Governor Paterson’s 2010-11 Five-Year Financial Plan includes a helpful table summarizing the sources of state spending growth over the past 10 years.  The numbers highlight the favored status of education during a period that saw one of the greatest spending run-ups in New York’s history.

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Last week, an item was posted here about Governor Paterson’s somewhat puzzling announcement implying (seemingly) that his 2011-12 budget would result in a $1 billion surplus that he would use to finance a property tax circuit breaker.  “If the governor is saying that the four-year financial plan to be issued with his 2010-11 Executive Budget next week will make up for lost stimulus money, wipe out the entire projected gap and hold recurring spending a full $1 billion below recurring revenues in 2011-12, that’s really something to celebrate,” I wrote.

I should have read the fine print: Paterson’s original release said the surplus would be a product of his proposed tax cut “if enacted.”  Of course, the spending cap has not been enacted (not that it would make a difference).  And sure enough, the governor’s newly released 2010-11 Executive Budget does not, in fact, point to a surplus as soon as the year after next.  Quite the contrary: if enacted in its entirety, Paterson’s budget will leave the next governor facing a 2012-13 budget gap of $6.3 billion, which will grow to $10.5 billion in 2012-13 and $12.3 billion in 2013-14.

But the next governor, like the current one, will have the power to enforce a spending cap through use of the constitutional line-item veto.  Just in case Paterson is really interested in the concept.

Governor Paterson’s 2010-11 Executive Budget carries a hidden New York City personal income tax (PIT) increase for the city’s wealthiest households.

The increase would result from adoption of Paterson’s proposed changes to the state School Tax Relief program, or STAR.   Eighty percent of the $3.1 billion state STAR allocation underwrites property tax breaks, with the lion’s share going to homeowners outside New York City.  The remaining 20 percent pays for New York City income tax breaks–principally, a six percent across-the-board reduction in the city’s PIT rates, which now reach 3.65 percent on taxable incomes over $90,000.

Paterson’s budget would disallow the use of STAR money to finance a city PIT rate reduction for taxable incomes above $250,000.  In effect, this would create a new 3.88 3.85 percent city PIT bracket starting at $250,000. The result: a $143 million budget savings for the state.  Of course, unless the city makes up the difference out of its own funds, that also translates into a $143 million tax increase for high-income New York City residents.

The governor also has proposed eliminating the STAR homestead exemption for residences worth $1.5 million or more. The total state budget savings from Paterson’s STAR changes would come to $213 million, with two-thirds of that amount coming from the New York City PIT adjustment.

A more detailed description of Governor Paterson’s STAR proposals begins on page 33 of the Executive Budget Briefing Book. The legislative language begins on page 221 of the Education, Labor and Family Assistance Article VII Bill.

Producers of films made principally in New York will receive another $420 million a year in state tax subsidies under Gov. Paterson’s 2010-11 Executive Budget.  The proposed allocation of $2.1 billion for the film production credit over the next five years would come on top of more than $1 billion that the state has funnelled through the tax credit program over the last five years.

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A news release from Governor David Paterson claims he is proposing “significant spending reductions” in the 2010-11 Executive Budget he is releasing today.   If only it were true.

The net budget “reductions” sought by the governor consist largely of cuts in projected baseline growth–with the significant exception of school aid, which would decrease $1.1 billion (5 percent) below the actual level projected for 2009-10 school year.  Including local funds, assuming no local tax hikes, the cut effectively asks schools to get by on 2 percent less next year.

Yet, as a starting point for negotiations with a Legislature that will be bent on raising spending, Paterson hasn’t gone nearly far enough to curb spending in many areas.  In fact, the Executive Budget is similar in many respects to the 2009-10 plan he rolled out just over a year ago—which led, four months and billions in federal stimulus aid later, to a disastrous final product that made the state’s long-term structural budget imbalance even worse.

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