memo

memo

TO: State Senators and Assembly Members

DATE: February 10, 2006

RE: SFY 2006-07 Budget Priorities of the Public Employees Federation

SUNY (S6458/A9558, Part A)

Ø Reject once again the proposal to authorize the SUNY Board of Trustees to transfer the SUNY hospitals to the private sector. Estimated Cost: None.

Office of Children and Family Services (S6453/A9553)

Ø Reject the proposal to privatize a current OCFS “minimum security” facility and close three community residences in Gloversville, Mount Vernon, and Brooklyn. Restore the 60 FTE positions that are eliminated due to this proposal. Estimated Cost: $492,000

Transportation (S6459/A9559, Parts K, L, and V)

Ø Reject the proposed Art. VII legislation which would implement “Design Build” (Part K) and “Transportation Facility Development Partnership” (Part L) programs because it will increase DOT’s dependency on more costly consultant engineers, expand the use of no-bid contracts and limit public oversight of the State program to maintain and expand the State’s transportation infrastructure. Estimated Cost: None

Ø Amend the proposal (Part V) to permanently extend the State Single Audit Act for the Department of Transportation so it is only extended for one year in order to study whether such audits can be completed by State employees at a lower cost. Estimated Cost: None

Division of Parole (S6450/A9550)

Ø Reject the proposed reductions of 40 parole staff positions. Estimated Cost: $1.3 million

Department of Correctional Services (S6456/A9556, Part O)

Ø Amend the proposal to create a broad exemption to the new law requiring one-year notice of a correctional facility closure by substituting a specific exemption for Camp Pharsalia. Estimated Cost: None

Early Retirement, Pension, Employee Health Insurance and Civil Service Issues (S6456/A9556, Parts E, F, G, &I)

Ø Amend the proposed targeted early retirement incentive (ERI, Part G) and allow a non-targeted 25/55 ERI window that does not require positions to be abolished if the incumbent receives an ERI. Estimated Cost: $15-20 million for the Employees Retirement System, slightly lower cost to the State

Ø Reject the proposal (Part E) to create a Pension Task Force and an Actuarial and Investment Oversight Board. Estimated Cost: None

Ø Reject the proposal (Part I) to allow temporary five-year appointments to information technology project jobs and only allow such employees to receive a defined contribution retirement benefit. Estimated Cost: None

Ø Reject the proposal (Part F) to authorize use of certain interest earnings to offset costs of health insurance for public employees and retirees until all parties are sure that it does not result in a cost shift to State employees. Estimated Cost: None

Agriculture & Markets (S6459/A9559, Part Y))

Ø Reject the proposal to establish a program of risk-based inspections of retail food stores, pet dealers and breeders replacing the current annual inspection program. Restore 21 food inspector positions. Estimated Cost $1.1 million

Economic Development (S6459/A9559, Part DD)

Ø Reject the proposal to make the Urban Development Corporation loan powers permanent. Estimated Cost: None

Education(S6458/A9558, Parts H, Section 63, and K)

Ø Reject the proposal to establish a Cultural Education Trust. Estimated Cost: None

Ø Reject the proposal to give the Office of Mental Retardation and Developmental Disabilities greater oversight over residential programs the State School for the Blind. Estimated Cost: None

Public Employee Relations Board (S6456/A9556, Part V)

Ø Reject the proposed increased fees and more extensive reporting requirements for public sector unions to make to Public Employment Relations Board. Estimated Cost: $525,000

Tax Cuts (S6460/A9560)

Ø Reject the proposed tax cuts that benefit wealthy New Yorkers at the expense of working families. Estimated Revenue: Up to $927 million in SFY 2006-07, $3 billion in SFY 2007-08, $4 billion in SFY 2008-09 and SFY 2009-10, and $4.5 billion in SFY 2010-11

Workers Compensation (S6461/A9551)

Ø Reject the Governor’s proposed changes in the workers compensation program that puts limits on benefits for workers, particularly those who have permanent partial disabilities due to workplace injuries and limit a claimant’s rights to a fair and full hearing. Estimated Cost: None

____________________

Roger E. Benson

cc: Executive Board

Council Leaders

Labor-Management Chairs

memo

TO: State Senators and Assemblymembers

DATE: February 10, 2006

RE: SFY 2006-07 Budget Priorities of the Public Employees Federation

SUNY (S6458/A9558, Part A)

Ø Reject once again the proposal to authorize the SUNY Board of Trustees to transfer the SUNY hospitals to the private sector. Estimated Cost: None.

