care Reform Act of 2000 (HCRA 2000) is scheduled to expire on June 30, 2003. As part of his Executive budget submission, the Governor proposes a two year extender of HCRA through June 30, 2005. The proposed legislation makes some notable but wrong changes that not only would deny or limit access to needed health insurance coverage to thousands of low income working families and their children, but also would impose a greater financial burden on health care providers and insurers, which could jeopardize their economic viability. In order to replace revenues lost through a proposed plan to securitize tobacco settlement payments, the Governor proposes the dedication of several new revenue sources to HCRA. These would include additional proceeds from the Empire Blue Cross/Blue Shield conversion to a for-profit corporation, as well as proceeds from any future conversions; anticipated federal relief funds related to the World Trade Center disaster; new Community Health Care Conversion Demonstration Project revenues; and revenues from a proposed amnesty program. More importantly, however, the Governor proposes increased surcharges on hospital and clinic patient bills and an increased assessment on health insurance companies. In many instances, these increases will be passed on to consumers in the form of higher out-of-pocket expenses or premiums.

To further close the gap between lost revenues and to meet the cost of previous HCRA commitments and new General Fund shifts, the Governor recommends cuts in funding for valuable public health programs related to rural health care, poison control, emergency medical services, cancer initiatives, worker retraining, and anti-tobacco efforts. Of even greater significance, however, is the Governor's effort to achieve Medicaid savings by eliminating Medicaid coverage for an estimated 234,000 low-income children, shifting their coverage to the Child Health Plus program. Child Health Plus provides no long-term care benefits, so this action could seriously disadvantage disabled children in need of such services. Moreover, the Governor's purported commitment to lowering the numbers of New York's uninsured is defied by his proposal to eliminate health care coverage for approximately 22,000 low-income adults under the Family Health Plus program by rolling back eligibility standards. Here again, the Governor has made the wrong choice by opting to resolve the State's fiscal crisis on the backs of vulnerable populations -- the State's poor children and the uninsured. These are the wrong choices.

The Elderly

The Executive Budget for State Fiscal Year (SFY) 2003-04 demonstrates little compassion for the plight of New York's senior citizens who struggle daily to make ends meet on fixed incomes. In fact, the Governor's budget makes the wrong choices by finding fiscal solutions on the backs of the elderly.

SSI COLA

Although many seniors rely totally on Supplemental Security Income (SSI) to meet their living expenses, the Governor denies passing through to them a federal cost-of-living adjustment, amounting to $14 per month for individuals and $21 per month for couples. Rather than allowing the elderly and the disabled to receive this money, the Governor proposes to divert it to defray a portion of the State's cost associated with the SSI State supplement payments.

Medicaid

In addition, access to quality health care is critically important for the 2.45 million New Yorkers who are 65 years of age or older. While poor children and families constitute the largest number of Medicaid recipients, this group accounts for only 21 percent of Medicaid spending. Across all service categories, the aged, blind and disabled account for approximately 73 percent of Medicaid expenditures, even though this group represents only 31 percent of recipients. Consequently, cuts to Medicaid adversely affect the poor elderly and disabled population that have no other recourse and must rely on Medicaid for needed medical care. As the elderly use a disproportionate share of hospital, home health care, and nursing home services, proposed new cuts are certain to have a severe impact on the health care services needed by the elderly.

Home care costs less than one-third the cost of nursing home care and is one of the most cost-effective alternatives to nursing homes. From a human perspective, it allows elderly individuals in need of care to remain in their homes or with their families in the community, instead of being institutionalized. Among the proposals that will have the most harmful effect on the elderly are new cuts of $71.8 million (All Funds) on the home care industry. Proposed reductions in home care rates will limit the elderly's access to home care services. Severe workforce shortages have already caused some upstate providers to curtail services, thereby denying access to many families desperately in need of this care.

The Governor also proposes new Medicaid reductions to nursing homes of $388.2 million (All Funds). Such cuts could severely impact the quality of care at these facilities as homes are forced to lay off workers in an industry already plagued by workforce shortages. In addition, over one-third of New York's voluntary nursing homes are already at risk of bankruptcy or insolvency ("Sounding the Alarm: New York's Nursing Homes in Financial Crisis", December 2002, New York Association of Homes and Services for the Aging). Nursing homes receive about 70 percent of their net patient revenues from Medicaid. The imposition of new cuts could spell disaster to those homes already in jeopardy, ultimately forcing them to close their doors, thereby denying access to needed care for many of the State's elderly population. Moreover, such closings could place severe hardships and mental anguish on families responsible for elderly relatives who have become too incapacitated to be cared for adequately at home.

Prescription Drugs

Another area of grave concern to the elderly is the rising cost of prescription drugs. Most elderly individuals take multiple drugs on a daily basis to maintain good health. The escalating costs of these drugs have become a serious cause of concern for those living on a fixed income, forcing many elderly to choose between essential medications and the necessities of life like food or rent. Even though out-of-pocket costs for prescription drugs continue to rise for the elderly population, the Governor does nothing to address this dilemma. In fact, the Governor recommends various reductions to the Elderly Pharmaceutical Insurance Coverage (EPIC) program that effectively would dig deeper into their already empty pockets by increasing fees and deductibles paid by program participants by 10 percent. His proposal to reduce reimbursement to pharmacies for filling prescriptions for EPIC participants would result in reduced access to greatly needed medications for the elderly. Given the Governor's rhetoric that recognizes the hardship ever-increasing drug costs have placed on seniors, this is the wrong solution to a pressing problem.

Community Services

When elderly individuals are unable to access needed community-based services, they are often forced to utilize more costly services in institutional settings, such as nursing homes. Despite this fact, the Governor's proposed budget would eliminate various community-based programs in the State Office for the Aging (SOFA) that assist low-income elderly to remain as independent as possible for as long as possible, thereby avoiding costly institutional care.

The Executive's proposed budget for SFY 2003-04 eliminates funding for several programs that foster wellness, independence, and community involvement. One such program is the Congregate Services Initiative (CSI) which provides the elderly with services that promote their physical and mental well being in congregate settings, such as senior centers. The Executive also recommends the elimination of funding for Naturally Occurring Retirement Communities (NORC), a program that encourages elderly citizens to remain in their homes and in the community. Other worthy senior programs defunded in the Governor's proposed budget include: the Retired and Senior Volunteer Program (RSVP), a program that achieves the dual goal of providing services to needy citizens while providing encouragement for older volunteers to remain active in the community, and the Foster Grandparent Program, which allows the elderly to become "foster grandparents" to children with special or exceptional needs.

The Governor's budget also provides significantly decreased funding for respite programs. These programs offer services that provide caregivers relief from the stresses or responsibilities of providing care to frail or disabled relatives or friends, thereby enabling the caregivers to maintain the person at home for as long as possible. Again, the Governor's decision to cut these programs is yet another wrong choice in a series of bad choices that will negatively impact New York's vulnerable elderly citizens.

Economic Development

The Assembly has been a leader advocating for comprehensive, progressive economic development policies and has been first in line to recommend new programs to achieve economic growth and create jobs. Many of the significant economic development accomplishments over the last several years-Empire Zones, the Excelsior Linked Deposit Program, CAPCO, and Downtown Development Initiative Grants, and workforce training funds-- were Assembly initiatives. However, in spite of legislative efforts to provide innovative tools to stimulate growth, the lack of a strategic framework by the Executive has continued to contribute to the State's under-performance.

During most of the past decade, although the national economy was expanding and targeted investments were made in the area of economic development, the Executive failed to provide a comprehensive economic development strategy that would have allowed New York State to capitalize on its regional strengths and the booming national economy, despite the Assembly having advanced a comprehensive, statewide economic development strategy. Evidence of these failed policies can be seen in the State's slow employment growth. During the period between 1995 and 2001, the nation's employment grew by 12.6 percent, while New York State employment grew by only 8.8 percent. If New York State employment grew at the same rate as the nation over this period, 289,900 additional jobs would have been created.

New York State's job growth continues to lag behind most other states. New York State is ranked 40th in employment growth when compared to other states. Now, as New York faces what is likely to be one of its biggest budget crises in recent history, it is imperative that the foundation for economic growth not be further undermined. However, the Executive's proposed budget only continues his failed policies of the present, and also devastates the most significant job creation and retention program in New York State, the Empire Zones Program.

Rebuilding Lower Manhattan

In the fourth quarter of 2000, two million people were employed in Manhattan private establishments and 407,700 or 20.6 percent were employed in the area below 14th Street. A year later, in the fourth quarter of 2001, immediately after the attacks of September 11th, the level of private employment fell to 1.8 million; 129,000 jobs were lost over the previous year. Below 14th Street, private employment fell to 363,300; a loss of 44,400 over the previous year. The share of private employment in Manhattan below 14th Street fell from 20.6 percent to 19.7 percent between the fourth quarters of 2000 and 2001. While there are federally funded programs intended to assist the affected businesses in Lower Manhattan, many businesses have complained about arbitrary decision-making, unnecessary paperwork, and undue delays on the part of the state agency administering the programs.

