Civil Service Enforcement/Research Department

TO:                 Executive Board Members and Statewide Labor-Management Chairs  

FROM:           Thomas Cetrino, Susan Mitnick, Stephen Connolly, Jeff Waggoner, and Michael Marinello

DATE:            January 23, 2004

RE:                 Executive Budget SFY 2004-05 – Preliminary Summary of Major Provisions

STATE WORKFORCE IMPACT

The Executive Budget proposes to maintain the State workforce at 187,900 full-time equivalent (FTE) positions; the same number of FTE positions that it is projected to have at the end of the SFY 2003-04.  Since SFY 1994-95, the State workforce has declined by approximately 23,300 FTE positions.  Attachment A is the Division of Budget’s (DOB) Workforce Impact Summary Report for Executive Branch agencies in SFY 2004-05.  It details the workforce changes for each Executive Branch and “off-budget” agencies.  According to this report, there will be no position abolitions in any state agency in SFY 2004-05, all position reductions will result from attrition or agency mergers.

We have supplemented the DOB report with our own analysis of FTE reductions in most State agencies that have PEF members (see Attachment B).  SUNY and off-budget agencies cannot be included in this analysis because the Executive Budget does not provide FTE position information for these agencies.  The main value of our analysis is that we look at the difference between the total FTE positions that the SFY 2003-04 Executive Budget estimated each agency would have on 3/31/04 and the number of FTE positions the SFY 2004-05 Executive Budget estimates each agency will have on 3/31/04.  This indicates which agencies have changed their FTE workforce more or less than anticipated in the SFY 2003-04 Executive Budget.  This year, this analysis is complicated by the fact that the Legislature restored a significant number of positions in the enacted SFY 2003-04 budget in the Office of Children and Family Services, Office of Mental Health, Office of Mental Retardation and Developmental Disabilities, and the State Education Department.   In addition, the Legislature rejected the movement of additional positions to the Department of Labor and the Department of State and the creation of new positions in the Department of Motor Vehicles.  Therefore, FTE gains and losses during SFY 2003-04 depicted in Attachment B, column 4 for these agencies should be ignored. 

Based on the information in Attachments A and B, the agencies with the largest net losses of positions in SFY 2004-05, including real position losses from the enacted SFY 2003-04 Budget include:

•         Office of Mental Health (OMH) will lose 175 FTE positions through attrition offset by 66 new FTE positions for a net loss of 109 FTEs.  This includes a decrease of 140 FTEs in Adult Services and a decrease of 30 FTEs in Research.  According to DOB, the position attritions in the Research Program eliminate funded vacancies at the Nathan Kline and New York Psychiatric Institutes. The Executive Budget proposes to close the Middletown State Psychiatric Center by April 1, 2005.  Patients will be moved to Rockland Psychiatric Center and 50% of the “defined” savings from the closure will be reinvested into State–operated community services in the Middletown area. The Executive Budget also proposes a “bipartisan Commission for the Closure of State Psychiatric Centers to provide facility closure recommendations through 2010”.

•         Department of Correctional Services (DOCS) will lose 213 FTEs through attrition in SFY 2004-05. This includes the attrition of 12 FTEs in Program Services and a 5 FTE reduction in the Health Services Program.  DOCS will have 636 more FTE positions on 3/31/04 than estimated in the SFY 2003-04 budget most of them in the Supervision of Inmates Program.  According to DOB, this reflects funded vacancies that DOCS could fill if their inmate population varied from DOB estimates and these funded vacancies are carried throughout the fiscal year.

•         Department of Taxation and Finance will lose 122 FTEs through attrition in SFY 2004-05 largely in the Audit (-47), Revenue & Info Management (-39), and Tax Compliance (-20) programs. Tax and Finance will have 34 less FTE positions in the same programs on 3/31/04 than estimated in the SFY 2003-04 Executive Budget for a total loss of 156 FTE positions.

•         Department of Health will lose 206 positions through attrition in SFY 2004-05 offset by 150 new positions for a net loss of 58 FTE positions in SFY 2004-05.  The largest FTE reductions will occur in the Administration and Executive Direction (-26 FTEs) and Laboratories and Research (-24 FTEs) programs.

•         Department of Transportation will lose 219 FTEs through attrition offset by 180 new FTE positions for a net loss of 39 FTEs in SFY 2004-05, all in the Design and Construction program. This loss is exacerbated by the additional loss of 52 positions beyond the reductions contained in the enacted SFY 2003-04 budget for a total loss of 91 FTE positions.  Most of the losses during SFY 2003-04 occurred in the Preventive Maintenance Program.

MAJOR AGENCY CONSOLIDATIONS, TRANSFERS, AND PRIVATIZATIONS

The Executive Budget proposes the consolidation of the State Museum, State Library, and State Archives, which are now part of the State Education Department (SED), into a new public benefit corporation called the New York Institute for Cultural Education (NYICE) on October 1, 2004.  This would involve the transfer of 400 FTEs, including many PEF members.  The Executive Budget does not indicate any specific savings or costs from this proposed transfer; however, we estimate it will cost $1 million.  It is unclear what mechanism will fund NYICE’s operations.  Two years ago, the Governor proposed, and the Legislature agreed, to increase the surcharge for the recording, indexing, and certifying of records by county clerks, which already partially funds the operation of the State Archives.  According to DOB, the increased surcharge was projected to raise $26 million.  It is unclear whether this surcharge will now fund NYICE.  However, the proposal essentially takes these entities “off-budget” and funds the new public benefit corporation with a lump sum $12.5 million appropriation with no detail on how much of these funds would be used for personal services, non-personal services and contractual expenses. Employees would be transferred from SED to the new public benefit corporation.  These employees would remain State employees and maintain their current civil service and representational rights and privileges.  The consolidation seems to be motivated by making these cultural entities directly accountable to the Governor rather than the Board of Regents, who are appointed by the Legislature and not the Governor.  The Legislature has rejected similar proposals the last two years.

