Legislative Updates

The Riddell Group, LLC 119 Washington Ave., 2nd Flr. Albany, N.Y. 12210 Phone: (518) 434-7400/Fax: 434-0558

Memo

To:	All Clients
From:	Glenn T. Riddell
Date:	8/9/10
Re:	Update for the Week of March 22nd

2010-'11 Budget – Update

The battle lines – or at least the negotiating positions – separating the State Senate and Assembly became clearer today as Assembly Democrats offered their 2010-11 budget plan in the form of a resolution they passed Wednesday. The Senate had already passed their budget resolution which had a larger cut to school aid than the Assembly but does not include a plan to borrow $2 billion as part of a "Recovery Act" devised by Lt. Governor Richard Ravitch. The Senate budget plan approved Monday comes in at $136.2 billion while the Assembly's is $136.7 billion and the budget proposal by Governor Paterson is at $134 billion.

School aid offers a major problem as Governor Paterson and Senate Democrats want to cut $1.4 billion, while Assembly Democrats want $800 million in reductions, in effect restoring $600 million. As a result, Governor Paterson began preparing Wednesday for a budget that will not arrive at his desk until well past the April 1st deadline, which is one week from today. The Governor has submitted legislation allowing the State to pay its bills through April 11th and keep the public employee payroll running through April 14th. After that date, cash flow requires separate pieces of legislation to be introduced. "We will keep government running", Governor Paterson said, "but will also be preparing the people of this State for some very, very tough sledding over the next period of time until we're able to generate more revenues." After this Friday, March 26th, lawmakers will be out of Session for the Easter and Passover holiday periods and are not scheduled to be back in Albany until Wednesday, April 7th.

Highlights of Senate Budget Resolution

The State Senate, voting along party lines, passed a Budget Resolution this past Monday that leaves intact many of Governor David Paterson's cuts to education and healthcare but ignores a proposal to borrow $2 billion. The Resolution to move forward on the $136.2 billion spending plan still needs fine-tuning which will probably happen through joint Assembly/Senate Conference Committees. All 32 Senate Democrats voted for the Resolution Monday while 29 of the Republicans voted against it with Senator Tom Morahan (R) New York City absent due to illness.

The Budget Resolution which several Democrats describe as a road map made no mention of the plan recently developed by Lt. Governor Richard Ravitch that includes $2 billion in borrowing along with some new constraints on future budgets. Also missing was Governor Paterson's proposal for a tax on sugary drinks ($465 million), increased cigarette taxes ($210 million), tighter regulation of health insurance rates ($216 million), and a long-debated proposal to allow the sale of wine in grocery stores ($253 million). The Democratic plan passed by the Senate does call for raising $700 million by refinancing the income stream from tobacco bonds that the State currently gets. Senate Democrats are also counting on $250 million from taxing cigarettes sold on Indian Reservations, a measure which like wine sold in grocery stores, has been debated for years. In addition to the $1.4 billion cut in school aid, the Senate proposal also includes an $800 million cut in higher education.

All told, the Senate's Resolution includes a total amount of expenditures including Federal monies that goes from $133.1 billion to $136.2 billion with the General Fund portion going from $53.3 billion to $54.3 billion. It was explained that the jump in All Funds amount is due to the State's pushing forward some expenses with their roots in earlier years, such as payments due from a 2005 debt restructuring. Conference Leader Senator John Sampson said Monday's Resolution was a big step forward in finalizing the 2010-11 budget. However, there is a general feeling that because of the 32/30 slim majority that the Democrats have that Senator Sampson will have to continue to work hard to keep all of this 32 members on board given the political hazards of supporting a spending plan that includes school aid cuts in an election year.

Highlights of Assembly Budget Resolution

"Our plan addresses New York's $9.2 billion budget deficit through a combination of responsible spending, critical budget reforms, while protecting programs and services of New York's working families and rejecting $1 billion in proposed taxes and fees," said Sheldon Silver, Speaker of the Assembly (D) Manhattan.

The Assembly budget restores more than $475.4 million in funding for New York City that were eliminated in Governor Paterson's original budget proposal including a restoration of $150.8 million in AIM funding, $193 million in school aid, $18.5 in Title XX funding for NYC seniors, $92.5 million for NYC's adult homeless shelters and $13.5 million for summer youth employment. The Assembly budget resolution also rejects the Governor's proposal to increase the MTA payroll tax in New York City and restores the Governor's proposed cuts to New York City STAR property tax relief.

In terms of health care, the Assembly Resolution reduces health care cuts by $126 million, rejecting $32 million in cuts to hospitals, $25.9 million in cuts to nursing homes, and $36.5 million in cuts to home health care.