Office of Children and Family Services (S6453/A9553)

Transportation (S6459/A9559, Parts K, L, and V)

Division of Parole (S6450/A9550)

Ø Reject the proposed reductions of 40 parole staff positions. Estimated Cost: $1.3 million

Department of Correctional Services (S6456/A9556, Part O)

Early Retirement, Pension, Employee Health Insurance and Civil Service Issues (S6456/A9556, Parts E, F, G, &I)

Ø Reject the proposal (Part E) to create a Pension Task Force and an Actuarial and Investment Oversight Board. Estimated Cost: None

Agriculture & Markets (S6459/A9559, Part Y))

Economic Development (S6459/A9559, Part DD)

Ø Reject the proposal to make the Urban Development Corporation loan powers permanent. Estimated Cost: None

Education(S6458/A9558, Parts H, Section 63, and K)

Ø Reject the proposal to establish a Cultural Education Trust. Estimated Cost: None

Ø Reject the proposal to give the Office of Mental Retardation and Developmental Disabilities greater oversight over residential programs the State School for the Blind. Estimated Cost: None

Public Employee Relations Board (S6456/A9556, Part V)

Ø Reject the proposed increased fees and more extensive reporting requirements for public sector unions to make to Public Employment Relations Board. Estimated Cost: $525,000

Tax Cuts (S6460/A9560)

Workers Compensation (S6461/A9551)

SUNY

Ø Reject once again the proposal to authorize the SUNY Board of Trustees to transfer the SUNY hospitals to the private sector (Delete Part A, S6458 /A9558).

The Executive Budget includes a proposal to privatize the three SUNY hospitals in Stonybrook, Brooklyn, and Syracuse. The privatization itself is not described in detail. The Executive Budget requires the SUNY Board of Trustees to submit a privatization plan to the Legislature but also gives them the authority to privatize the hospitals without legislative approval.

Several years ago, SUNY engaged a health care consulting firm to assess the current finances of SUNY’s teaching hospitals and recommended short-term and long-term actions needed to maintain their fiscal viability in today’s changing health care environment. The PriceWaterhouseCoopers study confirms that SUNY Hospitals operate more efficiently than 75% of their academic peers and have both good market position and programmatic potential.

The SUNY teaching hospitals are an important part of SUNY’s educational mission because education and research in the health sciences are an integral part of SUNY’s mission. Such vital elements must not be separated and left to the private sector. It would also have a dramatic impact on employees because they would lose their status as State employees. This would mean the loss of pension rights, union contract rights, and Civil Service Law protections. In addition, the communities they serve might lose important health care services if the new private operators felt them to be unprofitable.

No evidence has been presented that privatization of these hospitals would improve efficiency or the quality of services to the public. There are no savings associated with this proposal in the Executive Budget. The Legislature should once again reject this proposal to authorize the SUNY Board of Trustees to transfer the SUNY hospitals to the private sector. These hospitals should remain part of the SUNY system.

Estimated Cost: None, as there is no cost savings assumed in the SFY 2006-07 Executive Budget.

OFFICE OF CHILDREN AND FAMILY SERVICES

The Executive Budget proposal to privatize an OCFS minimum security facility is a frightening prospect. The Legislature rejected a similar proposal in SFY2003-04 and passed legislation, which was vetoed by the Governor, to ban such facilities in New York. The record of privately-operated correctional and youth facilities across the country is a dismal mix of incompetence, corruption, and child abuse.

For example, one year after a private corporation assumed operations of a juvenile facility in Louisiana the state reassumed control after federal and state lawsuits alleged a lack of mental health treatment and education and a pattern of physical abuse of youths. The New York Times reported that the Tallulah Correctional Center for Youth in Louisiana run by the Wackenhut Corrections Corporation was “a juvenile prison so rife with brutality, cronyism and neglect that many legal experts say it is the worst in the nation.”

There have been widespread reports of abuses at privately run juvenile facilities for years. Recently, a 17 year old girl died in an Arkansas youth facility operated by Cornell Companies, Inc., after her repeated complaints of illness and her collapse were dismissed as “faking sickness for attention.” After the girl’s death widespread problems with the facility’s medical system were uncovered. A guard at another facility operated by Cornell was convicted of rape of a 16 year old juvenile in New Mexico. A review of the largest privatized girls youth facility in Florida showed staff sexual contact with youth and over reliance on physical force and restraints.