It has been nearly a year and a half since the tragic events of September 11th and the clean up of the site is now complete. However, very little progress has been made either in redeveloping the site of the former World Trade Center and the surrounding area or in creating a memorial to those who lost their lives as a result of the terrorist attack.

Beginning in December of 2001 and continuing to the present, the Assembly has conducted a series of hearings on the future of Lower Manhattan. These hearings have focused on the governance, transportation, economic development, small business, tourism, and insurance issues that remain unresolved. One of the more significant findings of these hearings is a strong indication of an overall lack of coordination on the part of the city, state, and federal agencies involved in the rebuilding and revitalization efforts. This has resulted in confusion and uncertainty over which agencies are responsible and accountable for the various phases of this massive undertaking. As further indication of the administrative and managerial confusion, the Federal Emergency Management Agency (FEMA) recently noted that the State has missed two deadlines for submitting proposals to fund security projects in and around Lower Manhattan for which a minimum of $418 million has been set aside. However, on January 30, 2002, the State finally submitted their $418 million security plan to FEMA. The details of this plan have yet to be released adding further speculation regarding the ability of those agencies involved in the rebuilding and revitalization efforts.

The Assembly has been committed to providing direct assistance to the rebuilding and revitalization of Lower Manhattan. Through its Rebuilding the Empire State Through Opportunities in Regional Economies (RESTORE) New York Program, enacted as part of last year's State budget, the Assembly committed to provide capital support for two major initiatives that will contribute to Lower Manhattan's economic rejuvenation-the Lower Manhattan Bioscience Project and the Institute for Advanced Studies in Software and Information Technology. These projects will generate over 1,300 new jobs and add significant new incubator space in Lower Manhattan.

Small businesses are the economic backbone of many diverse neighborhoods that comprise Lower Manhattan. The unprecedented loss of jobs since September 11th has been exacerbated by a drop-off in tourist traffic to Chinatown, South Street Seaport, and other communities, resulting in a precipitous drop in revenue for the many restaurants, tourist oriented businesses and retailers. Unfortunately, New York City's application to establish an Empire Zone in Lower Manhattan was rejected by the Governor's designation board. The Empire Zone concept, created by the Assembly in 2000, seeks to bolster struggling communities around the State by using a range of tax-based incentives to attract new businesses and support existing ones.

Improving the Upstate Economy

While the Downstate economy struggles to rebound in the aftermath of the World Trade Center attacks and the earlier downturn of the economy, the Upstate economy has also lagged under the Governor's failed economic policies. With its historic dependence on manufacturing, it suffered greatly from the recession of the early 1990's and benefited the least from the prolonged economic boom that began in the mid-1990's. Since the Upstate economy never benefited from the economic expansion, it never really entered a recession in 2001. Rather, it simply experienced acceleration in its ongoing economic decline (see Figure 9).

Figure 9

In fact, Upstate's job growth rate has been virtually stagnant, falling from one half of one percent in 2001 to zero growth in 2002. Furthermore, since the mid-1990's, most of the regions in Upstate New York lagged the State in annual employment growth, with four of the regions growing at less than one-half the rate of the State as a whole. Upstate also lagged the State as a whole for wage growth since the mid-1990's. New York City fueled by Manhattan, was the only region in the State to outpace the State as a whole. (see Figure 10)

Figure 10

A Clear Open Path for Economic Development

The Assembly has long recognized that New York's economy is a collection of diverse regional economies and industry clusters. The Executive's cumbersome, top-down, project-by-project approach to economic development is the wrong choice. It has been slow to respond to differing needs across the State or provide coordinated guidance to help sectors benefit from synergistic growth, thus preventing the State's economy from reaching its full potential. New York has added new programs and organizations for economic development, but without an apparent overall economic development strategy. The development of a rapidly changing, technology-based "new economy" only further highlights the need for flexibility, creativity and responsiveness to increase the State's competitiveness in national and global markets.

Although providing a more strategic focus to State economic development programs is not enough by itself to boost the State's economy, it can contribute to this effort by optimizing the State's valuable, but limited resources and by marketing the State more aggressively as an attractive business location.

New York State should adopt a more comprehensive strategic policy for economic growth beyond the requirements of individual projects and companies. The Assembly has put forward this strategy to capitalize on industries in which the State has a competitive advantage and recognize the economic diversity of the State's regions. This strategic approach should emphasize programs that link research and development funding to jobs for New Yorkers in new industries as well as modernize traditional industries to increase their competitiveness. It should identify the needs of regional economies and make available assistance to revitalize urban centers and main streets, assist small business, promote tourism and maintain a state of the art workforce.

Revitalizing New York's Manufacturing Sector

New York's manufacturing industry has been steadily losing jobs. From 1995 through 2001, the manufacturing industry lost over 106,100 jobs statewide. Furthermore, during this same period, Upstate manufacturing employment declined at more than twice the rate of the nation (New York State Department of Labor). In order for manufacturers to remain competitive in a global economy and provide stable employment opportunities to their employees, they must be able to quickly adapt to rapid technological changes. New York State's diverse manufacturing base, which includes traditional manufacturers and the newer high tech industries, must be an integral component of a comprehensive economic development strategy to reinvigorate the State's economy.

Empire Zones

During the 2000 Session, the Assembly Majority transformed the old Economic Development Zones Program into the Empire Zones Program. As part of the transformation, the Assembly Majority fought for and secured changes to the Program that resulted in the creation of many of the new jobs in the State. This Program is now the most successful economic development program for attracting and retaining business in New York State.

The Program provides vital tax-based incentives to businesses that locate and grow in a Zone and allows them, under certain circumstances, to operate tax-free. The State reimburses the localities for local taxes the expanding employer would otherwise have to pay. However, in his SFY 2003-04 State Budget proposal, the Executive threatens the viability of the Program by requiring localities to pick up 50 percent of the cost of the real property tax benefit offered to new Zone businesses certified as of January 1, 2004. This proposal will have a chilling effect on future job creation efforts as localities would have to weigh the cost of attracting a new business to its Zone.

In addition, the SFY 2002-03 enacted State budget provided for the creation of six new zones. However, many areas of the State, both Upstate and Downstate, were overlooked by a flawed designation process controlled by the Governor. For example, the City of New York's application for an Empire Zone in Lower Manhattan, still reeling economically from the events of September 11th, as well as applications from many Upstate areas that continue to face hard economic times, were rejected in the designation process.

Providing Capital Access to Small Business

Small businesses are one of the major forces driving New York State's economy. Based on data for the second quarter of 2002, small businesses accounted for over 97.9 percent of businesses in New York State and employed 53.9 percent of the State's workforce (New York State Department of Labor). ¹ While small businesses are the backbone of the State's economy, many small business start-ups continue to find it difficult to access much needed financing, especially venture capital. Minority and women-owned businesses are even more susceptible to failure due to their inability to obtain financing through traditional lending institutions.

Originally an Assembly initiative, the Linked Deposit Program provides small businesses with access to capital through "linked loans." These funds allow companies to improve their competitiveness through an increase of sales, enhancement of product development, market expansion, and realization of operational cost savings. In the 2002-2003 State budget, funding authorization for this Program was increased from $200 million to $350 million.

There is also a need for equity investment in small, start-up companies. As the "technology revolution" has changed the nature of the economy, new "knowledge-based" companies, who typically do not possess traditional forms of collateral, require equity, rather than debt financing. Yet, the business assistance offered by the State economic development agencies has tended to be of the more traditional "bricks and mortar" financing.

During the technology boom in the last decade, private venture capital markets grew tremendously, taking equity stakes in new high-tech ventures allowing these firms to take their products and services to market. Although large concentrations of private venture funds were located in New York City, often the actual businesses invested in were located in other states or even internationally.

Recognizing the need to keep a greater amount of venture investments within the State, the Assembly championed enactment of the CAPCO Program, that provides tax incentives for insurance companies to invest in certified venture capital funds which, in turn, make available funds to help small businesses start-up and grow in New York. Since 1998, over $280 million has been raised, with over 74 firms receiving capital critical to their growth. In addition, the Assembly supported authorization for the New York State Comptroller to allocate up to $250 million in state pension funds to qualified investment firms, which provide equity funds to technology businesses.

In the SFY 2003-04 State Budget proposal, the Executive recommends the creation of a new CAPCO Program to provide additional venture capital investment in discoveries that emerge from the State's capital investment in academic research. While the Assembly welcomes the concept of new funds for CAPCO, the Governor's proposal differs significantly from prior CAPCO Programs and must be evaluated in such context.