The Executive Budget also proposes giving the SUNY Board of Trustees the power to privatize the three SUNY Health Science Centers.  This means it is possible that current hospital employees could no longer participate in the retirement system, could no longer be represented by PEF and could no longer have civil service system rights and protections.  DOB claims that if this proposal was implemented, the State could reduce its current SUNY hospital subsidy of $92.6 million.  Additionally, DOB claims that upon completion of the transfer of the hospitals to new not-for profit corporations the State’s All Funds budget could be reduced by $1 billion, the State workforce could be reduced by 9,300 FTEs, and the SUNY hospital debt could be eventually removed from the State’s debt cap. The bill directs the Trustees to turn over a transfer plan to the Governor and the Legislature on or before October 1, 2004.  The Legislature rejected a similar proposal last year.

The Executive Budget also proposes the merger of the Crime Victims Board (CVB) with the Division of Criminal Justice Services (DCJS) which would move 95 FTEs from CVB to a new Victim Services Program within DCJS.  DOB claims that this merger will bring added value and assets for the benefit of the crime victim. This includes DCJS’s extensive technology network and various databases that can be used to provide quicker claims response. Current CVB agency staff would be relieved of administrative duties to focus on improving victim services. In addition to enhanced victim services, this consolidation of programs would reduce the administrative costs associated with such services.  The Executive Budget shows a $501,000 reduction from CVB’s SFY 2003-04 appropriation, $489,000 of which is a decrease in the personal services appropriation. The estimated 95 FTE level for the Victims Services Program for 3/31/04 is a decrease of 8 FTEs from the estimated 3/31/04 FTE level for the Crime Victims Board in the SFY 2003-04 Executive Budget. We assume that this is the administrative savings referred to in DOB’s support memo for this proposal.  A similar proposal was rejected by the Legislature last year.

RETIREMENT, EMPLOYEE BENEFITS, and COLLECTIVE BARGAINING ISSUES

The Executive Budget does not propose another Early Retirement Incentive (ERI) program in SFY 2004-05.  The Division of Budget’s position is that an incentive is not necessary because the overall state workforce will remain at the same level as it will be at the end of the SFY 2003-04 fiscal year.

The Executive does propose major reforms in the manner in which employer contributions are made to the State Retirement System. Baseline projections from OSC show an employer pension contribution rate of 12.3 percent of payroll for the Employees Retirement System (ERS) in SFY 2004-05 that would produce an annual State pension cost increase of $664 million (a 136.8% increase) in SFY 2004-05.  The Executive Budget proposes a series of pension reforms that will moderate these costs and produce a total employer pension contribution of $669 million, an annual increase of $184 million (37.9% increase) and a contribution rate of 6.5%, a 2% increase over last year’s contribution rate.  According to DOB, these reforms would save the State $500 million in SFY 2004-05, $60 million of which is in the Judiciary budget. 

The Article VII bill requires the State Comptroller to consider the following options to limit the volatility of local government and State pension costs:

·         Modify current actuarial methods used to determine employer pension contributions, including: alternative approaches to recognizing investment gains and losses. According to DOB, the current approach used to determine the actuarial value of assets includes restrictions that are not required under government accounting standards and are not used by other public retirement systems in New York State. Under this proposal, more investment assets would be counted in the calculation of pension contribution rates and employer contribution requirements would be significantly lower.  The Comptroller has indicated that he believes that this proposal is unconstitutional

·         Limits on the amount contribution rates can increase from year-to-year (a 2 to 3% limit is suggested); The Comptroller has indicated that he believes that this proposal is unconstitutional

·         A longer amortization period for recent benefit improvements. 

·         Create a reserve fund for minimum contributions, dedicated for the exclusive purpose of offsetting employer contributions.

·         Evaluate the statutory minimum contribution requirements periodically, consistent with other actuarial assumptions.

·         Bill local governments and the State based on actual salary experience instead of the current practice of using projected salaries.

The Comptroller will have to report his determinations to the Governor and the Legislature by June 1, 2004.

The bill also:

• Prohibits the cost of future benefit improvements from being funded by existing assets in the retirement systems for approximately 17 years after the benefit improvement is enacted.
• Requires the Comptroller to disclose the funded status of the Retirement System on a basis that is comparable to other states. According to DOB, the Retirement System currently does not report the funded status of the system (i.e., a comparison of assets and accrued liabilities) on a basis that is comparable to reporting used by most, if not every other state in the nation. Credit rating agencies review the State's pension fund as a measure of the State's financial condition and their ratings affect the costs of borrowing for the State. New York should compare favorably in pension funding because it uses very conservative actuarial funding rules relative to most other states. Thus, DOB believes it is important for the Retirement System to provide the information necessary for the State to clearly demonstrate that its retirement system is well funded.

