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 21, 2005

RE:                 Executive Budget SFY 2005-06 – Preliminary Summary of Major Provisions

STATE WORKFORCE IMPACT

The Executive Budget proposes to increase the State workforce by 491 FTE positions from 190,925 full-time equivalent (FTE) positions to 191,425 FTE positions.  It is interesting to note that the SFY 2004-05 Executive Budget projected that the State workforce would remain at 187,900 FTE positions on March 31, 2005.  The workforce will be approximately 3,000 FTE positions higher than expected on that date primarily because of a higher number of positions at the Department of Correctional Services (DOCS, 84 more FTE positions than estimated) and the State University of New York (SUNY, 1,348 FTE positions more than estimated).  According to the Division of Budget (DOB), from January 1995 to March 2006 the State workforce will decline by approximately 19,800 FTE positions.  Attachment A is the DOB’s Workforce Impact Summary Report for Executive Branch agencies in SFY 2005-06.  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 2005-06, all position reductions will result from attrition or agency mergers.  Also included is Attachment B which details, by agency, how many employees are funded with Capital Projects Funds.  Currently, there are 11,638 employees employed with Capital Funds, which will increase by 100 employees in SFY 2005-06.  76 of these new Capital Projects employees work in the Department of Environmental Conservation.

Based on the information in Attachment A the following agencies have the largest net losses of positions in SFY 2005-06, including real position losses from the enacted SFY 2004-05 Budget:

•         Workers’ Compensation Board (WCB) will lose 1,544 FTE positions; 1,539 will be lost due to the proposed merger of WCB with the Department of Labor (DOL).  Another 5 FTE positions will be lost due to attrition, all in the Workers’ Compensation program which accounts for 1,407 FTE positions within the WCB.  There will be no FTE position loss in the WCB’s Disability Benefits and Systems Modernization program.

•         Department of Education will lose 1,170 FTE positions; 1,150 FTE positions will be lost due to the proposed transfer of the adult VESID program to the Department of Labor (750 FTEs) and the proposed consolidation of the State Museum, State Library, and State Archives into a new public benefit corporation called the New York Institute for Cultural Education (NYICE) on October 1, 2005 (400 FTE positions).  Another 20 FTE positions will be lost through attrition due to a proposed “Management Efficiencies” program.

•         Office of Children and Family Services (OCFS) will lose through attrition 99 FTE positions, 98 of which will be in the Youth Facilities program.  It should also be noted that the Youth Facilities program will have 25 less FTEs on 3/31/05 than estimated in the SFY 2004-05 Executive Budget; these positions have been lost through attrition. 

•         Department of Correctional Services (DOCS) will lose 76 FTEs through attrition in SFY 2005-06. None of these position losses will occur in Program Services or Health Services, all will occur in the Supervision of Inmates programs.  However, this does not include the Program Services and Health Services positions that are to be lost due to the closure of Camps McGregor and Pharsalia and the Fulton Correctional Facility which are due to last year’s budget actions.  According to DOB, none of these facilities will close until the SFY 2005-06 budget is enacted.  DOCS management has indicated that under civil service layoff and transfer procedures, it will take 90 days from the date the budget is enacted until the last employee leaves these facilities.  According to DOCS, $22.4 million would have to be added to the proposed SFY 2005-06 DOCS budget in order to keep all facilities open during all of SFY 2005-06.

•         Division of Parole will lose 67 FTE positions through attrition in SFY 2005-06, all in the Parole Operations program.  No justification is provided for this decrease.

•         Department of Labor will lose 185 FTE positions due to the proposed transfer of the Welfare-to-Work program to the Office of Temporary and Disability Assistance.  However, overall DOL will gain a total of 2,098 FTE positions due to the proposed transfer of the WCB and adult VESID programs.

MAJOR AGENCY CONSOLIDATIONS, TRANSFERS, AND PRIVATIZATIONS

The Executive Budget once again 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, 2005.  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.  It is unclear what mechanism will fund NYICE’s operations.  Three 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 $14 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 three years.

The Executive Budget also proposes giving the SUNY Board of Trustees the power to privatize the three SUNY Health Science Centers pursuant to a plan approved by the Commissioner of Health.  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 $119.6 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 $1.3 billion, the State workforce could be reduced by over 10,000 FTEs, and the SUNY hospital debt could be eventually removed from the State’s debt cap. The bill directs the Trustees to submit a transfer plan to the Governor and the Legislature on or before October 1, 2005.  The Legislature rejected a similar proposal the last two years.