Today, the economic downturn of the past few years has the private venture capital market "entrenched in the worst slump in its history" according to the National Venture Capital Association. It is critical to New York's economic recovery that the State continues to support private sector investment in technology companies and seek creative ways to fill the gaps in various stages of venture capital investment.

Providing a Skilled Workforce

Improving the skills of the workforce has always been one way to encourage job creation and stimulate wage gains. However, there is uncertainty in funding levels and potential changes in training programs for New York workers. At the federal level, the Workforce Investment Act of 1998 (WIA) is subject to reauthorization in 2003. The program, which provides funding for job training for adults, dislocated worker services, and youth employment, would see declines in federal funding under current proposals. Even with increasing worker retraining needs following the events of September 11, 2001, WIA funds allocated to New York State have remained unspent and may be subject to the recapture provisions under federal law. Because of implementation delays by the Executive, only $43 million of $116 million in 2001 program year funding allocated to New York City was disbursed through November 2002, and none of the City's 2002 program year funding ($96.7 million) had been spent. Even though the program is over four years old, New York City still has only three operational one-stop employment and training centers. Without one-stop centers and a fully implemented system for retraining and reemployment, many workers in New York City unemployed as a result of the September 11th World Trade Center attacks and the economic downturn are severely under-served.

As technology continues to drive changes in almost every industry sector and as new, emerging industries gain significance in the State's overall economy, the demand for a workforce that is technically skilled continues to grow. Without a highly trained workforce, we put New York's present and future prosperity at risk. This shortfall will jeopardize New York State's leadership role in the nation's economy and undermine the growth of the high-tech industry in New York.

According to a recent survey by the U.S. Chamber of Commerce, members of employer organizations have made it clear that a quality workforce is one of their most pressing challenges. Workforce development was a priority of 99 percent of the members of the largest chambers of commerce responding, with 91 percent reporting workforce development as their top priority. The Chamber also reported this month that by 2010 the national labor force would fall 4.8 million workers short of meeting the demands of an estimated 58 million job openings.

The State's Strategic Training Alliance Program, which provides for the development of a technically skilled workforce, was enacted in 1998 and funded at $34 million. The Executive agencies have only disbursed approximately $9 million. Furthermore, only a small percentage of awards and funding has been approved for training projects undertaken by industry alliances or consortia. Providing training assistance to businesses through consortia is an innovative and cost-effective way to ensure that employees are highly trained. The Executive's inability to effectively implement this Program is detrimental to the State's economic recovery. With the current unemployment rate increasing to 6.3 percent in December 2002, the effective implementation of a program that could provide necessary job training that would help retain jobs and avert layoffs should be a priority of the Administration.

Providing Technology Innovation through Increased Collaboration between Industry and Universities

It is imperative that the unsurpassed research and development efforts of the many universities of the Empire State are supported and allowed to prosper. New York maintains a tremendous system of public and private institutions of higher education that provide a unique and comprehensive knowledge base that will continue to serve as an engine of future economic growth.

In order to reap the benefits of the significant investments the State has recently made in research and development, we must formulate a strategic commercialization policy to translate the innovations created at our universities into jobs for New Yorkers. This policy should ensure that academic entrepreneurs have access to appropriate technology transfer services - financing, management, business plan and marketing assistance, and help in navigating the patent process. Additionally, the State should continue its capital support of incubators and accelerators that provide low-cost, flexible, state-of-the-art space where young and expanding technology firms can thrive.

The Assembly has historically supported increased collaboration between industry and universities. The Assembly successfully fought for the creation of the RESTORE New York Program as part of the 2002-03 enacted State budget, which, in part, focuses on the development and improvement of facilities promoting the growth and advancement of high technology research and commercialization efforts in New York State.

In SFY 1999-00, the budget provided roughly $117 million in State support for research and development and capital improvements at research universities, incentive grants for Centers for Advanced Technology and incentives to attract quality research and development faculty. In 2001-02, the Assembly proposed a five-year program providing an additional $525 million in State support for high technology, biotechnology and biomedical research being performed across the State.

Increased cooperation between university centers and high technology sectors has been a key link in the development and commercialization of technological innovation. Whether it is California's Silicon Valley or the Research Triangle of North Carolina, a preponderance of leading research universities has been a key factor in the development of regional high technology clusters. Within New York State there already exists such an accumulation of "intellectual capital". This includes over 360,000 scientists and engineers, roughly 10-percent of the nation's Ph.D's, and more than 185 members of the Academy of Sciences. This existing capacity for new discovery must be nurtured so that technologies of the future will continue to be developed in New York. As new technologies make their way from the laboratory to the marketplace, new business opportunities will be created, spurring on the creation of high-skilled, high quality jobs across New York State.

Tourism

The tourism industry remains an essential component of New York State's economy. In 2001, tourism was directly responsible for over 319,250 jobs and accounted for $11.1 billion in wages (New York State Department of Labor). However, the Executive continually fails to provide a coordinated strategy to facilitate growth of the tourism sector.

The State must focus its efforts on attracting more visitors, thereby bringing new money into New York's economy. Finding ways to stimulate international travel as well as developing a tourism strategy that allows localities to share in the State's successes remain important. The Assembly has long supported partnerships between local governments and tourism promotion agencies to market their tourist destinations throughout the State. Further, local investment in tourism catalyzes regional job growth sustained by traveler demand.

New York has great economic strengths and great potential. The Assembly Majority has fought in the past to establish economic development strategies that promote real job growth in every region and every industry in New York State. In order for New York to reach its full economic potential, the State must focus its limited resources by eliminating bureaucracy, ensuring and promoting the availability of a skilled workforce for the new economy, investing in partnerships between university and industry, investing in programs that revitalize communities, reviving the manufacturing sector, revitalizing tourism and encouraging entrepreneurs and small business growth.

Energy

The Governor's failed electric deregulation strategy has hurt residential and business consumers. Utility rates in New York are consistently among the highest in the nation and electricity prices in New York State have increased faster than prices in the rest of the country. Further, due to suspect accounting practices and a weak economy, the credit ratings of power generators in New York have been significantly downgraded, discouraging new construction and threatening the operation of existing plants. Given concerns about job creation and retention throughout New York, the need for a comprehensive energy policy that encourages economic growth and provides rate relief for business and residents throughout the State should be addressed immediately.

For the past several years, the Assembly has continued to demonstrate leadership in the energy policy arena. To assist families and businesses struggling with high energy prices, the Assembly approved the New York State Transitional Energy Plan (NYSTEP) - a comprehensive energy plan to provide for immediate action to relieve burdens on consumers and protect them from extreme price fluctuations and unfair selling practices. NYSTEP also promoted conservation, energy efficiency and alternative energy resources to lower energy costs and spur job creation. One of the components of this package, the Consumer Protection Act of 2002, was signed into law on December 20, 2002 (Chapter 686, Laws of 2002). This legislation extends provisions of the Home Energy Fair Practices Act to cover all energy service companies, to ensure that consumers continue to be protected in a changing energy market.

The Assembly will continue to advocate for actions that will provide immediate rate relief, balanced economic and environmental energy policy, and provide mechanisms to guarantee market development that offers true customer choice for all New York State energy consumers. Over the past seven years, the Assembly has introduced comprehensive legislation that provided a cautious, instrumental approach toward restructuring the energy industry. Unless the Governor makes the right choices and advocates for similarly sound energy policies this year, New York State will not be able to reach its full economic potential.

Transportation

State Highways and Bridges

The Capital Program of the State Department of Transportation (DOT) is a five-year plan to improve and rehabilitate critical components of the State's transportation infrastructure by providing funds for State and local roads and bridges, transit systems, the State's freight and passenger rail network, airports, ports and canals. The Program also provides funds for economic investments through the Industrial Access Program.

The DOT Capital Program and a number of local road and bridge programs, including the Consolidated Highway Improvement Program (CHIPs) and the Municipal Streets and Highways Program ("Marchiselli"), are supported by New York's Dedicated Highway and Bridge Trust Fund. This fund is comprised of revenues from motor fuel taxes, motor vehicle registration fees, and highway user fees.

The Capital Program is vital to improving the transportation infrastructure, increasing the flow of goods and services, and stimulating economic development and job creation. The Executive has proposed to decrease the highway and bridge construction letting level from $1.75 billion to $1.65 billion.

A sufficient letting level for highway and bridge construction and repair is important to maintaining good transportation infrastructure. The Governor's proposal to decrease the letting level to $1.65 billion for the 2003-04 fiscal year will likely mean the condition of New York State roads will decline.

Approximately 30 percent of the roads in New York have pavement conditions that were rated poor or fair in 2002. Nearly 30 percent of state highway bridges were also rated deficient. An alarming 43 percent of local bridges were rated deficient. Poor pavement conditions and deficient bridges are a threat to the safety of motorists and a tax on the State's economy. Improving the transportation infrastructure in the State is critical to ensuring the safety of motorists as well as keeping New York competitive in attracting businesses and jobs, and promoting tourism in the State.