                The State Comptroller has indicated that several of these proposals are either unconstitutional or inconsistent with proper fiduciary management of the pension fund. He indicated a willingness to study some of the other proposals.  This makes it unlikely that $500 million in savings can be achieved which would add to the budget gap that must be closed in SFY 2004-05.

            The Executive Budget does not propose any changes to State employee or retiree health insurance benefits or assume any savings in State employee or retiree health insurance program in SFY 2004-05 as it did in last year’s budget. Providing health insurance to State employees and retirees is projected to total $2.05 billion in SFY 2004-05, an increase of $255 million over last year’s costs. According to DOB, this is attributable primarily to underlying growth of 13 percent in premium costs to cover the rising expense and utilization of employee health care, including escalating prescription drug costs.  DOB was clear in its budget briefing to State employee unions that the failure to include any changes or savings related to State employee health insurance benefits did not indicate that the State was backing away from their previous proposals to increase State employee health insurance premium contributions that were included in last year’s budget and have been reiterated during current collective bargaining negotiations.  DOB also pointed out that the SFY 2004-05 Executive Budget does not include any funding for any prospective across-the-board raises for State employees.

        The Executive Budget also proposes technical amendments that clarify the authority of the Department of Civil Service regarding the administration of the Employee Health Insurance Program. In April of 2003, the Office of the State Comptroller raised questions over the Department's statutory authority in accounting for health insurance program dividends and making payments from the Fund without an appropriation.  This bill clarifies statute to codify the Department's longstanding practice of accounting for health insurance program dividends and making payments from the Fund without appropriation authority. According to DOB, current law clearly authorizes the use of dividends to offset future premium charges. In the past, the Department has needed to temporarily use these dividends for cash flow purposes and, in addition, the enacted budget has traditionally authorized the State to receive its share of dividends in advance. According to DOB, making payments from the Health Insurance Fund without an appropriation is also appropriate and consistent with the administration of other funds used to administer employee benefits such as the Common Retirement Fund, the Dental Insurance Fund and the Social Security Contribution Fund among others.  We are currently studying this proposal to determine whether it will have an impact on the Health Insurance Fund.

HOW THE SFY 2004-05 EXECUTIVE BUDGET CLOSES THIS YEAR’S $5.1 BILLION BUDGET GAP AND HANDLES FUTURE BUDGET GAPS

            The SFY 2004-05 Executive Budget recommends All Funds spending of $99.8 billion, a 3.5% increase over last year’s budget when adjusted for spending that was shifted from one fiscal year to the next in order to balance the SFY 2002-03 and SFY 2003-04 budgets.   State Operations accounts for the cost of running the Executive, Legislative, and Judicial branches of government and is projected to total $7.25 billion in SFY 2004-05, an increase of $196 million (2.8%) from SFY 2003-04.  The projected $196 million annual increase in State Operations costs includes higher spending of $130 million for an extra institutional payroll occurring in SFY 2004-05. Spending for the Legislature and Judiciary is projected to remain unchanged.

            DOB projects the State will end SFY 2003-04 with General Fund cash resources of $345 million above the levels projected in the Mid-Year Financial Plan Update issued October 28, 2003. Of this amount $261 million will reduce the SFY 2004-05 budget gap and the remaining $84 million will be deposited to the Tax Stabilization Reserve Fund (the State’s “rainy day reserve”).

            The SFY 2004-05 Executive Budget projects that the State has to close a $5.1 billion budget gap in SFY 2004-05.  This gap will be closed with $2.589 billion in spending reductions (closing 51% of the gap), 972 million in revenue actions (closing 19% of the gap), and $1.51 billion in non-recurring actions also known as “one-shots” (closing 30% of the gap)

.

            The SFY 2004-05 Executive Budget reduces spending by $2.589 billion by restructuring programs and using alternate funding sources. Significant savings proposals include:

·         Medicaid/health care cost containment to restrain prescription drug costs through a preferred drug program and lower the cost of optional services by eliminating coverage for dental, nursing, audiology, psychology and podiatry services.  The proposal also enhances case management and reduces the need for General Fund payments to finance Health Care Reform Act (HCRA) spending (saves $425 million).

·         Pension reforms, including a cap in the annual increases in employer contribution rates and proposals to reduce the annual rate of increases in employer pension costs (saves $440 million plus $60 million in Judiciary budget).  The Comptroller has already rejected many of these proposed reforms.

·          Restructure welfare-related programs including benefit cuts ($77 million) and use of Federal TANF resources to support spending ($275 million) for total savings of $362 million.

·         Cost containment in mental hygiene programs including State operations efficiencies and 5% cuts in most local programs ($133 million) and initiatives to increase Patient Income Account (PIA) and other revenues ($165 million) for total savings of $298 million.

·         Changes in the Tuition Assistance Program (TAP) that would convert one-third of the TAP award to a loan payable, including interest, upon graduation (saves $227 million).  The Legislature rejected a similar proposal last year.

·         Lower debt service costs through debt management actions, including refundings and expanded use of variable rate debt (saves $150 million).

·         All other spending reductions totaling $595 million include recommended efficiencies in State agency operations and restraint in local assistance spending and transportation costs.

·         These savings are offset by General Fund spending increases totaling $94 million composed of $70 million additional General Fund school aid support to New York City ($100 million on a school year basis) that will supplement Video Lottery reserves for funding additional school aid for urban districts ordered by the Court of Appeals and initial costs for the proposed multi-year State takeover of local Medicaid costs for long-term care services ($24 million).