The Executive Budget also proposes the transfer of administration of WCB and all existing functions, powers, and duties to the Department of Labor (DOL) effective April 1, 2005.  1,539 WCB employees would be transferred to DOL under section 70 of the Civil Service Law.  The proposal also authorizes the merger of WCB’s administrative functions and claimant services with DOL’s.  The proposal specifically continues WCB’s autonomy in making case determinations without the Labor Commissioner’s review, supervision, input or control. No cost savings other than the loss of 5 FTE positions is attributed to this transfer, although the DOB notes in its memorandum of support that “some administrative efficiencies can be expected in the future.”

The Executive Budget also proposes the transfer of the adult employment Vocational and Educational Services for Individuals with Disabilities (VESID) program from SED to DOL effective October 1, 2005.  750 VESID employees would be transferred to DOL under section 70 of the Civil Service Law.  245 VESID employees who work on  programs relating to the education of children with disabilities will continue to be employed by SED.  No cost savings is attributed to this transfer although the DOB notes in its memorandum of support that the transfer would “result in improved program coordination and will lead to enhanced cost-effectiveness for vocational rehabilitation programs.”

The Executive Budget also proposes the transfer of the Welfare-to-Work program in the Department of Labor to the Office of Temporary and Disability Assistance (OTDA) effective April 1, 2005. 185 DOL employees in the Welfare-to-Work program will be transferred to OTDA under section 70 of the Civil Service Law.  The Executive Budget attributes no cost savings to this proposal but notes that federal reauthorization of the TANF program will likely include increased work participation rates and the elimination of caseload reduction credits that currently help the State to meet current work participation requirements.  It indicates that the State faces a potential $360 million penalty if it does not meet new federal work participation rates.  It should also be noted that the Welfare-to-Work program was originally administered in the old Department of Social Services until its breakup under the Pataki administration in 1997 into several new agencies including OTDA.

The Executive Budget also proposes the merger of the Division of Probation and Correctional Alternatives (DPCA) with the Division of Criminal Justice Services (DCJS) effective April 1, 2005. This proposal would move 28 FTEs from DPCA (21 PEF members) into the Administration Program within DCJS under section 70 of the Civil Service Law.  It should be noted that the Executive Budget for DCJS only shows an increase of 20 FTEs in their Administration program which indicates that either eight DCJS or DPCA positions will be lost to attrition with this proposed merger.  DOB claims that this merger will “strengthen coordination of local programs and create a single point of contact for recipients of local criminal justice assistance funds”.  Last year the Legislature denied the proposed transfer of the DPCA’s local grants program administration to DCJS, but the Governor vetoed the $202,000 the Legislature added to the DPCA Community Corrections Program to administer these grants. Based on the information in the SFY 2005-06 Executive Budget, it appears that the administration of the DPCA’s local grants program was transferred to DCJS in SFY 2004-05 along with 4 FTE positions.

The Executive Budget also proposes the merger of the Office of Advocate for Persons with Disabilities (OAPD) with the Commission on Quality Care for the Mentally Disabled (CQC)  into a single agency, the Commission on Quality Care and Advocacy for Persons with Disabilities (CQCAPD) effective April 1, 2005. This proposal would move 15 FTEs (8 PEF members) from OAPD into CQCAPD under section 70 of the Civil Service Law.  The Executive Budget claims this merger will enable the State to generate in SFY 2005-06 about $160,000 in additional federal reimbursement to enhance advocacy, oversight, and services to persons with disabilities.  DOB claims this will grow to a $320,000 full annual reimbursement in SFY 2006-07.  DOB also claims that the proposal builds on an SFY 2004-05 initiative that consolidated certain administrative and support functions of both agencies, including human resources, procurement services, and grants management.

PENSION and EMPLOYEE BENEFIT ISSUES

The Executive Budget does not propose another Early Retirement Incentive (ERI) program in SFY 2005-06.  The Division of Budget’s position is that an incentive is not necessary because the overall state workforce will increase during SFY 2005-06.

            The Executive Budget does propose major reforms in the manner in which employer contributions are made to the State Retirement System. The budget proposes language to require that the State Comptroller provide for an independent professional review and public comment before making any changes in the actuarial funding assumptions and funding methods affecting the NY State and Local Employees Retirement System (NYSLERS). The budget proposes that the Comptroller reconsider the previously established employer contribution rates for 2005-06 until this independent review has been conducted. The Executive states that this would reduce employer contributions from the State by $367 million in 2005-06 and reduce its NYSLERS contribution rate from 11% to 7%.