Federal Transportation Act of the 21st Century

The Transportation Act of the 21st Century (TEA-21) is Federal legislation (Public Law 105-178) that was enacted in 1998 and expires September 30, 2003. The current program allocates $8.1 billion in highway funding and $6.7 billion in transit funding to New York during the 1998-2003 period. TEA-21 requires the Federal government to prioritize highway funding for the States and to provide guaranteed minimum funding levels to the States based on formulas and State contribution levels. States contribute to the funding in the form of highway user fees, fuel taxes and similar revenue. Reauthorization is critical. If the reauthorization fails or if the current level of funding decreases it will greatly impact highway and transit funding in the State. New York must send a clear message to the Administration and Congress about the importance of TEA-21 and be active in securing its fair share of Federal transportation funding.

Mass Transit

New York State transit systems transport approximately 2.37 billion riders over 678 million miles every year. State investments in mass transit benefit all New Yorkers. It has been estimated that for every $1 spent on mass transit, at least $6 in economic benefits is realized. Mass transit is essential to cutting pollution, increasing energy conservation, relieving road congestion as well as bolstering the economic well being of the State. The Executive proposes $1.73 billion in transit aid for transit systems statewide. Upstate transit systems would receive $111 million. Downstate transit systems, excluding the Metropolitan Transportation Authority (MTA), would receive $163 million. The MTA, which serves the New York City metropolitan area, would receive $1.46 billion. New York transit riders account for one third of all transit riders in the entire United States. State mass transit funding supports suburban, urban and rural mobility; accessibility and opportunity for welfare to work program participants; transportation for school children; and accessibility for the elderly and people with disabilities. Additionally, economical and efficient transit systems support businesses by providing transportation for workers and consumers.

Metropolitan Transportation Authority

In November 2002, the Metropolitan Transportation Authority announced it would face budget gaps totaling $2.8 billion in 2003 and 2004. In an effort to close the gaps, the MTA has proposed to increase fares and tolls by as much as 33 percent. The alternative would be funding from State or regional sources. The SFY 2003-04 Executive Budget proposes no increase in State funding for the MTA.

More than 2.3 billion New Yorkers rely on the MTA every year for travel in the metropolitan New York area. Yet, the MTA's budget process is essentially closed to the public. The MTA should be required to improve its budget adoption process to better incorporate valuable public input as well as provide more transparency in its financial accounting practices. Better financial oversight is prerequisite to ensuring that the MTA handles its financial affairs in an accurate, efficient and responsible manner.

The MTA is in the third year of its $18.3 billion 2000-04 Capital Plan. The MTA Capital Plan includes essential network expansion projects like the 2nd Avenue Subway project and access to Grand Central Station for Long Island Railroad (LIRR) commuters. The full-length 2nd Avenue Subway line will extend from 125th Street in East Harlem to Lower Manhattan. The 2nd Avenue Subway project is important because it will relieve over-crowding on the Lexington Avenue line; serve as a new transit line for residents on Manhattan's East Side, who currently are under-served; and provide better access to Lower Manhattan. Access to Grand Central Station from the LIRR will more thoroughly integrate the region's mass transit operation. Moreover, network expansion projects help reduce pollution and traffic congestion by providing additional mass transit options.

The MTA Capital Plan was amended subsequent to the terrorist attack on September 11th to allow for the reconstruction of facilities destroyed with the collapse of the World Trade Center. The MTA has received federal funding and expects to receive insurance reimbursement to assist in covering the costs of already completed repairs and additional 9/11 related reconstruction in the future.

Since September 11th, ferry ridership has doubled in the metropolitan New York City area. The United States Department of Transportation recently announced $11.4 million in funding for a new West Midtown Intermodal Ferry Terminal in New York City. The money is part of a $55 million allocation for New York and New Jersey to expand ferry service, a measure necessary due to the loss of the PATH train service as a result of 9/11.

State support of continued improvements in transportation infrastructure and efforts to maximize mass transportation options is vital to health and well being of New Yorkers and to the State economy.

Public Safety

Homeland Security

Without question, the September 11th 2001 attacks on New York City, Pennsylvania and Washington, DC have had a profound impact on public protection policy and procedure. In response to these acts of terrorism, the Assembly has introduced legislation that is designed to prevent and combat terrorism in its many forms, from the rigorous screening of airport personnel to the criminalization of possession of chemical and biological agents. New York State has seen military, police and other public safety personnel redouble their efforts to enhance the State's security through an increased presence at reservoirs, airports, boarders and bridges. These efforts require interagency cooperation at the local, State, federal, and international levels.

The Executive has proposed the establishment of an Office of Public Security, which would be responsible for the development and implementation of a statewide counter-terrorism strategy. Originally established by Executive Order following the September 11, 2001 attacks on the World Trade Center, OPS is charged with creating coordinated strategies to prevent and counter future incidents of domestic terrorism. The proposed Office would operate a Cyber Security and Critical Infrastructure Coordination program to continually assess the vulnerability of the State's data, communications and geographic information systems. The Office of Public Security will be funded on an All Funds basis at $11.9 million, which includes support for 95 positions.

Statewide Wireless Network

Interagency cooperation within the law enforcement community is fundamental to effective policing. When confronting the possibility of future terrorist attacks on our State this cooperation is paramount. The Assembly will remain committed to the creation and full implementation of a Statewide Wireless Network, allowing for seamless communication between State and local police agencies. At full performance, this network will be available to all agencies performing public safety and emergency response functions.

Enhanced Wireless 911 Funding

A 70-cent surcharge on monthly cellular phone use was implemented during 1991, for the payment of State Police costs related to the operation of a cellular 911 (C-911) emergency telecommunications system. In 1996, implementation of a C-911 program became necessary to come into compliance with Federal Communications Commission (FCC) regulations related to locating and identifying a person in need of assistance when the caller is using wireless or cellular technology. After 10 years and at least $160 million in surcharge deposits to a seized assets account, no real progress has been made in implementing enhanced wireless emergency service. Imprudent allocation of the surcharge revenue, lack of significant cooperation by providers with government, and the lack of Executive leadership have all contributed to the failure to achieve the system that all citizens deserve and that lawmakers envisioned when passing the enabling legislation. Over this same ten-year period, in an effort to comply with the federal requirements, many localities have begun to allocate their own resources to provide this crucial technology.

During SFY 2002-03, the cellular surcharge was raised to $1.20 per month, and a Local Enhanced Wireless 911 program was created. An allocation of $20 million from the State surcharge is provided in the SFY 2002-03 Budget for local reimbursement of eligible costs associated with implementation of wireless 911 service. A framework was established to create a board to disperse these funds on a per capita basis. Despite repeated requests, funding for these purposes has yet to flow to municipalities, thus stalling efforts to spread an emergency wireless safety network. With cellular phone use on the rise and for many New Yorkers replacing land lines altogether, it is time to implement emergency wireless caller locator systems for the safety of all New Yorkers.

Child Care

Thousands of working families in New York State have been able to seek and to retain employment due to the commitment of the Assembly to provide subsidized child care. The Executive proposes a $17 million increase to the Child Care Block Grant contained in the Executive Budget proposal for State Fiscal Year (SFY) 2003-04, bringing the total to $929 million. This level will sustain 183,400 subsidized child care placements, which is the current number of available subsidies, while allowing for a market rate increase for child care providers.

The Executive Budget proposal does not include new funding to continue the SUNY and CUNY child care programs, satellite child care, nor the facilitated enrollment demonstration projects enacted in the current year's budget. The total funding provided in the current year to support these programs is $20.4 million. Moreover, the Governor, again, fails to take advantage of the maximum allowable transfer of TANF funds to the Child Care Block Grant. Maximizing the transfer of TANF funds would have raised the TANF transfer to $488 million, $80 million above the Governor's proposed transfer of $408 million. Such additional funding would support approximately 19,000 additional subsidies. Some 940,000 children under age 13 years in New York State are eligible for child care, and at least 29,158 families are on waiting lists; nevertheless, the State is providing child care for only 183,400 children². Even in times of fiscal crisis, quality, affordable child care is a necessary expenditure. It is an important and integral part of the equation that keeps families moving from welfare to work and helps low-income parents stay employed.

Affordable, accessible, quality child care is of great concern to working families. Moreover, the availability of subsidized care can often mean the difference between employment and public assistance. In addition, quality child care can be instrumental in fostering a child's intellectual and personal development and in teaching appropriate social and behavioral skills. Various studies have shown that a child's earliest learning experiences shape them for life and, that child care, particularly school-age child care, is an effective deterrent to antisocial behavior. As reductions in child care funding are likely to have far-reaching repercussions, a sustained commitment to providing subsidies to working families should be viewed as a government obligation.