            Revenue proposals are expected to raise $972 million in 2004-05 and include:

·         Provision of four sales tax free weeks instead of a permanent exemption on clothing and footwear ($400 million).

·         Reimposition of an assessment on hospital and home care revenues and an increase to the existing reimbursable nursing home revenue assessment to support health care programs ($323 million).

·         Criminal Justice fees including a parking ticket surcharge and a $100 fine for speeding through work zones assessed on the owner of the vehicle that is photographed speeding ($58 million).

·         Quick Draw enhancements ($43 million).

·         Increases in the corporate alternative minimum tax that increase the fixed minimum tax base ($40 million).  It should be noted that this change is much different than the alternative minimum tax proposal advocated by PEF and other unions which would generate between $150 and $200 million.  DOB’s proposal could hurt many small businesses and not close the loopholes in the alternative minimum tax that allow large multi-national corporations to avoid their fair share of taxes.

·         Pistol Permit fee ($31 million)

·         Phasing in a single sales factor in the calculation of the corporate franchise tax for manufacturers (no cost in SFY 2004-05, $40 million cost when fully phased in SFY 2009-10).  According to the Fiscal Policy Institute, without requiring the combined reporting of corporation subsidiaries this proposal could result in the virtual elimination of the corporate franchise tax for most manufacturers.

·         All other revenue actions would generate $96 million offset by the $19 million cost for other proposed tax cuts for a net revenue increase of $77 million.

            The SFY 2004-05 Executive Budget proposes a total of $1.51 billion in nonrecurring actions including:

·         The shift of various pay-as-you-go capital projects to bond financing ($283 million).

·         A continuation of the legislative delay of the last Medicaid cycle payable at the end of SFY 2004-05 ($190 million).

·         Additional revenues produced by the SFY 2003-04 tobacco bond sale transaction ($181million).

·         Implementation of an alternative proposal to provide support for New York City which according to DOB eliminates legal uncertainty and protects LGAC bondholders while preserving expected City resources ($170 million).

·         Legislation to reverse the effect of the recent “Meyers” decision to eliminate delays in collecting tax payments ($50 million, see Tax and Finance spreadsheet for a more detailed discussion).

·         All other proposals include using available resources of the Power Authority of the State of New York (PASNY) to help finance the “Power-for-Jobs” program ($100 million), sweeps of available fund balances ($72 million) and continuation of bond issuance charges ($50 million). In addition, surplus reserves from the Housing Finance Agency (HFA) will be available in SFY2004-05 and used to lower the projected 2005-06 out-year gap.

Table 1

PROJECTED BUDGET GAPS FOR

SFYs 2005-06 AND 2006-07

($ in millions)

It is important to note that these General Fund budget gaps are based on economic forecasts of greater growth in the State’s economy over the next two fiscal years. They will be significantly larger if the State experiences a slower recovery in the State economy than the Executive Budget forecasts.  These large gaps are also based on an assumption of 2.6% growth in State Operations spending in SFY 2005-06 and 3.2% growth in SFY 2006-07.  This assumes “no additional general salary increases or productivity savings in SFY 2005-06 or SFY 2006-07”. 

SUMMARY OF EXECTIVE BUDGET PROPOSALS FOR MAJOR STATE AGENCIES

This section highlights the major changes proposed in the Executive Budget for the major State agencies.  Executive Board members and Statewide Labor-Management Chairs will receive a more detailed analysis for these agencies in a separate mailing.

HEALTH AND MENTAL HYGIENE (S.6054/A.9554)

Office of Mental Health

• The net loss of 109 FTEs in SFY 2004-05 from the adjusted 2003-04 FTEs which included over 350 restored FTEs.  This includes a decrease of 140 FTEs in Adult Services, 30 FTEs in the Research Program, and 5 in the Children and Youth Services Program. The Forensic Services Program will be increased by 66 FTEs. The estimated workforce will be 16,707 FTEs on March 31, 2005. 

• Closure of Middletown PC on April 1, 2005 (in compliance with the one year notification law).  Remaining patients will be transferred to Rockland PC.  Fifty percent of savings all administrative, support and overhead cost from the closure ($3.4 million) will be reinvested in state-operated community-based programs.

• Elimination of 21 under-utilized child inpatient beds (locations not identified).  Full annual savings of $2.6 million will be reinvested into other children’s community services.

• Article VII legislation that will establish a bipartisan Blue Ribbon Commission for the Closure of State Psychiatric Centers to recommend facility closures through 2010 to report on 4/1/05.  The Commission will be composed of gubernatorial (4 members) and legislative representatives (4 members), with the Commissioner of Mental Health serving as the chairperson with the tiebreaking vote.  Unless both houses of the Legislature reject all recommendations in their entirety within 45 days of receipt of the recommended closure list, the closures must be implemented.  Not less than 10% or more than 40% of the total excess inpatient capacity would be eliminated in any fiscal year.

• Legislation establishing the Commission will also extend the Community Mental Health Support and Workforce Reinvestment Act through 2010, providing reinvestment of 50% of all administrative, support and overhead cost savings into State-operated community-based services.

• An increase in the Forensic Program of $7.6 million in personal services, reflecting the increase of 66 FTEs and the additional pay period.

• A reduction of $1.9 million in the Research in Mental Illness Program.  As in the Adult Services Program, restorations for averted research center closures/consolidations in the 2003-04 budget were not broken out into personal and non personal services, making a year to year comparison difficult.  The Executive Budget shows a reduction of $1.9 million in personal services.  The Division of Budget indicated that this reflects the elimination of funded vacancies in both Nathan Kline and New York Psychiatric Institute.