            PEF opposes this proposal on the basis that it is an unconstitutional interference with the Comptroller’s obligation as the Trustee to manage the pension fund in a way that protects the integrity and security of pensions. It would have the effect of artificially deferring part of the State’s contribution that is required to keep the pension system fully funded to meet its future liabilities. Delaying this payment will not save money in the long run because the State remains obligated to fully fund its pension obligations. According to the SFY 2005-06 Financial Plan, under the Governor’s proposal, the State’s pension contribution rate would increase to 12.4% in SFY 2006-07 and 11.5% in SFY 2007-08 at an annual cost of $1.4 billion.

            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 2005-06. Providing health insurance to State employees and retirees is projected to total $2.2 billion in SFY 2005-06, an increase of $189 million over last year’s costs. According to the SFY 2005-06 Financial Plan, health insurance costs for State employees will increase to $2.5 billion in SFY 2006-07 and $2.8 billion in SFY 2007-08.  According to DOB, these increases are attributable primarily to underlying growth in premium costs to cover the rising expense and utilization of employee health care, including escalating prescription drug costs. 

        The Executive Budget proposes making permanent technical amendments enacted last year that clarified the authority of the Department of Civil Service regarding the administration of the Employee Health Insurance Program.  This bill permanently 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. We are currently studying this proposal to determine whether making this authority permanent will have an impact on the Health Insurance Fund.

HOW THE SFY 2005-06 EXECUTIVE BUDGET CLOSES THIS YEAR’S $4.1 BILLION BUDGET GAP AND HANDLES FUTURE BUDGET GAPS

            The SFY 2005-06 Executive Budget recommends All Funds spending of $105.5 billion, a $2.5 billion or 2.4% increase over last year’s budget when adjusted for Health Care Reform Act (HCRA) and Medicaid spending that was “off-budget” in SFY 2004-05.  State Operations, which accounts for the cost of running the Executive, Legislative, and Judicial branches of government, is projected to total $16.594 billion in All Funds spending in SFY 2005-06, an increase of $569 million (3.5%) from estimated SFY 2004-05 All Funds spending. 

            DOB projects the State will end SFY 2004-05 with $170 million surplus which will be used to reduce the SFY 2004-05 budget gap. The state will also deposit $70 million into the “Rainy Day Fund” (formerly known as the Tax Stabilization Reserve Fund), bringing this fund up to $864 million. The main reason for the surplus is an underlying annual receipts growth of 10.2% in SFY 2004-05 and 6.5% in SFY 2005-06 that was not forecasted in the Mid-Year Financial Plan update issued on November 1, 2004. Senator Bruno and the Fiscal Policy Institute had predicted this revenue growth and the  reduced SFY 2005-06 budget gaps that would result from this growth which is mostly in personal income tax receipts.

            The SFY 2005-06 Executive Budget projects that the State has to close a $4.152 billion budget gap in SFY 2005-06.  This gap will be closed with $2.763 billion in spending reductions (closing 66% of the gap), $533 million in revenue actions (closing 13% of the gap), and $856 million in non-recurring actions also known as “one-shots” (closing 21% of the gap).

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            The SFY 2005-06 Executive Budget reduces spending by $2.763 billion by restructuring programs and using alternate funding sources. There are actually $3.076 billion in spending reductions offset by $313 million in new spending primarily for the expense of the takeover of some local Medicaid costs and aid and incentives for municipalities.  Significant proposals include:

·         Medicaid reforms including cost containment (saves $869 million growing to $1.5 billion in SFY2007-08), provider assessments (saves $234 million growing to $470 million in SFY2007-08), and other financing sources (saves $795 million decreasing to $351 million in SFY2007-08).  Cost containments include actions to restrain growth for nursing homes, hospitals, Family Health Plus and prescription drug costs, and lower the cost of optional services by eliminating coverage for dental, private-duty nursing, audiology, clinical psychology and podiatry services.  Provider assessments include a new 0.7 percent tax on hospitals and raising the current nursing assessment from 5 percent to 6 percent.

·         State operations efficiencies (saves $130 million which grows to $132 million in SFY 2007-08).  These savings are spread across multiple agencies and are achieved through the continuation of the hiring freeze, expansion of the “administrative host” concept in which one agency provides administrative functions for multiple agencies, controls in non-personal service spending and centralized purchasing of certain commodities and services.  According to the Financial Plan, another $100 million in State Operations savings is achieved through other cost reduction steps taken in Mental Hygiene, Transportation and Motor Vehicles, Social Services and SUNY/CUNY.  Cost reductions in these areas are discussed below but the Financial Plan does not provide the specificity to determine which of these cost reductions will affect State operations.