With over 29,000 families on waiting lists, the State faces the need to expand both the number of child care subsidies and child care capacity. In SFY 1999-2000 and 2000 01, the Assembly secured appropriations that together totaled $30 million to establish the Child Care Facilities Development Program to create, to renovate and to rehabilitate child care facilities. No such commitment to child care capacity is expressed in the Executive Budget for SFY 2003-04.

Moreover, the Governor's proposal to eliminate universal pre-K in this State has ramifications beyond the positive learning experience that will be denied to our children. Not-for-profit child care providers are an integral part of the system for providing universal pre-K programs through the State. The elimination of pre-K funding could jeopardize present child care capacity if child care providers, operating at the margin, are forced to close as a result of this loss of revenue.

Juvenile Justice

A growing body of research brings to light that after-school supervision that engages children in constructive activity and connects them with caring adults can help develop attitudes and skills that dramatically reduce the instance of risky or delinquent behavior that would otherwise result in their entry into the juvenile justice system.

In SFY 2003, the Executive makes youth proposals that appear to be inconsistent with "prevention" as a goal. The Executive proposes to reduce the Youth Development and Delinquency Program (YDDP) by $4.3 million, the Special Delinquency Prevention Program by $1.042 million, Advantage schools by $4.8 million, and extended day care programs that were partially funded from TANF funds will be operating with $11.3 million fewer dollars. At a time when we can see the benefit of the State's investment in prevention, the Executive is proposing to reduce that investment by $21 million. At the same time, the Executive proposes to reform the juvenile justice system through the implementation of an initiative which includes a community-based intensive supervision program, a reduction in the number of beds in the OCFS residential system, and the transfer of certain juvenile offenders to the Department of Corrections.

While the decline in juvenile crime suggests reform of the system is appropriate, such reform must stay focused on the provision of preventive and rehabilitative services to the children and their families that reduce the risk of their entry or re-entry into the legal system. Moreover, at the centerpiece of such reform should be programs that provide high-risk children with a place in which to be constructively engaged in developmental, educational and recreational activity. In addition, for that small minority for which placement in the OCFS-operated residential system is unavoidable, rehabilitative services and effective community reintegration activity must be a priority.

Social Services

Welfare Reform Reauthorization

Federal authorization of the Temporary Assistance for Needy Families (TANF) Block Grant originally expired on September 30, 2002 but was extended through January 11,2003, spending authorization provided until the end of the State Fiscal Year (SFY) 2002-03. Welfare Reauthorization is expected this congressional session. Many anticipate another extension of the TANF Block Grant at the current funding levels. This is not the appropriate time for the Federal Government nor the Executive to implement new requirements that could make a significant impact on the way New York State utilizes TANF funding by decreasing support for programs that assist individuals most vulnerable during economic instability.

TANF Surplus

New York's $2.44 billion TANF allocation is based on the State's caseload and expenditures from 1995. New York's caseload and expenditures were significantly higher in 1995 than in the subsequent years. As a result of the change in the number of New Yorkers in the TANF program, the State has annually experienced federal TANF funding above the amount needed to support the Federal share of the Family Assistance Program. This funding overage is referred to as the "TANF Surplus". Since 2000, the annual surplus has been approximately $1.5 billion. The Legislature has allocated the TANF Surplus to provide additional funding for children and family services; various employment and training initiatives, including health care, worker training and child care worker recruitment and retention; child care subsidies; and transitional/local program administration.

Many worthwhile programs funded in the enacted SFY 2002-03 Budget which provide much needed services are eliminated or drastically reduced in the Executive's recommended SFY 2003-04 Budget. Programs serving individuals with disabilities, households with small children, persons with basic educational needs, and families seeking preventive or emergency services have been all but abolished in the Executive's budget. This approach simply seeks to leave the most vulnerable individuals behind during these difficult economic times.

Food Stamp Assistance

Many families that continue to be eligible for Food Stamps are not receiving them after securing employment and leaving public assistance. Food Stamps should be a means of supporting families that are making the shift into the workforce. The State must try to improve outreach programs to identify and better serve eligible families. The Food Stamp Program could be made more effective if statewide measures were taken to simplify eligibility rules and adjust the quality control system. If the Executive utilizes the federally funded Food Stamp Program more effectively, additional State resources could be employed to promote more programs for low-income families working towards self-sufficiency. Again, the Executive has failed to implement State social services policies in a way that is both successful at assisting families towards self-sufficiency and cost effective.

Safety Net Assistance

In October of 2001, 111,103 recipients were receiving public assistance through the State's Safety Net Assistance Program. In October 2002, that number increased by 248 percent to 275,736 recipients. Much of this increase is due to the large number of Family Assistance recipients who exhausted their 60 month time limit on Federal TANF and transitioned to the State Safety Net Program.

The Executive's failure to fully utilize the federally allowed exemption status for many of these new Safety Net recipients has cost the state significant dollars. Those individuals exempted from the federal 60-month time limit are still eligible to have their living expenses funded by the Federal Government. Failing to fully utilize the 20 percent exemption provided for by the federal law is the wrong choice because it forces the State and local governments to assume costs that would otherwise be borne by the Federal Government. A more effective use of the exemption would be prudent in these difficult fiscal times.

Mental Hygiene

Mental Health

Events of the past year have shown that the Executive has fallen short in its responsibility to build a coherent, integrated statewide system of mental health services that helps persons who struggle daily with serious and persistent mental illness to lead fulfilling lives. This inattention has resulted in a serious shortage in residential placements, with mentally disabled individuals being placed inappropriately in adult homes and nursing homes where inadequate follow-up by the Office of Mental Health (OMH) allowed them to be neglected and abused. The expiration of the Community Mental Health Reinvestment Act serves to magnify these problems.

The State must take bold steps: to expand the number of supportive, residential opportunities; to move mentally ill persons out of adult homes and nursing homes; to protect the service expansion made through the Enhanced Community Services Program; to continue building up base funding for mental health services; and to re-establish the Community Mental Health Reinvestment Act in order to meet the needs of this vulnerable population.

The Shift to Community Based Services

Tremendous change has occurred over the last 50 years as approximately 85,000 beds were eliminated from the State psychiatric hospital system. The people who would have occupied those beds are now residing in our communities. These individuals require a constellation of services to assist them in meeting life's day-to-day challenges, such as housing with a mental health component; free-standing mental health services; supported employment; case management; social activities; and, in some cases, medication supervision. In its rush to downsize and to achieve General Fund savings, the Office of Mental Health has not planned adequately for the development of sufficient community based mental health services or for placement and follow-up care of patients being discharged from its institutions as witnessed by recent news reports.

Housing

Mental health services are provided most effectively when they are organized around a stable, supportive living situation. Unfortunately, while 85,000 beds have disappeared from the State operated mental health system, only 24,982 residential placements have been developed in local communities and there are few vacancies. OMH has relied on other, less satisfactory, places for persons with chronic mental illness to live.

Between 12,000 and 15,000 vulnerable, mentally ill persons have been placed in adult homes across the State in conditions that range from satisfactory to appalling. Generally, adult homes provide little or no mental health services. Another untold number live in nursing homes. Again, little or no mental health services are provided in this setting.

In response to articles in the New York Times which ran in the spring of 2002, exposing the deplorable conditions in certain adult homes and nursing homes, the Department of Health (which has oversight responsibility for these facilities) formed an Adult Homes Workgroup to develop solutions. A recent report of the Work Group documented the appalling conditions existing in certain Adult Homes that house persons who are mentally disabled and recommended certain remedies. The Executive has proposed that the Commission on Quality of Care for the Mentally Disabled (CQC), the Office of Mental Health (OMH), the Department of Health (DOH) and the State Office for the Aging (SOFA) work together to implement the Work Group's recommendations. Eight million dollars would be appropriated to initiate the following steps: conducting client assessments, improving medication management, enhancing service coordination, providing advocacy services, and expanding social and recreational activities. Providing sufficient residential opportunities with strong mental health supports is essential to addressing the problem.

The shortage of mental health housing impacts other programs. The Mental Health Court, administered by the Office of Court Innovation, seeks to provide alternatives to incarceration for non-violent, mentally ill felons. While the program is proving very successful, the need for housing with mental health supports on premises, as well as wrap around services, is key. Persons who are otherwise eligible for the diversion program will not be accepted until stable housing is found for them. Many more mentally ill persons could be kept out of our jails and prisons if more housing and services were available.

The Office of Mental Health reports that there are 3,013 beds "in the pipeline," i.e., under various stages of development. Moreover, the Executive's SFY 2003-04 budget request includes a new two-phase community bed development proposal that provides $65 million in capital bonding authority to support construction of 1,000 beds (Phase I). The goal of this project is to construct a total of 2,000 new beds to house a mix of persons released from State psychiatric centers, persons with mental illness who had been inappropriately placed in Adult Homes, and persons who are mentally ill and homeless. While this is a laudable goal, and these new beds, together with those beds that are continuing to move forward "in the pipeline", will ease the housing shortage, it must be recognized that capital construction projects to create more bed capacity take a significant amount of time to reach completion. Consequently, the Governor's budget does little to address the pressing, immediate need for more housing with shorter-term solutions.