More than 200 employees fired from Florida juvenile centers for misconduct, incompetence, or violence were hired again by companies running other Florida juvenile centers.

These facilities also have a poor record of rehabilitation and cost effectiveness. According to a report from the Yale University Economic Growth Center, “the short-run savings offered by for-profit facilities are certainly reversed in the long-run due to increased recidivism rates.”

Not only do privately run facilities in other states have a shoddy record, voluntary providers in New York have also failed. The most recent example is Berkshire Farm, where charges of staff beatings of youth, sexual abuse and drug dealing were exposed this past July. The preliminary impact of these charges includes the replacement of the director, firing of staff, removal of youth by their home counties, freezing of referrals to the facility, and layoffs as the youth population dwindles.

There is no specific Article VII bill or appropriation that authorizes the transfer of the OCFS facility to a private operator. Instead the OCFS Youth Facilities budget provides funding for the private facility in a lump sum appropriation that funds all OCFS facilities.

The Executive Budget claims that the closure of three OCFS run community residences is necessary to better align the number of community residence beds with the size of the population served. The OCFS population increased in 2005 as did the need for community residence beds as evidenced by the 53 FTEs hired by OCFS above their authorized Youth Facility FTE level in the enacted SFY2005-06 budget. Community residence beds are always needed as juveniles transition out of more secure facilities. In contrast the Evidence based Community Initiative (EbCI) has been unable to place enough youth in their programs and did not spend all its authorized funding in SFY 2005-06. It makes little sense to close community residences and invest some of the savings into a program that cannot spend the money it already has. The closure of these community residences will either force the juveniles under their care into ill-equipped private facilities or on to the streets without the supervision and support they need to remain crime free.

Estimated Cost: $492,000. The Executive Budget claims that the closure of the three community residences (and the elimination of 18 FTEs) will save $792,000 in SFY 2006-07 but it reinvests $300,000 of those savings into the EbCI program. No savings is claimed in the Executive Budget for privatizing the “minimum” secure facility as the savings from eliminating 42 FTE positions is reinvested to pay for the cost of privatizing the facility.

DEPARTMENT OF TRANSPORTATION

Ø Reject the proposed Art. VII legislation which would implement “Design Build” and “Transportation Development Partnership” programs because it will increase DOT’s dependency on more costly consultant engineers, expand the use of no-bid contracts and limit public oversight of the State program to maintain and expand the State’s transportation infrastructure. (Delete Parts K & L, S6459/A9559)

By any objective measure the greatest value in transportation maintenance is found in the State workforce. Multiple bi-partisan studies spanning significant periods of time have indicated that State-employed engineers cost significantly less than private sector consultants, including the cost of their benefits. Studies by State Comptrollers Regan and McCall both concluded that tens if not hundreds of millions of dollars can be made available for actual highway and bridge projects simply by hiring more Department of Transportation engineers while reducing the Department’s reliance on costly consultant engineers and engineering services.

The KPMG report commissioned by the Department of Transportation found that consultants are approximately 75% more costly than in-house resources for comparable design projects and are approximately 50% more expensive than using in-house resources for comparable construction inspection projects. The report also found that consultant overhead rates are on average 32% and 29% higher than in-house overhead rates for design and construction and inspection projects respectively.

Overall, the Design and Construction program has experienced a net loss of 1,179 FTEs from the enacted SFY1994-95 budget, including over 800 engineers as of the beginning of SFY2005-06. The proposed budget for SFY 2006-07 begins to address this shortage by adding 179 positions for this program. As the funds dedicated to funding transportation projects continue to fall short of transportation needs, the Department of Transportation needs to reverse the prior trend and hire more in-house engineers. Unfortunately the two major transportation initiatives in the proposed Executive Budget – the “Design Build” and “Transportation Development Partnership” legislation will increase the dependence of DOT on consultant engineers. Commissioner Boardman admitted this at last year’s DOT budget hearing.

There are other major problems with both proposals. 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.

