Posted on 29 Mar 2011
New York Governor Andrew M. Cuomo and leaders of the Legislature announced on Sunday the outlines of a $132.5 billion budget that would cut state spending, impose no major new taxes, begin a long-term overhaul of the state’s bloated Medicaid programs, and create a new Department of Financial Services by merging the existing state banking and insurance agencies.
The agreement comes five days before the March 31 budget deadline, offering the prospect of Albany’s first on-time budget in five years, in what Mr. Cuomo and his counterparts in the Legislature said they hoped would signal a new day of responsible budgeting and effective government in a Capitol long criticized for its gridlock and dysfunction. The deal would end a temporary income tax surcharge on high-income New Yorkers, which some have called the "millionaire's tax" even though it affects incomes starting at $200,000 annually.
Mr. Cuomo’s aggressive and strategic approach to negotiations appeared to have yielded significant victories, including a year-to-year cut of more than $2 billion in spending on health care and education, the two largest drivers of New York’s ever-growing budget. Mr. Cuomo and the Legislature also agreed to create a new Department of Financial Services by merging the existing state banking and insurance agencies, as well as other consolidations.
“I have said that New York is at a crossroads — one road leading to further dysfunction and decline, the other towards fiscal responsibility and government efficiency,” Mr. Cuomo said in a statement. “I believe this budget puts us on the right path.”
The Department of Financial Services is to consolidate the functions, operations and staff of the Banking and Insurance Departments, along with related segments of the state’s Consumer Protection Board, according to the governor’s budget presentation in February.
His budget recommended $564 million in funding for the combined department, up 1.1% over the combined 2010-2011 budgets of the individual banking and insurance departments. The funding would allow more on-site examinations of insurance companies, resulting in “savings to the insurance industry by reducing costly direct-pay examinations for which insurers contract with outside vendors to fulfill regulatory requirements,” according to Gov. Cuomo’s February proposal.
The proposal also requested that the Department of Financial Services, whose superintendent would be appointed by the governor with consent of the state Senate, would be charged with ensuring “the safety and soundness of all regulated entities.”
The budget deal also adds a total of $250 million to Mr. Cuomo’s original proposal, including more dollars in education aid for the blind and deaf, human services and higher education. Mr. Cuomo also agreed to abandon a cap on so-called “pain and suffering” damages for victims of medical malpractice, a controversial measure avidly sought by the hospital industry in exchange for its support of significant cuts to health care spending.
The deal includes a substantial cut of 3,700 prison beds, but does not specify which prisons might close in the coming months, a significant issue of contention for Senate Republicans, some of whom represent districts in which prison facilities are major employers. Another important unresolved issue is the geographic distribution of school aid, a matter Mr. Cuomo and the Legislative leaders said would be hammered out in the coming days but which holds the potential to rile many rank and file lawmakers.
“This budget agreement keeps our Senate Republican commitment to reduce spending, cut taxes and empower the private sector to create jobs,” said Dean G. Skelos, the Republican Senate majority leader. “We have tightened our belt and protected middle-class families in every region of this State.”
Dashing the hopes of many Democratic lawmakers, including the bulk of the New York City delegation, the budget included neither an extension of state rent regulations — slated to expire in June — or of the temporary income tax surcharge on wealthy New Yorkers, a measure that has drawn support among Democrats and even some Senate Republicans as a way to further offset Mr. Cuomo’s proposed cuts to schools and other programs.
Sheldon Silver, the Assembly speaker, said in a statement: “Government had to tighten its belt with the same sense of urgency that working families have been tightening their belts since the economy went into freefall in 2008. The sole consolation is that working with the Governor, we were able to achieve critical restorations which will soften the cuts affecting working families, our senior citizens, our most vulnerable populations and the children in our classrooms.”