Facility Closures

The Executive continues its efforts to downsize the State-operated psychiatric center (PC) system in the SFY 2003-04 Budget with proposals to eliminate 90 beds from the system by March 31, 2004 and to close four adult psychiatric centers and one children's psychiatric center over the next three years. In addition, the Nathan Kline Institute for Psychiatric Research would be merged into the New York Psychiatric Institute. The Office of Mental Health workforce is slated to be reduced by 950 people.

Under the Governor's plan, Elmira PC, Hutchings PC, and Middletown PC would be closed by July 1, 2003, while the Bronx PC and Bronx Children's PC would be closed by October 1, 2005. The Executive proposes using savings from the SFY 2003-04 bed and facility closures to support the cost of living adjustment and Medicaid fee increase provided in SFY 2002-03 which total $30 million on a full annual basis. The Governor's plan, however, does not address the impact these closures will have on the affected communities, nor the personal hardship that may be placed on the families of patients who will be moved.

Community Mental Health

The groundbreaking Community Mental Health Reinvestment Act (Chapter 723, Laws of 1993) required that savings from the elimination of adult, non-geriatric beds in State psychiatric centers, as well as savings from facility closures, be "reinvested" in the expansion of community-based mental health programs. Such program growth was needed to serve the tens of thousands of persons no longer being served by the State-operated system. The Act also included provisions to protect various stakeholders -- patients and their families, State employees, and the local communities -- that would be impacted by psychiatric center closures. During its existence, the Reinvestment Act directed funds to community providers through the Reinvestment Program, which grew to provide more than $180 million annually.

The Reinvestment Act expired on September 30, 2001. The Legislature of 2002 passed a new Community Mental Health Support and Workforce Reinvestment Program Bill (A. 11604) that would have placed particular emphasis on increasing and strengthening base level funding for existing programs so as to support workforce retention and recruitment initiatives. Governor Pataki vetoed the bill on December 20, 2002, and in his veto message he indicated that he would submit a new reinvestment proposal in its stead. The Governor's budget proposes Article VII legislation that would create a new Reinvestment Program to channel savings from future bed closures and facility closures to community programs. The new legislation, however, would not take effect until SFY 2004 05.

The State must find ways to confront continuing serious problems: staff recruitment and retention; the severe shortage in housing alternatives that provide mental health care and supervision; and the need for effective oversight of services provided to persons with mental illness in adult homes and nursing homes.

Mental Retardation and Developmental Disabilities

NYS-CARES II

The NYS-CARES program was inaugurated in State Fiscal Year (SFY) 1999-2000 with the goal of eliminating waiting lists of persons living at home that were in need of a permanent out of home residential placement. Many of these individuals are adult children of elderly parents who are no longer capable of caring for them at home. SFY 2003-04 was expected to be the fifth and final year of the initiative with 4,900 beds having been added to the community-based residential system, in addition to expansion of day services and family supports. The SFY 2003-04 Executive budget, however, proposes a new program, NYS-CARES II, that would provide yet another 1,900 new residential beds, 370 new day service opportunities, and increased support for in-home services over the next five years.

Capping Overburden Aid

The success of the proposed NYS-CARES II program may be compromised, however, by another action in the Executive's budget, the proposal to cap "over burden aid." As a result of the de-institutionalization movement, persons with mental illness or mental retardation, who had previously resided in State-operated, State-funded facilities for years, were released to local communities. Virtually all persons being released from these State-run psychiatric centers and developmental centers were eligible for Medical Assistance (Medicaid) coverage for their care upon discharge.

Medicaid is funded jointly by the Federal Government, the State, and localities. As Medicaid recipients, a portion of the cost of their care would have been shifted from the State to counties. In recognition of the many support services this population would need, and the burden the cost shift would place on local taxpayers, the State agreed to absorb the counties' share of the costs of providing services to this group. The fiscal relief provided to local governments is referred to as "overburden aid." Today's policies direct that more and more of those individuals who would once have been institutionalized be retained in the community whenever possible; State aid for the care of these individuals has continued to accrue to the counties.

The Governor's SFY 2003-04 budget, however, includes a proposal to cap overburden payments at calendar year 2002 levels, so that any service expansion would require counties to contribute a local share. The proposed expansion through the NYS CARES II program could impose a fiscal impact on counties that had previously been protected by "overburden aid." If counties take steps to lessen the fiscal impact of new services by discouraging not-for-profit providers from participating in the NYS-CARES II program, developmentally disabled persons needing out-of-home placements and day services would suffer.

The National Economy

According to the Executive, the recession that began in 2001¹ was led by business and caused by the ending of financial market and high technology investment bubbles in 2000. Consumer spending was robust compared to other recessions. Unlike during the 1990-91 recession, consumption spending increased 1.3 percent from the GDP peak to the trough. According to the Executive, the level of consumption can mostly be attributed to housing and auto strength due to low interest rates and automobile incentives.

The Executive's 2003 GDP forecast is 0.4 percentage points below the Blue Chip Economic Consensus (see Table 1). The January 2003 Blue Chip Consensus Forecast is the average of 54 forecasters. Only 5 of these forecasters, or 9 percent, have 2003 GDP growth forecasts as low as the Executive's forecast.

The Executive expects consumption growth to fall to 2.4 percent in 2003 from 3.0 percent in 2002. Non-residential fixed investment is projected to accelerate to 3.5 percent growth from the 5.6 percent decline estimated for 2002. Unemployment is expected by the Executive to average 5.8 percent in 2003, the same as in 2002. The Executive is also forecasting that the stock market will continue to fall, with a 4.5 percent decline in the S&P 500 index expected in 2003.

The New York State Economy

According to the Executive, New York State was hit harder and for a more prolonged period than the nation by the recession that began in 2001. This is especially true of wages, which grew in 2002 for the nation but are estimated by the Executive to have declined for the State (see Figure 1). According to the Executive, we are just now starting to come out of recession in New York State.

Figure 1

The State also suffers to some extent during the current period from the high concentration of the securities industry, which is facing some industry-specific difficulties. In 2000, securities industry profits peaked at $21 billion. Since then, they have declined 62 percent, with profits for 2002 estimated to be $7.9 billion.

The impact of this recession on the New York State economy is also different than the 1990-91 recession. The decline in employment in 2002 is estimated by the Executive to have been milder than in the last recession. However, the decline in wages is estimated to be more severe in the current recession (see Figure 2). This is due to declining variable compensation. Without bonuses, the Executive estimates that wages and salaries dropped 0.1 percent in 2002 compared to a 3.2 percent drop when bonuses are included. In 1991, wages and salaries dropped 0.2 percent with bonuses included.

Figure 2

The Executive expects New York State employment to rise 0.7 percent in 2003 and 1.0 percent in 2004. Unemployment in 2003 is expected to average 5.9 percent for the State, 0.1 percentage points above the national average for the same period. In 2004, unemployment for the State is expected to average 5.7 percent, 0.3 percentage points above the national rate.

The Executive expects wages and salaries to grow 2.3 percent in 2003 overall. In 2004, wages and salaries are expected to grow 4.7 percent. The bonus component of wages for the State is expected to drop 10.4 percent in 2003 following a 23.0 percent drop in 2002. The Executive expects bonuses to be very slow in coming back. In fact, even by the year 2006, the Executive expects bonuses to be 16 percent lower than they were in 2001.

By far, most of the jobs created in New York State since the mid 1990's have been downstate. The exception to this was 2001, when 69 percent of the job loss for the State occurred downstate, and 31 percent occurred in Upstate New York (see Figure 3).

Figure 3

The entire drop in New York State wages in Q4 2001 can be attributed to the securities industry and business services, which is closely linked to the securities industry in New York City. When these two sectors are excluded, wages were up slightly (see Figure 4).

Figure 4

Financial Plan

New York uses a cash basis Financial Plan to report the amount of money that is collected and spent during the State fiscal year. Each year the Division of the Budget develops a plan that shows proposed receipts and disbursements for the coming fiscal year. The plan is then submitted as part of the Executive Budget. It is revised subsequent to enactment of the budget to show the effect of the changes made by the Legislature to the Executive's original budget proposal. The plan is then updated quarterly to revise estimates and reflect actual experience.

The Financial Plan divides receipts and disbursements into different fund categories. The General Fund is the fund into which most State taxes are deposited and from which most state operations and the state share of local grants are disbursed. The General Fund provides for funding to programs that are not supported by dedicated fees and revenues (see Figure 5).

Programs that are supported by dedicated fees and revenue are funded from Special Revenue Funds. These funds are used to insure that monies are used solely for the purpose for which they are raised, or to insure that individual programs are self-supporting. Examples of such dedicated funding streams include the Environmental Protection Fund and the Dedicated Highway and Bridge Trust Fund. When these funds and non-federal capital and debt service funds are combined with the General Fund, the total is known as State Funds.