The proposed “Transportation Development Partnership” has the potential to significantly decrease the State’s control over its public transportation infrastructure. Early in the State’s history many roads were privately funded and maintained. Such roads were called turnpikes because pikes blocked access to the roads unless a toll was paid to the owner. This system of private roads led to well developed and maintained roads in populated areas but less populated areas were left with little or no viable way to transport their citizens and goods. The State stepped in and built the Erie Canal and began to take over the construction and maintenance of the State’s major roads. There is no evidence that a return to the way roads and bridges were financed in the early 1800’s makes sense in today’s economy. The State already uses the private sector to build its roads and bridges so any private sector efficiencies are already part of the State’s highway and bridge program. In addition, the public sector can use tax-exempt bonds to build public roads and bridges. The private sector does not have access to this type of financing and therefore their costs to build roads and bridges will be higher than the State’s. If the private sector can make money by building or expanding a State highway or bridge and charging tolls then the State could make the same money while charging lower tolls due to their lower costs of financing.

There is no evidence that either of these proposed initiatives will save the State money. There is a great deal of evidence that they will actually cost the State money. Significant savings can be achieved at DOT. However, it requires initiatives that will use more State employee engineers, not fewer.

Estimated Cost – None. No cost savings is attributed to either the Design/Build or the “Transportation Development Partnership” legislation. There is also no additional cost to the State if it dedicates a larger proportion of the Engineering Services Fund for State engineers as they assume the responsibility for more DOT design and construction and inspection work. According to the Fiscal Policy Institute if the State used State employees exclusively for DOT design and construction and inspection work it could save at least $119 million annually.

Ø Amend the proposal to permanently extend the State Single Audit Act for the Department of Transportation so it is only extended for one year in order to study whether such audits can be completed by State employees at a lower cost. (Amend Part V of S6459/A9559)

The Governor’s Transportation Article VII budget bill (Part V) proposes to remove the sunset from Transportation Law Section 21. This law authorizes State funding of auditing expenses for audits of transportation projects that are funded with a combination of Federal and New York State funds. The original law called for a report of the costs and benefits of this program. Before the law is made permanent, this issue should be studied to determine if there are ways to accomplish this work at lower cost by using State-employed auditors instead of contracting with CPAs. PEF proposes that instead of removing the sunset, it should be extended for one year until December 31, 2007 and that DOT be directed to study this question and report to the Governor and Legislature no later than April 1, 2007.

DIVISION OF PAROLE

Ø Reject the proposed reductions of 40 parole staff positions.

Existing parole caseloads are already so large that they threaten community safety because parole officers cannot provide adequate supervision to all parolees. PEF analysis of sample caseloads provided by our members indicates that unweighted caseloads average over 75 parolees downstate and 60 parolees upstate. Many parole officers in New York City carry unweighted caseloads of over 100 parolees. In addition new regulations issued by the Division of Parole require parole officers to have more contacts with parolees which is impossible to do with their current caseloads. Given these facts, there is no justification for a decrease in the number of parole staff positions even if they are clerical positions. When clerical positions are eliminated the clerical work is not eliminated with the positions, it is simply transferred to the job responsibilities of parole officers who already don’t have enough time to do their current jobs much less additional clerical responsibilities.

Estimated Cost: $1.3 million, based on the savings claimed in the Executive Budget for the elimination of these positions.

DEPARTMENT OF CORRECTIONAL SERVICES

Last year the Legislature passed and the Governor signed a law requiring that one-year notice be given to affected communities and employees before a DOCS facility can be closed. The Executive Budget proposes closing Camp Pharsalia this year in order to build a new facility to house civilly committed sex offenders. While PEF supports the creation of this new facility it is not necessary to create a broad exemption to the one-year notification law in order to close Camp Pharsalia. The proposed exemption would allow the closure of a DOCS facility as long as it will be used for another purpose. The proposed exemption does not require that this “new use” be sufficient to employ the facility’s current employees or that the “new use” be operated by the State. A specific exemption of Camp Pharsalia from the one-year notification law is all that is necessary to accomplish the Executive Budget’s stated goal.

Estimated Cost: None

EARLY RETIREMENT, PENSION, HEALTH INSURANCE AND CIVIL SERVICE ISSUES (Amend Part G and delete Parts E, F and I of S6456/A9556)

Ø Amend Part G, the proposed targeted early retirement incentive (ERI) and allow a non-targeted 25/55 ERI window that does not require positions to be abolished if the incumbent receives an ERI.

