TAX NEWS - 2010

Albany Tax: Albany set to restore $425 million in education cuts

ALBANY — Negotiators at the State Capitol have tentatively agreed to restore nearly one-third of the $1.4 billion in cuts to public schools sought by Gov. David A. Paterson.

But officials are still divided over whether the additional funds steered to districts should go entirely to property tax relief or for spending to restore program cuts or teachers facing layoffs.

To pay for the added school spending, as well as other programs, Paterson said Thursday that the upcoming state budget will include about $1 billion in tax hikes and other revenue-raising ideas.

Among the plans being pushed are higher sales taxes on clothing purchases, deduction limits on what the state's super-rich give to charities and deferring a couple dozen corporate tax breaks.

While nearly 70 percent of the expected price tag of the budget has been adopted through emergency spending bills passed since the April 1 beginning of the fiscal year, the sides have still not publicly agreed on a final deal for state aid to public schools, various programs for the state university system and tax hikes.

"These are tough choices. It's time to make them," Paterson said.

Officials say a tentative deal is in place to restore about $425 million in aid to public schools. Since schools have a different fiscal year from the state, it would be worth about $600 million.

Because most schools already have passed their budgets and at levels that took into account Paterson's cuts, Democrats who control the Senate want to earmark the extra aid to property tax relief. Assembly Democrats want to provide an exemption to current law — which says the money could only go to reserve funds or property tax relief — to permit schools to spend the money even though their budgets are already approved by taxpayers.

"We would prefer those restorations be left to the local decision-makers as to how that money might best be used," said Timothy Kremer, executive director of the New York State School Boards Association. He said some districts could afford to give tax breaks, while others might want to use the money to hire back laid off teachers.

Paterson again warned that if the final budget is not in place by Monday, he will force lawmakers to choose between a final emergency bill — which will have the cuts and tax hikes he wants — or shutting down a portion of state government.

However, some lawmakers say the threat is holding up a final deal. "No," Assembly Speaker Sheldon Silver said when asked if he was certain Paterson wants a deal.

Some lawmakers believe Paterson wants to go through with his "showdown" vote threat on Monday as both a way to control the final elements of the budget and to look strong to New Yorkers in his last budget before leaving office at the end of the year.

As for taxes, Paterson is trying to keep alive a tax killed by lawmakers weeks ago: a new levy on sugar-flavored beverages. The governor wants it as a way to reduce obesity levels, and to raise nearly $500 million this year.

Also still alive is a plan to end the current 4 percent state sales tax exemption on clothing and shoe purchases valued over $110. There is also a tentative deal to defer business tax credits, though exactly how is still being negotiated. And those New Yorkers earning more than $10 million a year would see their state deduction for charitable contributions cut in half.

One of the last stumbling blocks to a final deal continued to be over a plan, promoted by Paterson but opposed by Assembly Speaker Sheldon Silver, to let the State University of New York impose annual tuition hikes instead of the "spikes" that occur every few years. The plan, pushed heavily by the University at Buffalo, would also let SUNY keep the proceeds of the new tuition hike instead of having Albany control the funds, and make it easier for campuses to enter into partnerships with businesses.

The plan picked up both support and opposition Thursday.