·         Social services efficiencies (saves $104 million growing to $156 million in SFY 2007-08). These savings are achieved by maximizing the use of federal resources ($49 million), benefit cuts ($24 million) federal Temporary Aid to Needy Families (TANF) welfare spending realignments ($24 million), and redirection of funding for institutional-based programs ($7 million, which we believe refers to moving youth out of OCFS facilities and into EbCI programs).

·         Mental hygiene efficiencies (saves $250 million decreasing to $135 million in SFY 2007-08.)  These savings are achieved through initiatives to increase Patient Income Account (PIA) and other revenues ($196 million) and cost containment actions including audit recoveries, overtime controls, and local program reductions ($54 million).

·         Transportation/Motor Vehicles efficiencies (saves $163 million growing to $178 million in SFY 2007-08).  These efficiencies involve expanding the use of non-General Fund resources to help support on-going operations.

·         SUNY/CUNY reductions (saves $137 million growing to $159 million in SFY 2007-08) which would reduce State support for operations.

·         Changes in the Tuition Assistance Program (TAP) (saves $135 million growing to $337 million in SFY 2007-08).  These changes would convert one-half of the TAP award to a loan payable, including interest, upon graduation.  The Legislature has rejected a similar proposal the last two years.

·         Lower debt service costs (saves $150 million decreasing to $100 million in SFY 2007-08) through debt management actions, including refundings and expanded use of variable rate debt.

·         All other spending reductions (saves $109 million growing to $222 million in SFY 2007-08) including lower funding for Empire State Development Corporation programs, reduced interest rates for Court of Claims payments, and alternate financing for certain environmental protection capital projects.

            Revenue proposals are expected to raise $779 million in 2005-06 and grow to $995 million in SFY 2007-08.  These proposals include:

·         Provision of two sales tax free weeks instead of a permanent exemption on clothing and footwear (generates $456 million growing to $605 million in SFY 2007-08).

·         Eliminating Quick Draw restrictions (generates $39 million growing to $57 million in SFY 2007-08).

·         Increases in the corporate franchise taxes (generates $51 million growing to $100 million in SFY 2006-07 and decreasing to $51 million in SFY 2007-08). This includes eliminating double benefits for certain business taxpayers and updating caps on corporate taxes to reflect changes in inflation.  It should be noted that this change is much different than the corporate loophole closures advocated by PEF and other unions which would generate about $1 billion annually. 

·         Increasing the excise tax on wine (generates $38 million growing to $45 million in SFY 2007-08) from 5 cents per liter to 28 cents per liter.

·         All other revenue actions would generate $195 million growing to $237 million in SFY 2007-08.  These actions include closing a loophole regarding tax treatment  of real estate investment trusts and regulated investment companies, Power Authority PILOT payments, higher filing fees for limited liability partnerships, and higher fees to register all terrain vehicles (from $10 to $45).

·         Other increased fee proposals include:

ü      Vehicle registration: Fee increase depends on vehicle.

ü      Title fee: Increase from $10 to $50.

ü       Driver's license photo fee: Increase from $5 to $10.

ü      Camping fees: Increase from $13 to $17.

ü      Work zone speed enforcement: New fee, amount varies.

ü        Dealer-issued temporary auto registration: Increase from $2 to $5.

ü        Unfair/deceptive business practices: Increase from $500 to $5,000.

ü      Insurance agent license: Increase from $20 to $40.

ü      Asbestos handling license: Increase from $300 to $500.  

            These revenue increases are offset by $246 million in new tax cuts which will grow to $303 million in SFY 2006-07 and decrease to $204 million in SFY 2007-08.  These tax cuts include accelerating the phase out of the temporary personal income surcharge imposed on the wealthiest New Yorkers. This proposal would reduce the tax rates on married couples with $150,000 or more in income from 7.25% to 7% and would reduce the rate on taxpayers with income over $500,000 from 7.7% to 7.6%.  This proposal would raise $190 million. 

The SFY 2004-05 Executive Budget proposes a total of $856 million in nonrecurring actions including:

·         Delaying actuarial funding changes for the State Employee Retirement (saves $321 million, not including $46 million which would be saved in the judiciary budget if the changes are enacted).

·         Use of the SFY 2004-05 surplus ($170 million).