Department of Health

·        A decrease of 58 FTEs in SFY 2004-05 from the adjusted 3/31/04 FTE level.  The adjusted 3/31/04 indicates a net increase of 7 FTEs during the current fiscal year, including an increase of 22 positions in the Community Health Program. The 58 reductions in 2004-05 reflect a decrease of 92 FTEs, offset by an increase of 35 FTEs.  Net reductions in FTEs occur in the following programs:  Administration and Executive Direction (-26); Child Health Insurance (-1); EPIC (-1); Environmental Health (-9); Health Care Financing (-5); Health Care Standards and Surveillance (-8); Laboratories and Research (-24); Office of Managed Care (-8) and Office of Medicaid Management (-9).  Net adds in FTEs occur in the Community Health Program (+8) and the Medicaid Audit and Fraud Prevention Program (+25).  The estimated year end workforce will be 5,861 FTEs on March 31, 2005.

·        Apparent merger of the Office of Continuing Care (333 FTEs) with the Health Care Standards and Surveillance Program, with a reduction of 4 positions in the current year for the combined programs and 8 positions in SFY 2004-05.  There is no mention of this merger in the budget documents.  This should be raised with management.

·        A reduction of $5 million in funding for Roswell Park Cancer Institute (to $78 million). Funding for Roswell Park is in the Article VII HCRA legislation, not in the DOH budget.

·        A decrease of $2.7 million in personal service funding agency-wide.  Significant reductions occur in the Administration and Executive (-$692,000); AIDS Institute (-$936,000); Office of Medicaid Management (-$765,500), and Health Care Financing (-$547,000). The personal service appropriation for Wadsworth increases by $1.1 million.

·        The Health Care Standards and Surveillance Program includes a new $6.6 million maintenance undistributed appropriation for “continuation of care surveillance related activities.”  Management should be asked for an explanation of this appropriation.

·        An increase in the Institutional Management Program of $7.4 million, including increases for Helen Hayes (+$1.9 million), NYC Veterans Home (+$1.3 million) and the Lower Hudson Veterans Home (+$2.8 million).  A $7.5 million Maintenance Undistributed appropriation for Helen Hayes is eliminated. This should be addressed with management.

·        A Replacement Medicaid System (RMS) that will replace both MMIS and the Electronic Medicaid Eligibility Verification System (EMEVS) with an integrated claims processing system.  Continued oversight by state personnel needs to be confirmed through Labor/Management.

·        A $21 million bond financed appropriation for the State share of a $60 million project to re-build the Veterans Nursing Home at Oxford.

Office of Mental Retardation and Developmental Disabilities

·        A net increase of 185 FTEs.  There are 222 FTE increases in the Institutional Services Program, offset by a reduction of 37 FTEs in the Research in Mental Retardation Program (the Institute for Basic Research).  The estimated year end workforce is 22,637 FTEs on March 31, 2005.

·        An All Funds increase of $52.7 million (4.3%) to $1,266,096,000.  The General Fund appropriation decreases by $24.1 million (14.3%).  State Operations comprises 44% of the OMRDD budget, while Aid to Localities comprises 53%.

·        An increase of $13.4 million in personal service (2%) and $6.2 (6.4%) million in non personal service in the Community Service Program.

·        An increase of $21.9 million in personal service (9.9%) and $5.2 million in non personal service (9.6%) in the Institutional Service Program, reflecting the addition of 222 FTEs.

·        An increase of $8.8 million in personal service (177.1%) and $1.4 million (277.2%) in the Research in Mental Retardation Program.  This comparison does not include the restorations in the 2003-04 budget as they were not broken out into personal and non personal services. The Executive Budget shows a reduction from the adjusted appropriation (including 2003-04 restorations) of $1.7 million in personal service, reflecting the elimination of 37 funded vacancies.

·        Movement of 100 consumers from institutional to community care.

·        Development of 20 new Multiply Disabled Units beds.

·        Creation of a New York State-Options for Persons Through Services (NYS-OPTS) initiative.  $49.5 million is recommended to establish this health care delivery system model for providing flexibility in consumer choices and maximization of available funding (primarily Medicaid).  The location of this appropriation could not be identified, but may be part of the Patient Income Account (Medicaid).  Details on this program are not yet available.  This issue should be raised with management.

·        A joint OCFS/OMRDD pilot program that provides enhanced service coordination for foster children with mental retardation and developmental disabilities.

PUBLIC PROTECTION AND GENERAL GOVERNMENT (S.6050/A.9550)

Division of Criminal Justice Services

• A year end workforce of 820 FTEs, which represents an increase of 95 FTEs from the adjusted FTE workforce for 3/31/04.  There was a net increase of 5 FTEs in the current year, including a reduction of 28 FTEs in the Operations and System Support Program, offset by an increase of 9 FTEs in Administration and 14 FTEs in Funding and Program Assistance.  All of the SFY 2004-05 increases are attributable to the proposed merger of the Crime Victims Board with DCJS in a new Victims Services Program.  The estimated FTE level for the Victims Services Program of 95 for 3/1/04 is a decrease of 8 FTEs from the estimated 3/31/04 FTE level for the Crime Victims Board in the 2003-04 Executive Budget.