The Executive Budget proposes an early retirement incentive (ERI) program for the 2006-07 fiscal year that would be used to manage the workforce goals anticipated by the proposed budget. Local governments would have the option to participate. Under this traditional ERI the decision of which agencies would offer the ERI and which job titles would be targeted would be made by the administration. Positions that are vacated would have to be abolished unless the agency could demonstrate two-year cost savings of at least 50%.

The problem with this type of targeted ERI is that it undermines the morale of employees by creating the impression of favoritism in selecting who gets to take advantage of it. Also, the job abolishment provisions create problems of excessive workload for remaining workers.

If an ERI is adopted to help manage the workforce, PEF advocates that it be modified to add a second component allowing any worker who is at least 55 years old and has 25 years of service to retire without penalty at his or her option. The job abolishment language should be changed to allow an agency to offer the ERI and still fill positions as long as it can demonstrate a net cost reduction. An ERI bill of this type was approved by the Legislature and the Governor in 2002.

Estimated Cost: The annual cost to the Employees Retirement System was estimated to be between $15 and $20 million by the State Actuary. The cost to New York State will be less as this estimate also includes the costs to local governments who elect to offer the same incentive.

Ø Reject the proposal (Part E) to create a Pension Task Force and an Actuarial and Investment Oversight Board and fund it with monies from the State pension funds.

The Executive proposes to create a task force to study the public employee pension systems in New York State and to recommend changes. Among other things the task force is specifically charged with considering the establishment of a new defined contribution pension plan to replace the existing traditional pension plan.

What’s wrong with the proposed task force? To begin with, out of 18 members, only two are labor representatives and one retiree. The membership is stacked in favor of management representatives. Because of this bias, the outcome is pretty clear. This task force is a vehicle to attack the traditional pension plan for public employees, and to substitute a less-secure defined contribution plan, or to establish a new Tier 5 that would reduce pension benefits at the worker’s expense. The cost of the Task Force would also be funded out of the State’s contribution to its pension funds. It is unlikely that the State Comptroller would approve the use of employee pension funds for this purpose as it is unclear how such expenditure would benefit retirees or their pension system.

The current traditional pension plans in New York have been in existence for decades and have been secure and successful in assuring fair retirement benefits for hundreds of thousands of taxpaying New Yorkers. While it is true that employer contributions required for the pension system have risen in recent years, it is also true that for more than ten years prior to the 2001 stock market crash, the State and local governments paid almost nothing into the pension plan. During those years the State and local governments got a windfall because of investment earnings. Because of this windfall, they paid far less into their pension plans during those years than most private companies did. In the wake of stock market declines, the public employers are now having to pay increased amounts to make up for those years of extraordinarily low pension costs.

Reforms proposed by the State Comptroller and adopted by the Legislature two years ago should help prevent this type of sharp up and down swing in future years. It would be a mistake to discard a pension system that has worked well for decades in favor of a risky new system that exposes workers to the same type of financial market swings. The current traditional pension plan works well, and any attempt to improve on it should be conducted in a setting where workers and employers have an equal voice.

Ø Reject the proposal (Part I) to allow temporary five-year appointments to information technology project jobs and only allow such employees to receive a defined contribution retirement benefit.

We agree with the Executive that the State can save millions of dollars annually by hiring State employees to do information technology work currently provided by costly consultants. However, the State has provided no evidence that the only way to hire more State employees in these positions is by hiring temporary employees for up to five years and provide them with a second-class defined contribution pension.

The problems with defined contribution pensions are numerous. Temporary information technology employees would be excluded from the New York State and Local Employees Retirement System- the pension plan that covers virtually all State government employees as well as most local governments. They would no longer be able to participate in a traditional pension plan that has worked well for decades and provides retirement security to hundreds of thousands. Instead they would be offered a lesser employer contribution to a 401K-type investment plan that would be subject to the risks of the financial markets.

This proposal to create a new pension plan for this limited group of employees would open the door to an attempt in the future to take away the traditional pension from all State employees by substituting the new less-secure defined contribution plan. Therefore this proposal, although initially limited, would put at risk the retirement security of all State workers.

It also runs contrary to decades of successful pension fund management in New York State. NYSLERS was created in order to insure that all State and local government employees would be able to participate in a common pension system that is secure, stable and professionally managed. One of the key goals was to eliminate the excessive risks created by having many small pension plans covering small groups of workers. This proposal for a new pension plan runs counter to that policy and would undermine the stability of the traditional pension plan. It also would create obstacles to the movement of employees among State job titles and between State and local government agencies.