·         Other actions including Federal Temporary Aid to Needy Families (TANF) reprogramming ($61 million), proceeds from the sale of property ($54 million), fund sweeps ($124 million), excess balances in mortgage insurance funds ($50 million), and federal Medicaid participation for aliens ($42 million).

         All these actions will still result in $2.7 billion General Fund budget gaps for SFY 2006-07 and SFY 2007-08 as detailed in Table 1

 Table 1

PROJECTED BUDGET GAPS FOR

SFYs 2006-07 AND 2007-08

($ 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 are also based on an assumption of 3.5% growth in State Operations spending in SFY 2006-07 and 2.9% growth in SFY 2006-07. 

SUMMARY OF EXECTIVE BUDGET PROPOSALS FOR MAJOR STATE AGENCIES

This section highlights the most important recommendations in the Executive Budget for the State agencies for which major changes have been proposed.  Executive Board members and Statewide Labor-Management Chairs will receive a more detailed analysis for these agencies in a separate mailing.  Next week Executive Board members and Statewide Labor-Management Chairs will receive a detailed analysis for all of their agencies.

HEALTH AND MENTAL HYGIENE (S.554/A.554)

Office of Mental Health

• The increase of 28 FTEs in SFY 2005-06 from the estimated 2004-05 year end FTEs. This includes an increase of 8 FTEs in Administration and Finance and an increase of 20 FTEs in Children and Youth Services. The estimated workforce will be 16,735 FTEs on March 31, 2006. 

• Closure of Middletown PC on April 1, 2006 (in compliance with the one year notification law).  Remaining patients will be transferred to Rockland PC.  One hundred percent of savings from the closure ($7 million) will be reinvested in state-operated, community-based programs.  The Executive cites avoidance of an “unjustifiable $28 million capital investment” and total patient census of 115 as the reasons for closure.  Local political support has been mixed.  Senator Bonacic has stated publicly that “it’s going to be hard to justify keeping the psych center open” but that he would fight for local services.  Senator Morahan, Assemblywoman Gunther, and Mayor DiStefano have vowed to fight the closure.

• A $5 million increase in contractual services in Adult Services.  This should be questioned in Labor-Management.

• The budget narrative indicates that there is $7 million in continued funding for expanded mental health treatment capacity and clinical staffing for forensic DOCS inmates with serious and persistent mental illness, continuing the initiative begun with DOCS in 2004-05.  The budget also states in the “Summary of Changes” that there is $3.5 million in new funding for annualization of the forensic expansion.  In 2004-05 the budget indicated that there was $7.6 million in new appropriations for this purpose, which would appear to suggest a $600,000 reduction in funding for 2005-06. There is not a separate line item for this funding so it is impossible to track through the actual budget bills.  We believe this discrepancy reflects the delay in bringing these services online.  There are no new positions in the Forensic Services program for this purpose, which probably indicates the 66 positions identified for this purpose in 2004-05 will come online by 3/31/05. This should be clarified with management.

Department of Health

·          An increase of 90 FTEs in SFY 2005-06 from the adjusted 3/31/05 FTE level.  In SFY 2004-05 there was a net increase of 11 FTEs during the fiscal year (4 more FTEs in Health Care Standards and Surveillance, 7 fewer FTEs in the Office of Medicaid Management, and a shift of 13 FTEs in the AIDS Institute from Special Revenue-Other to General Fund support).  Proposed increases in SFY 2005-06 are in the following programs:  60 FTEs in Community Health (Special Revenue-Federal); 15 FTEs in Health Care Standards and Surveillance (Special Revenue-Other); and 15 FTEs in the Office of Medicaid Management.

·          An All Funds appropriation of $4.7 billion, an increase of $77.4 million (1.5%).

·          Increased appropriations in the Institutional Management Program include a:

            ▪ $4.9 million or 7.7% increase in the SRO appropriation for Helen Hayes Hospital.     

            ▪ $3.4 million or 17.1% increase in the SRO appropriation for the NYC Veterans Home.

            ▪ $4.07 million or 19.2% increase in the SRO appropriation in the Lower Hudson                                     (Montrose) Veterans Home Account.

            ▪ $1.89 million or 20.6% increase in the SRO appropriation in the Western New York                Veterans Home Account.

▪ 4.2 million or 23.4% increase in the SRO appropriation for the Oxford Veterans Home.

            ▪ The purpose for all these increases should be clarified at Labor-Management.