In terms of insurance, the Assembly proposal reinstitutes the requirement that health insurance companies may not increase premiums on certain plans without prior approval from the State Insurance Department.

In terms of the environment and parks, the Assembly's budget proposal averts the closure of 91 state parks and historic sites by providing $11.25 million in funding, $2.1 million in restored fee revenues and an additional $25 million to the State Environmental Protection Fund. In terms of higher education, the Assembly majority accepts the Governor's $109.9 million reduction to SUNY state-operated colleges while rejecting the base aid cut to SUNY and CUNY community colleges.

In terms of agency consolidation, the Assembly budget includes a proposal for agency consolidation and shared services that will save over $30 million to a variety of merges of state agencies that share similar objectives.

Regarding prison closures, the Assembly accepts the closure of Lyon Mountain and Butler Correctional Facilities, as well as the consolidation of several medium-security dormitories, which will save $7 million this year and $52 million in subsequent years.

With respect to taxes and fees, the Assembly budget proposal rejects $1 billion in new taxes and fees as proposed by the Governor, including the syrup tax, cuts to the STAR program and selling wine in liquor stores. However, the Assembly plan does include a $1.00 increase on cigarettes bringing the tax to $3.75 for a pack of 20.

The $2 billion in borrowing was part of a five-year recovery plan offered by Lt. Governor Ravitch, who has said he believes that closing the current budget gap of more than $9 billion in an election year without such a plan is politically impossible. Assembly Democrats said they adopted most of Ravitch's plan, which includes putting the State on a GAAP or Generally Accepted Accounting Principles budget system. Some of the details in the Assembly Resolution tweaked Lt. Governor Ravitch's plan, such as the amount of time needed to determine whether the budget was in balance or not. The Assembly Democrat's proposal provides more time which officials said was more realistic.

Governor Paterson's Response to Senate & Assembly Resolutions

Governor Paterson responded to the Assembly's $136.7 billion budget proposal, like the one approved by the Senate on Tuesday was unacceptable and would prevent the necessary three-way deal before the current budget expires next Wednesday. The Governor indicated that because they were so far apart we will be unable to pass a budget on time and that we will have to go to a very bare bones, almost austerity appropriations plan. With the prospects of an on time budget looking grim, Governor Paterson warned Thursday that a late budget would mean paying for local governments and school districts. The Governor has submitted emergency appropriation legislation that would make only payments required by statute or contract for a few weeks if the Legislature doesn't reach a budget agreement by April 1st, the start of a new fiscal year. The Senate and Assembly plan on passing this emergency appropriation legislation today before they leave Albany with an anticipated return of April 7th.

Governor Signs a Number of Bills

Governor Paterson signed eight bills into law including A.602 (Cahill)/S.6724 (Addabbo) which relates to permitting all State-paid uniformed court officers to execute bench warrants. This bill will provide a more efficient use of law enforcement officials' time.

Ground Zero Pact Reached

After years of delays and months of negotiations, Ground Zero developer Larry Silverstein reached a tentative deal yesterday with the Port Authority for him to build two of his planned office towers at the World Trade Center site. But the plan, which will take up to three months to turn into a formal agreement, requires that Silverstein come up with $300 million of private financing for his second office tower and that he had leases in place for 1/5 of the building space. If Silverstein meets the Port Authority's requirements, the Agency, along with the City and State, will help him finance the $2 billion tower by providing guarantees, or a backstop, for as much as $390 million of the financing. The City would also agree to forego $130 million it would expect to collect over thirty years from the building as payments in lieu of taxes. The State will kick in $80 million in cash. Silverstein also would use all his remaining insurance money, roughly $600 million for the construction of his first two towers, instead of saving some for the third. He would apply all of his liberty bond financing to the first two towers. Despite the remaining hurdles, Silverstein called the proposal "great news for New York." "Today's agreement between my company and the Port Authority will accelerate the rebuilding of the World Trade Center," he said.

Department of Correctional Services – Hearing

In a hearing conducted by the State Senate, Department of Correctional Services Commissioner, Brian Fischer, told lawmakers this Wednesday that he is trying to cut costs, but has certain priorities such as keeping an administrator in each of his 68 prisons and that he is restricted from cutting because of various state mandates. His testimony follows a report in January of this year by Senator Jeffrey Klein (D) Bronx, and Senator Diane Savino, (D) Staten Island, about the need to cut spending at DOCS. At the hearing, Senators Klein and Savino focused on substantial overtime being worked by prison staff that not only bolsters income but will eventually boost pensions. The legislators also questioned the commissioner about the size of the administrative staff compared to the number of correctional officers. Earlier in the day Assembly Republicans conducted a news conference criticizing Commissioner Fischer's management, suggesting he was sacrificing security for Central Staff jobs. However, the Commissioner responded by saying that Central Staff at a level of 739 employees is a small part of a workforce of almost 30,000 and many personnel are rotating into posts that are vacant. He did concede however that it "may be time to see if we are over-budgeted and over-staffed" Fischer said.