• Transfer of the Crime Victims Board to DCJS, pursuant to Article VII legislation. The Executive Budget also proposes the merger of the Crime Victims Board (CVB) with the Division of Criminal Justice Services (DCJS) which would move 95 FTEs from CVB to a new Victim Services Program within DCJS.  DOB claims that this merger will bring added value and assets for the benefit of the crime victim. This includes DCJS’s extensive technology network and various databases that can be used to provide quicker claims response. Current CVB agency staff can be relieved of administrative duties to focus on improving victim services. In addition to enhanced victim services, this consolidation of programs would reduce the administrative costs associated with such services.  The Executive Budget shows a $501,000 reduction from CVB’s SFY2003-04 appropriation, $489,000 of which is a decrease in the personal services appropriation. A proposal transferring administrative, personnel, and finance functions of the Board was rejected by the Legislature last year.

• A host agency arrangement for routine administrative functions of the Capital Defender’s Office, similar to the previous initiative with the Division of Probation and Correctional Alternatives and the State Commission of Correction.  There do not appear to be any positions associated with this arrangement.

• A net increase of $169,149,000 in the Funding and Program Assistance Program (Special Revenue-Federal) from the 2003-04 enacted budget.  The Executive Budget shows an increase of only $20.7 million over the 2003-04 available funds, and is probably attributable to unanticipated current year increases in the Domestic Incident Preparedness Account.   Significant changes in Special Revenue-Federal funding include:

-         An increase of $158.0 million in the Domestic Incident Preparedness Account. (this is used to support State and local agency expenditures associated with the development of an anti-terrorism program).

-         An increase of $7.2 million in the Anti-Drug Abuse Account

-         A decrease of $600,000 in the Juvenile Justice Delinquency Prevention Program Title IV Account

-         An increase of $4 million in the Miscellaneous Discretionary Account

Department of Correctional Services

• A net decrease of 213 FTEs, from the adjusted FTE workforce for 3/31/04.   The DOCS workforce will be 636 FTEs greater than estimated in the 2003-04 Executive Budget.  Current year changes included an increase of 789 FTEs in the Supervision of Inmates Program, an increase of 40 FTEs in Program Services, and a decrease of 266 FTEs in the Administration Program. Workforce changes in 2004-05 include an increase of 7 FTEs in the Administration Program; a decrease of 12 FTEs in the Correctional Industries Program; a decrease of 5 FTEs in the Health Services Program; a decrease of 12 FTEs in Program Services; a decrease of 156 FTEs in the Supervision of Inmates Program; and a decrease of 35 in the Support Services Program. The workforce will be 30,961 FTEs on March 31, 2005.

• A year-end inmate population of 64,000, representing a reduction of approximately 1,000 from the current census.  The projected decline in the prison population would allow DOCS to pursue a contract with the Federal government to temporarily house convicted felons serving sentences of State imprisonment awaiting deportation.

·        An increase of $17.2 million in the Health Services Program, including $1.0 million in Personal Services and $17.1 million in Nonpersonal Services.

·        An increase of $3.8 million (2.5%) in Personal Services in the Program Services Program, despite the reduction of 12 FTEs.

·        We just received notice of the closure of Fulton Correctional Facility and the reduction of beds at Camp Pharsalia (258 beds) and Camp McGregor (300 beds).  This will impact a total of 42 PEF members at McGregor (4), Pharsalia (6), Fulton (14) and 18 combined at Cape Vincent, Marcy, Orleans and Riverview. This information was not included as part of the proposed SFY 2004-05 Executive Budget.

Division of Parole

• A year end workforce of 2,089 FTEs, which represents a decrease of 41 FTEs from the adjusted FTE workforce for 3/31/04.  There were 42 reductions in 2003-04 in excess of those estimated in the 2003-04 Executive Budget.  All reductions are in the Parole Operations Program.

• A $3.8 million reduction in Parole Operations, including a $2.8 million reduction in personal service, and a $960,000 reduction in Anti-Drug Abuse Special Revenue-Federal funding.

• There is no Article VII legislation proposing elimination of discretionary parole release.  It is expected that a proposal will be submitted in non-budget legislation during this session.

• Article VII legislation extending the period when the Division of Parole can process a parole violation warrant for certain out-of-State parole violators.

EDUCATION, LABOR AND FAMILY ASSISTANCE S.6053/A.9553

Office of Children and Family Services

• FTE level of 3,853, which represents a decrease of 28 positions from the adjusted 2003-04 FTE level which reflects the restoration of 178 FTEs in the Commission for the Blind and Visually Handicapped.   Decreases occur in the following areas:

§         (-19) Central administration, with administration staffing falling from 442 (All Funds) to 423.  The 19 positions to be eliminated are supported by General Funds.

§         (-5) in Family and Children Services, shrinking to 484 from 489 (All Funds). The five positions cut are General Fund supported.

§         (-4) System Support. This lowers the FTEs in Systems Support, which are all General Fund positions, from 142 to 138.

• No additional bed reductions or closures in the Youth Facilities Program.

• Article VII legislation creates a new $56 million Detention Block Grant (Aid to Localities) designed to “discourage excessive lengths of stay in detention while promoting the creation of new preventive program models.” The bill would encourage counties to monitor lengths of stay in detention and use community-based alternatives to institutional care.  Counties will be able to access state 65 percent open-ended reimbursement as well as federal Temporary Assistance for Needy Families funding.  PEF is investigating the potential impact of this proposal on state-operated services.