·          Health Care Reform Act funding is on budget for the first time.  A significant portion of it appears in the DOH budget as an Aid to Localities appropriation.  This includes $78 million for Roswell Park Cancer Institute.

PUBLIC PROTECTION AND GENERAL GOVERNMENT (S.550/A.550)

Department of Correctional Services

• A decrease of 76 FTEs, from the adjusted FTE workforce for 3/31/05, all of them in the Supervision of Inmates Program.   The DOCS workforce on 3/31/05 will be 84 FTE’s greater than estimated in the SFY 2004-05 Executive Budget.  Workforce changes that occurred during SFY 2004-05 include: 106 more FTEs in the Supervision of Inmates Program; 37 less FTEs in the Correctional Industries Program; 14 less FTEs in the Health Services Program; and 1 less FTE in the Support Services Program.

• An estimated inmate population of 63,100 by 3/31/06, representing a reduction of approximately 1,000 from the estimated census on 3/31/2005.  Based on this estimate the inmate population will have decreased by 8,400 from December 1999 to March 2006.

• Closure of Green Special Housing Unit (SHU) and Groveland Annex.  No PEF members will lose their positions because of these closures.  DOB has indicated that these facilities, in addition to the facilities identified for closure during the current fiscal year (Camp Pharsalia, Camp McGregor, Fulton Work Release, and Watertown SHU), will not be closed until the budget has been enacted.

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 2004-05 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 would extend 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.553/A.553)

Office of Children and Family Services

• An FTE level of 3,754, which represents a net decrease of 99 FTEs from the 3/31/05 target of 3,853.  98 of these FTE losses occur in the Youth Facilities program which is already down 25 FTEs from the SFY 2004-05 Executive Budget’s estimated level for 3/31/05.

• Facility capacity will be reduced by 115 beds, attributed to a continued population decline. According to the Executive Budget, there are no facility closures associated with this census reduction.  The Executive Budget states that the bed closures will save $3.679 million in SFY 2005-06.

• Special Revenue-Other funding for the State Central Register Account (for administration of the state central register employment screening activities) in the Family and Children Services program increases by $661,000 (124.7%). Some of this funding will support 2 FTEs formerly supported by the General Fund.  However, it should be determined at Labor-Management what the remainder of this increased appropriation supports.  We suspect it may be for contractual services.

• Maintenance Undistributed funding in the Systems Support program for operation of the statewide automated child welfare information system is increased by $4.3 million (45.7%).  A justification for this increase should be sought at Labor-Management as we believe the increase will support contractual services.

• The Maintenance Undistributed appropriation within the Youth Facilities Program which is targeted for EbCI programs is increased by $2.2 million.  The Executive Budget states that increase for EbCI programs is $1.214 million; this discrepancy should be explored at Labor-Management as should the justification for such an increase.  To date, this initiative has been underutilized because OCFS had been unable to find youth that meet the selective criteria of these programs.

State Education Department

• A decrease of 1,170 FTE positions from the adjusted workforce for 3/31/2005.  1,150 FTE positions would be lost due to the proposed transfer of the adult employment VESID program to the Department of Labor (750 FTEs) and the proposed consolidation of the State Museum, State Library, and State Archives into a new public benefit corporation called the New York Institute for Cultural Education (NYICE) on October 1, 2005 (400 FTE positions).  Another 20 FTE positions will be lost through attrition due to a proposed “Management Efficiencies” program, which is estimated to save $2 million.

• An increase of $11.8 million in the Elementary, Middle, Secondary and Continuing Education Program. $9.2 million of the $13.3 million SRF increase is for non-personal services in the Federal DOE account.  We suspect these funds will be used for contracting out. This issue should be clarified at Labor-Management. 

• School for the Blind funding increases by $803,000 (9.4 percent), mostly for personal services and fringe benefits.

• Batavia ICF/DD funding increases by $371,900 (12.2 percent) , mostly for personal services and fringe benefits.

• School for the Deaf funding increases by $789,000 (9.7 percent), mostly for personal services and fringe benefits.

The State University of New York

·        An estimated 38,100 FTE positions consisting of 22,600 positions supported through a combination of state tax dollars and tuition revenues and 15,500 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 2005-06.  In fact, the SFY 2004-05 FTE level is approximately 700 higher than originally estimated in the SFY 2004-05 Executive Budget.

·        The budget proposes an 8%, or $423 million, increase in SUNY’s State Operation budget, rising from $5.3 billion to $5.7 billion.