The State also receives significant budget support from the Federal government, which are reported as Federal Funds. State Funds plus Federal Funds combine to produce an All Funds figure. The All Funds amount is the figure that is usually reported as the State budget total.

Disbursements

General Fund

The Executive proposes General Fund disbursements for State Fiscal Year (SFY) 2003-04 of $38.6 billion, a decrease of $1.143 billion or 2.9 percent from SFY 2002 03. This decrease is the result of new dedication of receipts formerly deposited in the General Fund and programmatic changes to reduce spending.

General Fund disbursements for health and social welfare programs are projected to decrease by $17 million, or 0.2 percent, over SFY 2002-03. Higher education and elementary and secondary education, are projected to decrease by $1.04 billion or 6.4 percent. Medicaid disbursements are projected to decrease by $481 million or 8.1 percent, while public assistance disbursements are expected to increase by $488 million. Mental Hygiene funding disbursements are expected to decrease by $104 million or 4.4 percent, and education disbursements.

Public protection spending is projected to decrease by $64 million or 2.5 percent, while environmental funding is anticipated to decrease by $24 million or 10.7 percent. General Fund support for transportation is expected to decline by $109 million or 40.3 percent.

Figure 5

State Funds

State Funds include the General Fund, Special Revenue Funds (other than Federal Funds), Debt Service Funds, and Capital Project Funds. The Executive proposes that in SFY 2003-04, State Funds disbursements decrease by $73 million for a total of $58.890 billion. This represents a decrease of 0.1 percent over SFY 2002-03 attributable to spending reductions in school aid and higher education, health and mental health programs, and is offset by spending increases in capital projects, debt service, welfare, pension costs and employee health care.

State Funds support for health and social welfare programs is projected to increase by $461million or 3.5 percent. Mental Hygiene disbursements are anticipated to decrease by $38 million or 1.4 percent, while support for education is anticipated to decrease by $850 million or 4.0 percent. STAR Property Tax Relief program disbursements are projected to increase by $40 million or 1.5 percent.

State Funds public protection funding is anticipated to decrease by $16 million or 0.6 percent, while disbursements for environmental programs are projected to increase by $118 million or 13.7 percent. State Funds support for Transportation is anticipated to decrease by $26 million or 0.7 percent.

All Funds

The All Governmental Funds calculation of disbursement figure includes All State Funds plus any Federal Funds received by the State. SFY 2003-04 disbursements on an All Governmental Funds basis are projected to be $90.822 billion, a decrease of $126 million or 0.1 percent over SFY 2002-03.

All Funds spending is estimated to increase substantially for SFY 2002-03 over the SFY 2001-02 as a result in Federal aid that flows through the State to New York city and other localities related to the World Trade Center.

All Funds disbursements for health and social welfare programs are projected to increase by $1.284 billion or 3.6 percent, which is greater than the rate of State Funds spending growth noted previously. Of this amount, $515 million is related to increased Medicaid disbursements. All Funds support for public assistance programs is projected to increase by $192 million or 7.0 percent.

Proposed General Fund Reserves and Uses of the Surplus

In the Midyear Report released in October of 2002, the Executive projected that the State would end SFY 2002-03 with a $716 million surplus in the General Fund, made up entirely of statutory reserves. The Executive now estimates the closing balance for current fiscal year will be $1.183 billion. The main difference is the Executive proposed to balance the SFY 2003-04 budget with an additional $378 million of tobacco bonding proceeds held in the reserves from the tobacco sale proposed for this year.

The Executive estimates the SFY 2003-04 General Fund closing balance to be $730 million, $710 million in the Tax Stabilization Reserve Fund and $20 million in the Contingency Reserve Fund. The Tax Stabilization Reserve Fund is a constitutionally restricted fund that can only be used in the event of a revenue shortfall or deficit situation during a fiscal year.

The State Funds closing balance more accurately reflects funds available for future needs. The Executive's projected closing balance for State Funds for SFY 2003-04 is $1.089 billion.

Budget Gaps

The Executive's Financial Plan reflects the projection of a two-year General Fund gap totaling $11.5 billion. This total is comprised of a $2.2 billion gap in SFY 2002-03 and a $9.3 billion gap in SFY 2003-04. The budget gap in SFY 2002 03 was comprised of a $2.1 billion revenue shortfall and $100 million in additional spending.

The Executive proposes to issue $1.9 billion in Tobacco Bonds this year and $1.9 billion next fiscal year to close the budget gaps. The Executive proposes to use $1.5 billion of the $1.9 billion in tobacco revenues as well as making $700 million in spending reductions to close the projected $2.2 billion General Fund budget gap in SFY 2002-03. The remaining $400 million will be put into a reserve to use in SFY 2003-04 with the additional $1.9 billion in Tobacco Bond proceeds raised next year.

In SFY 2003-04 the gap is substantially larger than the $2.8 billion gap that was originally estimated as part of the Executive's SFY 2002-03 Budget submission. These changes in the budget gap estimates are largely attributable to the continued decline in the rate of receipts growth due to the weakening economy, and increased spending.

Under the Executive's SFY 2003-04 Budget construct, the projected $9.3 billion General Fund gap would be closed by using:

• $2.3 billion tobacco securitization funds;
• $1.4 billion from measures that will generate recurring revenue;
• $1.3 billion school aid reductions;
• $1.0 billion Medicaid and other health care programs;
• $1.0 billion in State agency operations, programs and projects
  (including reduction in workforce);
• $587 million in Federal aid for welfare cost;
• $977 million in Federal maximization
• $516 million in debt management actions; and
• $300 million in spending reductions.

One-Time Actions

In addition, many of the other gap closing actions proposed by the Executive are one-time, non-recurring actions. The following list is illustrative of the one-time General Fund actions encompassed in the Executive's SFY 2003-04 Financial Plan:

Deficit Financing

The Executive anticipates incurring a $2.2 billion deficit at the end of the current fiscal year, and upwards to $9.3 billion in the subsequent fiscal year. The State has few alternatives, in order to close the deficit. The State can issue deficit notes (which are tax and revenue anticipation notes), borrow from the Tax stabilization Reserve Fund, or enact the Executive proposed legislation to securitize tobacco revenues.

Securitization of Tobacco Revenues

The Executive proposed Article VII legislation that would authorize the State to securitize revenues from the 1998 Master Settlement Agreement, which is an agreement between tobacco companies and 46 States, the District of Columbia and five U.S territories. The remaining four states (Florida Minnesota, Mississippi and Texas) have settled in earlier agreements.

Under this legislation, a portion of the State's share of revenues from the tobacco companies will be secured through the issuance of bonds from the Tobacco Settlement Financing Corporation, a proposed new subsidiary of the Municipal Bond Bank Agency. The Corporation would issue bonds amounting to $4 billion to reimburse the States' General Fund in a variety of the following purposes: any capital purpose or programs; payment of debt service for any of the states' obligations; for grants to local governments, school districts or public benefit corporations; or a revenue source for other state expenditures. The bond proceeds from the securitization of tobacco revenues is one option the Executive has proposed to restore a balance budget for fiscal year 2002-03 and in subsequent State budgets.

Furthermore, unlike many states and municipalities that have issued bonds secured by tobacco payments, the Executive proposes to use certain revenues of the State of New York Mortgage Agency to enhance the creditworthiness of the tobacco bonds that would result in reducing finance costs to repay the bondholders.

Deficit Notes

The State can issue deficit notes (tax and revenue anticipation notes) to close the current budget gap. The State would be obligated to repay the tax and revenue anticipation notes within twelve months after the notes are issued.

Tax Stabilization Reserve Fund

In the event of a deficit, the $710 million deposited in the Tax stabilization Reserve Fund, would be used to reduce the General Fund budget gap. The amount of monies transferred must be repaid in at least three equal installments within a period of six years from the date of the transfer. The Tax Stabilization Reserve Fund can also make temporary loans to the General Fund but such loans must be repaid within the same fiscal year.

Any of these options, could be used in closing the budget gap for the current fiscal year. In the Executive budget, securitization of tobacco revenues is the main solution to closing the budget gap.

Figure 6

Figure 7

Figure 8

Figure 9

Capital Program and Financing Plan

The Capital Plan recommends $5.64 billion capital spending in SFY 2003-04, an increase of 11.5 percent or $581 million over SFY 2002-03.

Transportation spending accounts for $3.1 billion of the proposed capital spending for SFY 2003-04. The remaining capital spending projection includes $825 million for Environment and Recreation, $471 million for Education, $258 million for Public Protection, $202 million for Mental Hygiene, $592 million for Housing and Economic Development, and $203 million for all other categories of capital projects.