State Education Department

·        An FTE level of 2,654 on March 31, 2005, which represents a decrease of 400 positions from the current estimate of the FTE level on March 31, 2004.  This represents a decrease of 400 positions from last year’s adjusted projection of the FTE level on March 31, 2004.  The agency gained 12 positions, in addition to the positions that were not moved out of the agency during the current fiscal year.  Reductions in 2004-05 will occur in the Elementary, Middle and Secondary Education Program (-5), the Higher Education and the Professions Program (-3) and in a “Management Efficiencies Program” will take reduce another 20 FTEs across the entire agency.  Additions will occur in the Office of Higher Education and the Professions (+28).  Consolidations and transfers will result in reductions in the Cultural Education Program (-400).  All of these positions will move to Council on the Arts.

·        Moving the Cultural Education Program to a new public benefit corporation, the New York Institute for Cultural Education in the Council on the Arts.  The move is proposed for October 1, 2004.  The Executive Budget states that all 400 positions being eliminated in the SED budget will be transferred.  The employees of the Institute would be governed by the State Civil Service Law and would remain in the bargaining units they were in prior to the transfer.  It appears this transfer will cost the state an additional $1 million.

The State University of New York

·        An estimated 36,752 FTE positions consisting of 22,152 positions supported through a combination of state tax dollars and tuition revenues and 14,600 positions supported by other funds.  According to the Division of Budget’s Workforce Impact Summary Report there will be no positions abolished or lost to attrition in SFY 2004-05.

·        The budget proposes a 21.2%, or $920 million, increase in SUNY’s State Operation budget, rising from $4.3 billion to $5.3 billion.  More than half of this increase is reflected in a $554 million addition for other employee fringe benefits, which was apparently shifted from general state charges appropriations. This issue should be clarified with SUNY management.

·        Legislation will again be introduced to allow the SUNY Board of Trustees to transfer

operations of the SUNY hospitals to one or more private, not-for profit corporations.  If the Trustees approve the conversion (and there is little doubt that they will if given the authority), at least 5,000 SUNY hospital employees would not be state employees.  This means it is possible that current hospital employees could no longer participate in the retirement system, could no longer be represented by PEF and could no longer have Civil Service system rights and protections.  The bill directs the Trustees to turn over a transfer plan to the Governor and the Legislature on or before October 1, 2004.

·        An overall increase at Stony Brook Health Science Center of $45.8 million (8.4 percent), including an increase in personal services of  $15.5 million (6 percent).

·        An overall increase at Brooklyn Health Science Center of $29.5 million (10.1 percent), including an increase in personal services of $6 million (4 percent).

·        An overall increase at Syracuse Health Science Center of $54.2 million (14.6 percent), including  an increase in personal services of $8.4 million (5.4 percent).

·        The recommended State subsidy for the SUNY hospitals, which recognizes costs attributable to their state agency status, is maintained at $92.6 million for 2004-05.

Department of Labor

• An overall FTE level of 4,138, which represents no change from the adjusted 2003-04 FTE level.  This includes a decrease of 14 FTEs in the Administration Program; a net reduction of 28 FTEs in Employment and Training (including a shift of 15 FTEs from General Fund to Special Revenue-Other), an increase of 32 FTEs in the Labor Standards Program and an increase of 10 FTEs in the Occupational Safety and Health Program.

• An increase of $6,884,000 (+0.1 percent) for the All Funds DOL State Operations budget, rising from $5,443,782,000 to $5,450,666,000.

• A $3.5 million reduction, from $13.3 million to $9.8 million in the Employment and Training Program. This includes:

§         Elimination of General Fund support, a decrease of $954,000 in personal service and $104,000 in non-personal services.  This reflects the shift of 15 FTEs to Special Revenue-Other funding and the elimination of 28 positions.

§         The loss of $1 million in Special Revenue-Federal funds for the “Green Teams” program for youth eligible for services under Federal Temporary Assistance for Needy Families block grant.

§         A decrease of $1.4 million, from $10.4 million to $9.0 million in the Unemployment Insurance Interest and Penalty Fund (Special Revenue-Other). This decrease is apportioned as follows: $1.5 million for fringe benefit costs, $4 million for apprenticeship training programs (up $100,000 from the enacted SFY 2003-04 appropriation.) and $3.5 million for the cost of the Unemployment Insurance systems modernization project. This apparently results in the loss of the entire funding from this appropriation for the Displaced Homemaker Program (-$1.9 million); Affirmative Action programs (-$1.3 million); Model Dislocated Worker Assistance Center (-$882,000); Chamber of Commerce on-the-job training program (-$896,000); sub-allocation to Department of Health funds for on-the-job training, apprenticeship training, tuition assistance and supportive education (-$342,000), and a youth education, employment and training program for economically disadvantaged youth (-$1.2 million).

TRANSPORTATION, ECONOMIC DEVELOPMENT AND ENVIRONMENTAL CONSERVATION S.6055/A.9555

Department of Transportation

·        A reduction of 39 in the estimated number of FTEs from the adjusted 2003-04 year end target of 9,538.  All of these FTEs are located in the Design and Construction Program (Capital Projects Other).  There was an additional loss of 52 positions beyond the reductions contained in the enacted SFY 2003-04 budget.  Most of the losses in the Preventive Maintenance Program (Capital Projects – Other).