·        An overall increase at Stony Brook Health Science Center of $87.2 million (14.8 percent)   This includes an increase in personal services of  $27.2 million (10 percent), an increase in non-personal services of $60 million (29.3 percent), an increase in fringe benefits of $2.9 million (3 percent), and a decrease of $3 million (18 percent) in debt service. The purpose of these changes should be clarified at Labor-Management.

·        An overall increase at Brooklyn Health Science Center of $50.2 million (15.6 percent).  This is made up of an increase in personal services of $26.2 million (16.7 percent), an increase in non-personal services of $19.6 million (19 percent), an increase in fringe benefits of $3.8 million (7 percent) and an increase of $0.6 million (8.7 percent) in debt service.  The purpose of these changes should be clarified at Labor-Management.

·        An overall increase at Syracuse Health Science Center of $56.4 million (13.3 percent). This is made up of an increase in personal services of $25.9 million (15.8 percent), an increase in non-personal services of $18.8 million (9.7 percent), an increase in fringe benefits of $9.1 million (15.9 percent) and an increase in debt service of $2.6 million (24.5 percent).  The purpose of these changes should be clarified at Labor-Management.

Department of Labor

·        An overall FTE level of 6,236, which represents a net increase of 2,098 from the adjusted 2004-2005 level, primarily reflecting the following agency mergers and transfers:

§         an increase of 750 FTEs transferred from the adult employment Vocational Educational Services for Individuals with Disabilities (VESID) program currently in the State Education Department (SED), under section 70 of the Civil Service Law;

§         an increase of 1,539 FTEs transferred from the Workers’ Compensation Board (WCB) under section 70 of the Civil Service Law, into three programs in DOL:  Workers’ Compensation (1,407 FTEs), Systems Modernization (81 FTEs) and Disability Benefits (51 FTEs);

§         a reduction of 185 FTEs from the Administration Program reflecting the transfer of the Welfare to Work program from DOL into the Office of Temporary Disability Assistance (OTDA), under section 70 of the Civil Service Law;

§         a reduction of 16 FTEs from the Employment Relations Board reflecting the merger into the State Relations Board, formerly the Public Employees Relations Board (PERB)

·           Article VII legislation would eliminate the Hazard Abatement Board, add a Compliance Assistance component to the existing Office of Safety and Health Training and Education Program, and create a Worker Protection License.

Office of Temporary and Disability Assistance

·        The transfer of the Welfare-to-Work program in the Department of Labor to the Office of Temporary and Disability Assistance (OTDA) effective April 1, 2005.

·        An FTE level of 2,532, which represents an increase of 185 FTE from the adjusted SFY 2004-05 level. All of the increase would come from the shift of welfare-to-work program staff from the Department of Labor to the OTDA.

·        A $2.6 million increase (30%) in personal services in the Administration Program from the SFY 2004-05 appropriation.  This increase is not associated with an increase in FTEs in SFY 2005-06.  This discrepancy should be questioned in Labor-Management as it may reflect contracting out.

·        An increase of $3.4 million (11.3 percent) in Child Support Enforcement, primarily reflecting the increase of $3 million in the Child Support Incentive Revenue Account (Special Revenue-other). $2.3 million of this increase is in a Maintenance Undistributed appropriation within this account which can be used for any purpose.  This appropriation increase should be questioned in Labor-Management as it may reflect contracting out.

·        “Adjustments” of $3.3 million in State Operations which are not specified.  The justification for and the impact of this reduction in funding should be questioned in Labor-Management.

TRANSPORTATION, ECONOMIC DEVELOPMENT AND ENVIRONMENTAL CONSERVATION (S.555/A.555)

Department of Environmental Conservation

·        A year-end FTE level of 3,352, which represents an increase of 7 FTEs from the Governor’s current estimated FTE level for 3/31/04.

·        Changes in FTE levels are as follows:  A shift of 24 FTEs from the Clean Water/Clean Air Administration Program Capital Projects Funds – Other to the Air and Water Quality Management Program General Fund and an increase of 7 FTEs in the  Fish, Wildlife and Marine Resources Special Revenue Funds – Other

·        An All Funds increase of $4.9 million or 1.2%. 

·        A General Fund Decrease of $2.2 million, (2.3%) is offset by increases of $2.1 million in Special Revenue Federal and $5.1 million in Special Revenue – Other funds. 

·        Proposes Environmental Protection Fund (EPF) appropriations of $150 million, a 20% increase over SFY 2004-05.