The Executive's proposed Federal Funds pay-as-you-go share of capital spending is to remain the same for SFY 2002-03 and SFY 2003-04 at 29 percent. State Funds pay-as-you-go share of capital spending is reduced from 23 percent in SFY 2002-03 to 21 percent in SFY 2003-04. The Public Authority debt share of capital spending is increased to 45 percent, from 43 percent in SFY 2002-03 and General Obligation debt financing for capital spending remain unchanged with five percent of the total capital spending in SFY 2003-04.

RECEIPTS

SFY 2002-03

The Executive proposes to securitize the State's share of receipts from the tobacco manufacturer Master Settlement Agreement, which is expected to provide an additional $1.9 billion in Miscellaneous Receipts in State Fiscal Year (SFY) 2002-03. General Fund Receipts, including transfers from other funds and Tobacco Securitization proceeds are estimated at $39.94 billion, a decrease of $1.21 billion from SFY 2001-02. Adjusting for Refund Reserve Transactions, STAR Fund Deposits, and Revenue Bond Fund Deposits, General Fund Tax Receipts are estimated to total $34.24 billion, which is $2.85 billion below SFY 2001-02 levels.

Significant downward revisions since the Mid-Year Update include:

• Decrease in PIT collections of $1.8 billion
• Decrease in User Taxes of $53 million
• Decrease in Business Taxes $320 million

Much of the overall decline in General Fund Receipts is attributable to the "settlement" of Tax Year 2001 liability which was due April 15. However, continued weakness in the economy has also resulted in large declines in bonuses and capital gains, and sluggish withholding due to wage declines, leading to significantly deflated Personal Income Tax receipts.

Dramatic Reversal from Executive's Mid-Year Financial Plan

In late October, when the Executive released the Mid-Year Financial Plan Update, revenue projections for SFY 2002-03 remained unchanged from the Enacted Plan, which was released in May. At that time, the Executive projected revenues to decline by a mere 1.7 percent, or $634 million for the entire fiscal year. However, as of September 30, 2002, which was midway through the 2002-03 Fiscal Year, General Fund Tax collections had declined by more than $2.1 billion, or 11.7 percent, from the same period in the previous fiscal year. Therefore, given the level of tax collections to that point, revenues would have had to grow by an unrealistic 8.4 percent during the final six months of the fiscal year in order to reach the Executive's Mid-Year estimates.

In conclusion, the Mid-Year Financial Plan Update significantly overstated receipts in light of what was known then and what has happened since. By putting off any recognition of the size of the current fiscal year deficit until after the November election, the Executive has created a crisis atmosphere that he claims can only be solved by costly non-recurring revenue actions that push the State's financial problem onto future generations.

SFY 2003-04

The Executive forecasts General Fund Receipts to be $38.19 billion, a decline of $1.75 billion or 4.4 percent. General Fund Tax collections, however, are forecasted to total $35.06 billion, an increase of $816 billion or 2.4 percent. Despite this increase, the decline in overall General Fund Receipts can be explained by year over year declines in Transfers from Other Funds and Miscellaneous Receipts, increased STAR fund dedications and Refund Reserve funds, which negatively impact receipts by $2.5 billion. In an effort to bolster receipts, the Executive has proposed raising $1.46 billion in new taxes and fees and using an additional $1.9 billion in Tobacco Securitization proceeds.

The Executive's forecast for continued weakness in receipts growth for the upcoming fiscal year is attributed to a combination of non-recurring revenue actions in SFY 2002-03 and an economic forecast that predicts that New York's recovery from the recession will continue to lag that of the Nation overall.

Tax Cuts Still Being Phased In

The Assembly has two main tax policy goals -- job creation and the reduction of tax burdens on the State's working families. Many of the previously enacted tax cuts that are still in the process of being phased in are in line with those goals, and include the following:

Working Families

The Legislature has enacted numerous tax reductions aimed at alleviating the tax burdens felt by middle class families.

Marriage Penalty

In an effort to help reduce the income tax penalty facing married couples, the Assembly proposed to eliminate this penalty by increasing the standard deduction from $13,000 to $15,000 for married couples filing jointly. Legislation enacted in 2000 largely eliminated this penalty by increasing the standard deduction to $14,600 over a three-year period. The last phase of this program is for the 2003 tax year.

College Tuition Deduction/Credit

To help make college more affordable for working families, legislation enacted in 2000 provides taxpayers with a choice of an itemized deduction or a refundable credit for qualified tuition expenses. When fully implemented, the itemized deduction will be 100 percent of qualified tuition expenses up to $10,000. For qualified tuition expenses of up to $5,000, the credit will be the lesser of $200 or tuition paid. For qualified tuition expenses between $5,000 and $10,000, the credit will be equal to four percent of tuition paid. The credit and deduction are currently being phased in over a four-year period, and will be fully effective in Tax Year 2004.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) benefits working families earning less than $34,692 annually. Taxpayers with no children may qualify for the credit, but must be between the ages of 24 and 65. Legislation enacted in 2000 increased the EITC from 25 percent to 30 percent of the federal credit over a two-year period beginning in 2002. In 2002, the State credit was increased to 27.5 percent. The credit will be further increased in 2003 to 30 percent of the federal credit.

Long Term Care Insurance Credit

Effective for tax years beginning on or after January 1, 2002, taxpayers are able to claim a credit equal to the cost of 10 percent of a taxpayer's long-term care insurance premiums.

Job Creation

Over the past several years, the Legislature has enacted several tax reductions to promote a better business climate in New York State. Some of these reductions are still being phased in, and include the following:

Sales Allocation for Financial Services

Given that New York is the financial capital of the world, the financial sector is vital to New York's economy. To help make this sector more competitive, the method by which financial services companies allocate receipts was changed from the location of the service performance to the location of the customer's domicile. This change encourages financial services to expand both their payroll and their property holdings in New York State.

Utility Tax Reform

In 2000, legislation was enacted to change the method of taxation for utility companies from a gross receipts base to a net income base, and the Gas Import Tax was eliminated. These changes were phased-in over a four-year period, and will be fully effective in Tax Year 2005.

Sales Tax on Energy

Beginning September 1, 2000, a four-year phase-out of the Sales Tax on the transportation, transmission or distribution of gas or electricity became effective.

Small Business Rate Reduction

Small business has been an engine for job growth in recent years. To provide assistance to these businesses, the Legislature reduced the Entire Net Income rate of 7.5 percent that small corporations owe under the Corporate Franchise Tax to 6.85 percent, which is the same tax rate that businesses pay under the Personal Income Tax.

TAX INCREASE PROPOSALS

The Executive has proposed various tax increases that total approximately $721.4 million in SFY 2003-04, and $630 million when fully implemented. These proposals include:

Reinstate Sales Tax on Clothing   $523.4 Million
The Executive proposes to eliminate the current State and local Sales and Compensating Use Tax exemption for articles of clothing and footwear costing under $110.

Raise the Premium's Tax Base to 2% of Premiums  v$158 Million
This proposal would replace the current Insurance Tax, which consists of a combination of net income tax and a premiums based tax, with a tax based entirely on premiums. The tax would be equal to 2% of premiums.

Increase Limited Liability Company Filing Fee   $25 Million
Increases the filing fees under the Tax Law for limited liability companies and limited liability partnerships. The minimum and maximum fees are raised to $500 and $25,000 respectively. The filing fee is $50 times the number of members of the company or partners, as of the last day of the taxable year. Under current law, the minimum fee is $325, and the maximum fee is $10,000.

Initiate Withholding for Nonresident Partnership   $15 Million
Requires payments of estimated tax by partnerships, limited liability companies, and S corporations on behalf of nonresident individual partners, members, or shareholders and on behalf of all partners, members, or shareholders that are C corporations.

Decouple From Federal Expensing for Certain SUV's
Decouple from the special Federal expensing option for certain vehicles over 6,000 pounds. This proposal will increase receipts by approximately $2 million annually when fully implemented.

REVENUE REDUCTION PROPOSALS

The Executive has proposed various tax reduction proposals that will reduce receipts by approximately $238 million when fully implemented. These proposals include:

• Provides taxpayers/homeowners with a State tax credit for rehabilitating an historic home. Will reduce personal income tax receipts by $10 million annually starting in 2004-05.
• Establishes a fourth certified capital company program in order to encourage investments in high technology companies through State-supported research centers. This proposal will reduce revenues by $12.5 million per year for 10 years beginning with SFY 2004-05.
• Changes the VLT program by increasing the hours of operation; altering the distribution of receipts, and eliminating the current sunset provision.
• Provides four one-week exemption periods for clothing and footwear items costing less than $500.00. This proposal would reduce revenues by approximately $228 million annually when fully effective.

SCHOOL TAX RELIEF PROGRAM (STAR)

In order to realize savings in this fiscal year, the Executive is proposing to freeze School Year 2003-04 STAR benefits at their School-Year 2002-03 levels. This proposal is expected to save the State $93 million in STAR reimbursements.