Paterson Budget Hits New York City Hard

Proposes education cuts, taxes on sodas, cigarettes

By VALERIE BAUMAN
|  Tuesday, Jan 19, 2010  |  Updated 7:08 PM EDT
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As part of his budget plan, <a title=Gov. David Paterson says he will impose new taxes on cigarettes and sugary drinks." />

As part of his budget plan, Gov. David Paterson says he will impose new taxes on cigarettes and sugary drinks.

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Pasterson Says the State is Living Beyond Its Means

Gov. David Paterson outlines his budget plan, calling for sweeping cuts out of "necessity," as New York battles unemployment and a massive budget gap.
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New York City would take hits in school aid, local government assistance, social services and transportation under Gov. David Paterson's state budget proposal.

The city's school aid would be cut $469 million, and local government would lose $302 million. Paterson said Tuesday the cuts are part of the tough decisions necessary while the state is facing a $7.4 billion deficit. He says cuts to local government aid are less than 0.5 percent of total city revenues, much less than many other communities across the state.

Mayor Michael Bloomberg said the proposal was "neither proportional nor fair to New York City." He said the city's fiscal year doesn't line up with the state's fiscal year, and the actual impact will be more than twice what Paterson projected in his budget proposal. Bloomberg plans to be in Albany next week to testify on the proposals' effect on New York City.

All the proposals hinge on support of the state Legislature, which has been at odds with Paterson for months.

Paterson also proposed a Medicaid cap that he projects could save the city nearly $863 million, which could offset some of his proposed cuts.

"The proposed reduction in school aid will affect funding for our city's students at a time when we are still waiting to receive our just due as a result of the Campaign for Fiscal Equity lawsuit," said city Comptroller John Liu. He said the city will also struggle without the local government aid, and suggested Paterson tap the state's $1 billion rainy day fund.

New York City would also lose $53 million in funding for social services and nearly $4 million for transportation.

Smokers and students living in New York City would also feel the pinch under Paterson's proposal. A $1 tax increase on tobacco that would give New York the highest cigarette tax in the nation, resulting in $5.25 per pack in combined local and state taxes in the city.

Paterson is proposing $47.7 million in cuts from the City University of New York, but would allow CUNY to set its own regular tuition increase. It could vary by campus and wouldn't require legislative approval. Public and private college students would also see a $75 cut in their Tuition Assistance Program financial aid.

Paterson also wants to change the way the school tax relief program, known as STAR, is handled in New York City. The benefit would be limited to the first $250,000 of personal income.

Currently, taxpayers who earn more than $250,000 receive more than 50 percent of the overall benefit from the tax rate reduction, but represent 2.9 percent of the total number of recipients. Paterson says the change would save $143 million in fiscal year 2010-2011.

Paterson would also eliminate the $3 million state subsidy of the New York City Housing Authority, requiring it to work within its own $2.8 billion operating budget.

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