·        Recommends a decrease of $1.9 million for contractual services in the Fish, Wildlife and Marine Resources Program, a decrease of $250,000 for contractual services in the Forest and Land Resources Program and an increase of $711,000 in for contractual services in the Operations Program.  The purpose of the contractual services increase in the Operations Program should be clarified at Labor-Management.

Department of Transportation (Initial observations, detailed spreadsheet and findings to be completed next week)

The Executive Budget proposes a FTE level of 9,475 for the department, 10 less than the adjusted FTE level for March 31, 2005.  These losses primarily occur in the Preventative Maintenance program.  It should be noted that the adjusted FTE level for the Design and Construction program is 18 FTEs higher than was proposed in the SFY 2004-05 Executive Budget (3 FTEs would be eliminated in this program under the proposed SFY 2005-06 Executive Budget).

The Executive Budget also proposes legislation to authorize the NYSDOT and the Thruway Authority to construct projects using the design/build method of contracting. The NYSDOT could use design/build on up to 12 projects and the Thruway Authority could use it on 5 projects.

Under the present law, most public construction projects are first designed in detail by engineers and architects, and the design specifications are then advertised for competitive bids. The lowest responsible bidder is then awarded the construction contract.

The proposed “design/build” method combines the contract for construction with the design work on the project into one package. This creates several problems. It eliminates the competitive bidding process and allows the contract to be awarded to a contractor who is not necessarily the low bidder. It also restricts competition and opportunity because smaller contractors typically do not have the resources to perform the design of a project, even though they may be very capable of performing the construction work. Only the large contractors have this in-house design capability.

This method also increases the State’s reliance on expensive private contractors for engineering design work. Studies by the State Comptroller and other expert studies have repeatedly shown that most DOT engineering work can be done at lower cost and equal quality by using in-house engineers employed by the State. The projects awarded under this bill would all be designed by outside contractors and will therefore cost the taxpayers more money than if state engineers designed them.  PEF will strongly oppose this legislation.

The Executive Budget also proposes a controversial public/private partnership plan (the “Transportation Facility Development Partnership Program”).  This proposal would allow DOT, the Thruway Authority, and the MTA to enter into agreements with public or private entities to acquire, finance, build, operate, improve and maintain parts of the state’s roads, bridges and railways.  These entities could impose new tolls and other charges on new construction or where capacity is increased, and increase tolls where they already exist.  Twenty-one states have similar arrangements allowing privatization of state transportation facilities.  The $1.8 billion, 99-year lease with a private consortium in Chicago for the 7.8 mile Skyway will double tolls within eight years.  PEF vigorously opposes this proposal as we believe it will expand the state’s reliance on excessively expensive private contractors.

FINAL OBSERVATIONS

            It is clear that the Executive Budget closes the SFY 2005-06 and out year budget gaps mostly through spending cuts. While it does raise about $1 billion 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.  It also offsets these revenue increases with tax breaks for the wealthiest New Yorkers and big businesses. 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 Legislature is likely to add school aid to the proposed Executive Budget as a court appointed panel has recommended to the court in the Campaign for Fiscal Equity case that New York City schools receive $1.4 billion in additional school aid this year rather than the $280 million proposed by the Governor. 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 ($321million).

·         Extending the sales tax on clothing ($456 million).

·         Changes in the Tuition Assistance Program ($135 million).

·         Health care provider assessments ($234 million).

·         Medicaid and other health care cuts ($869 million) at least some of which will not be enacted into law.

      This adds up to $2 billion that the Legislature must find in additional revenue or spending cuts beyond what is proposed in the SFY 2005-06 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.

      Further complicating the budget battle is a recent Court of Appeals ruling that limits the Legislature’s ability to amend or not enact language changes the Governor submits with his budget appropriation bills.  These language changes are within appropriation bills and are also submitted in separate Article VII bills.  These separate Article VII bills contain many of the proposals that PEF opposes like the privatization of the SUNY hospitals, the creation of the New York State Institute for Cultural Education, the closure of Middletown Psychiatric Center and the various agency merger proposals.  If the Legislature cannot delete these policy changes without deleting the entire appropriations for the agencies they affect, it will greatly complicate PEF’s ability to stop these proposals.  PEF is studying these recent court decisions and will update you on the status of this situation as the budget process continues.

      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.  This memo and the complete agency analysis will be placed on the PEF website next week.

      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 link to Executive Budget Appendix I, which contains a summary of all agency budgets.  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 their budget.  Please call the Civil Service Enforcement/Research Department if you have any questions about or have further information to add to our budget analysis.