·        Recommends a State Operations decrease of ($2.5 million) and a Capital Projects decrease of ($128 million).  This decrease is due to the expiration of $137 million in one time legislative adds for highway construction and engineering made in 2003-04.  It is not clear how this reduction will be allocated between DOT and private consulting engineers.

Department of Environmental Conservation

·        A year-end FTE level of 3,345, which represents an increase of 19 FTEs from the Governor’s current estimated FTE level for 3/31/03.  However, the current estimate is actually 25 FTEs higher than the number projected in last year’s budget.

·        Changes in FTE levels are as follows:  Decrease of 16 FTEs in the Air and Water Quality Management Program (SRF), increase of 4 FTEs in the Environmental Enforcement Program (SRO), decrease of 4 FTEs in the Operations Program (General Fund) and an increase of 35 FTEs in the Solid and Hazardous Waste Mgmt Program (Capital Projects Funds – Other).  All decreases will be achieved through attrition.

·        Proposes an All Funds decrease of $16 million or 3.7%.  However, this is offset by a $30 million increase in Capital Projects in the Solid and Hazardous Waste Management Program which will fund the 35 FTEs added to the program.

·        Eliminates the SRO for Site Investigation & Construction in the Solid & Hazardous Waste Program ($28 million).  However, it appears that undistributed Environmental Protection Funds (EPF) funds necessary to support the program have been shifted to Capital Projects Funds – Other.  (see previous bullet)  Environmental groups have criticized use of EPF funds for this purpose.

Department of Taxation and Finance

·        An FTE level of 4,766 which is a decrease of 126 FTEs in SFY 2004-05.  These are all General Fund items and are in the following program areas:  Audit (-47), Revenue & Info Management (-39), and Tax Compliance (-20).  The Department also lost 34 FTEs beyond what was eliminated in the 03/04 enacted budget.  These positions were eliminated in the following program areas: Audit (-13), Revenue & Info Management (-9), and Tax Compliance (-6).  

·        Personal Service appropriations are reduced by approximately 3.1% in virtually all program areas.

FINAL OBSERVATIONS

            It is clear that the Executive Budget closes the SFY 2004-05 and out year budget gaps mostly through spending cuts and one-shot revenues. While it does raise $972 in revenues, it does so by raising regressive taxes like the sales tax and fees that put a greater burden on working families who already pay more than their fair share of State and local taxes.  According to the Institute on Taxation and Economic Policy, in 2002 all New York’s non-elderly taxpayers paid about 12% of their income in State and local taxes except the wealthiest New Yorkers, who make $634,000 or more a year, who pay only about 6.5% of their income in State and local taxes.  The Executive Budget will exacerbate this gap rather than close it.  The fact that New York’s large and profitable corporations are not asked to pay their fair share of the State’s fiscal burden is illustrated by the Executive Budget’s Financial Plan’s projections that business taxes collections remain flat (no increase) in SFY 2003-04, go up only $344 million in SFY 2005-05 will grow by only a projected 4% in SFY 2005-06 and 2% in SFY 2006-07.  Since 1977, New York’s corporations’ contribution to State revenues has decreased from 10% to less than 4% and that will remain true with the adoption of the proposed SFY 2004-05 Executive Budget.

            The Legislature is likely to add school aid to the proposed Executive Budget as the Board of Regents recommended a $800 million school aid increase as compared to the $147 million increase recommended in the SFY2004-05 Executive Budget (which Speaker Silver referred to as a $240 million cut from current services).  Based on public comments by Speaker Silver and Senate Majority Leader Bruno, the Legislature will likely reject or modify many of the Governor’s other spending reduction and revenue proposals including:

·         Pension reforms ($440 to $500 million).

·         Extending the sales tax on clothing ($400 million).

·         Changes in the Tuition Assistance Program ($227 million).

·         Health care provider assessments ($323 million).

·         Medicaid and other health care cuts (at least $150 million in cuts are likely to be rejected).

·         The expansion of video lottery terminals which is expected to raise $240 million in SFY 2004-05,   $950 million in SFY 2005-06, and $1.3 billion in SFY 2006-07 all of which will be dedicated to additional school aid so all school districts can provide for a sound basic education and to settle the current lawsuit on this issue.

      This adds up to at least $2 billion that the Legislature must find in additional revenue or spending cuts beyond what is proposed in the SFY 2004-05 Executive Budget.  PEF will not only need to fight proposed program reductions and increased privatization, but will also have to protect against further cuts imposed by the Legislature so they can fund other local assistance programs.

      In addition to this memo, we are forwarding to the respective Executive Board members and Statewide Labor-Management Chairs our department’s line-by-line analysis of the Program Details–State Operations portion of the budget for the State agencies with the most significant changes in their budgets.

      Next week, we will distribute any revised drafts of the major agency summaries sent this week, as well as State Operations summaries for all other agencies.  We will also include on PEF’s website a complete copy of Executive Budget Appendix I and all State budget legislation which contains each State agency’s specific budget information.  Executive Board members and Statewide Labor-Management Chairs who do not have a computer to access PEF’s website and want a copy of their agency’s budget should call the Research Department at 1-800-342-4306 ext. 280 and request a copy.

We will keep you informed as we get more details about the Executive Budget.  It is important that all Labor-Management Chairs schedule meetings with their agency management as soon as possible to get more budget details.  The agency specific spreadsheets contain many unanswered questions that need to be answered by agency management.  The Civil Service Enforcement/Research Department will work with Statewide-Labor Management Chairs to formulate these questions and, if requested, will participate in agency meetings on