State Homeland Security Chief Quits

Thomas Donlon, Director of the State Office of Homeland Security, will be leaving the Paterson administration sources said. Donlon, who was appointed to his $136,000 per year post in 2009, had been considering an exit for some time and announced his departure to his staff this past Tuesday. Governor David Paterson proposed consolidating his agency with several others in this year's budget. When Donlon asked senior officials for assurances he would head the new agency, a commitment was not forthcoming according to a source familiar with the situation.

Political News

Democratic Senate Majority – Labor Unions

Indications are that the Senate Democratic Campaign Committee is considering the creation of a Labor Advisory Council which will provide labor unions with the opportunity to meet with Senate Majority leaders and will actively participate in the essential policy conversations that help construct the Democrats 2010 campaign strategy. Indications are that Chairmanships on the newly created Labor Advisory Council will have the unique opportunity to advise Senate Democrats on the structure and focus of the Council. It was indicated in a letter from Senator Jeff Klein of the Bronx that these Chairmanships would cost $50,000 a piece and for labor leaders unwilling to kick in the $50,000, Senator Klein offered a second-tier "General Membership" of $25,000 a piece. Senator Klein's letter was sent as Senate Democrats hinted they might be willing to drop their support for $2 billion in State education aid and health care cuts that are strongly opposed by the teachers and health care workers unions.

Quick to negatively react to this proposal was the N.Y. Public Interest Research Group (NYPIRG) as expressed by their Director, Blair Horner. Criticism also came from the GOP through spokesman John McArdle. However, Senator Klein said the letter was a "fundraising tool" but conceded it would give labor leaders "an opportunity to have face time with the leadership of the Senate. It should be pointed out that State law permits the Senate Democratic Campaign Committee to accept contributions of as much as $94,200, while individual lawmakers can accept top donations of $9,500.00.

Senate Democratic Majority – Businesses

As a follow up to the story about the labor unions, indications are that the Senate Democratic Campaign Committee is also soliciting campaign cash from business leaders. A solicitation was sent out to business leaders similar to the one sent to labor leaders that indicates that they will create a Business Advisory Council that will consist of a core group of leaders in the business community who will actively participate in the essential policy conversations that help construct our 2010 campaign strategy. The Democratic Senate Campaign Committee asked for a minimum contribution of $25,000 from businesses, which is half of what they solicited from labor leaders. The solicitation drew rebukes from good-government advocates as well as Governor David Paterson. However, Senate Democratic Conference Leader John Sampson (D) Brooklyn defended the move by indicating that "this is just a fundraising mechanism and that nobody's twisting anybody's arm."

Governor's Race – Update

Suffolk County Executive Steve Levy met with Republican legislators at the Capitol yesterday and according to sources, emerged unbruised, which is about as good an outcome as an enrolled Democrat seeking the GOP nod for Governor could expect. Most of the legislators are backing former Congressman Rick Lazio, who is working to fend off Levy's threat. Levy said he received a "warm and courteous welcome" from Republican Senators, and that he would" work to elect like-minded people" if named the GOP standard-bearer. Levy said he was surprised at how receptive the members were, how much they wanted to win and get their majority back and after the meeting, I had a sense that I have the right message and I'm the right messenger that can articulate it. Responses from Republican Senators were mixed. They thought that Levy was enthusiastic and had a forceful, conservative message and that they were "excited" for the competition however Senate Minority Leader Dean Skelos says he remains in Lazio's camp. In fact, Lazio signed a pledge Wednesday promising not to raise taxes which was welcomed by the leader of the Conservative Party, Michael Long who lauded him as someone who "will break the perpetual cycle of taxing and spending."

Senator Malcolm Smith Senate President Malcolm Smith has hired prominent criminal defense lawyer Gerald Shargel to help him deal with mounting investigations. Shargel, was hired two weeks ago amid a U.S. Attorney probe into New Direction, a non-profit founded by Smith and Congressman Gregory Meeks. Shargel is also aiding Smith with a State Inspector General probe into the ill fated Aqueduct Raceway Racino Project. "I think the Senator is blameless in both of these issues. He has acted in an entirely professional, competent and ethical way and has done absolutely nothing wrong," Shargel said.