This proposal for a completely new pension plan is drastic and risky. The Executive has not shown any evidence that it is justified or necessary.

There are other issues with this proposal in addition to the problems of requiring temporary information technology employees to participate in a defined contribution pension plan. This proposal would prevent temporary information technology employees from receiving “just cause” discipline rights that are provided to every State employee who is in a permanent position or otherwise covered under Section 75 of the Civil Service Law and/or a collective bargaining agreement. Giving the State the ability to hire information technology employees who can be terminated at will gives the State a large incentive to only hire such employees which undermines the collective bargaining process and the purpose of the civil service system which is to ensure qualified people who have proven their merit and fitness hold public service positions.

In addition this proposal provides no safeguards that prevent the State from giving the temporary employees duties similar to those of other permanent employees in specific job titles and paying the temporary employees a different salary. Temporary positions are generally assigned to a NS salary grade which means they can be paid whatever salary the Division of Budget decides is appropriate. The lack of such safeguards could create two classes of State employees who do the same duties but at different salaries which undermines the foundation of the State classification system as outlined in Article VIII of the Civil Service Law.

Finally Section 64.3 of the Civil Service Law already gives the State the ability to make temporary appointments without examination for up to 18 months to people who will provide professional, scientific, technical, or other expert services for a special study or project. There are currently 344 people serving in such positions in the State in Project Director, Project Coordinator, or Project Assistant positions. Most of these employees are providing information technology services. The State has provided no evidence that the current system for hiring temporary State employees in information technology positions prevents them from hiring state employees instead of outside consultants. The fact that they currently have several hundred employees in these temporary information technology positions proves otherwise.

Rather than hire temporary employees who are likely to leave after five years or less, the State should invest in training its information technology workforce. This would keep the State technologically current, ensure the smooth delivery of State services and programs and maintain the information technology institutional history.

Last year the Executive Budget contained an Article 7 proposal to make permanent the 2004 law that clarified the authority of the Department of Civil Service to administer the State Employee Health Insurance Fund. Their bill memo claimed that, “Extension of the 2004 law is necessary to codify the Department's longstanding practice of accounting for health insurance program dividends and making payments from the Fund without an appropriation.” The unions and the Legislature were assured that this provision had no other impact. A one-year extension was enacted.

The Executive Budget also contained the following statement “Increases in Medicare Part B premiums will be accommodated by ensuring that employers, employees, and retirees contribute their fair share towards such coverage.” No Article VII language or specific appropriation language was proposed or enacted to implement this statement. However the Division of Budget now claims that this statement along with the authorization granted to Civil Service and the appropriation language (the same language that has been used for over a decade) authorizing the State’s health insurance payment allows them to ignore the provisions of Section 167-a of the Civil Service Law which requires the State to pay the Medicare part-B premium for retirees. Instead the cost of this premium is now an obligation of the Health Insurance Fund which shifts some of the State’s obligation to current and retired State employees which has the impact of raising their health insurance premiums. This matter is now the subject of three separate lawsuits involving eight public employee unions.

The Executive Budget attributes an $8 million savings to the current proposal and the Financial Plan shows that this savings is an annual savings through at least SFY 2008-09. The Division of Budget (DOB) claims that the enacted SFY 2005-06 budget contained a general “sweep” clause that moved all interest earnings of the Health Insurance Fund, Dental Fund, and Group Life Insurance Fund into the General Fund. They claim that this new language is simply a technical fix that allows these funds to retain the interest that they earn. However, DOB also claimed that the changes in last year’s Executive Budget were technical fixes that did not change current practice and we now find out that last year’s changes do change current practice, at least in DOB’s view.

We ask that the Legislature reject this proposal until all parties are satisfied that it does not authorize DOB to shift the State’s health insurance obligations to State employees or retirees.

In addition the Executive Budget does not disclose how much revenue it is receiving from the federal government from the Medicare Part D program in order to maintain its prescription drug coverage for retired state and local government employees who receive their health insurance coverage from the State’s Health Insurance Fund. We believe this revenue is going to the General Fund rather than to the Health Insurance Fund which pays for the health care costs of the retirees. The Health Insurance Fund should receive any federal reimbursement for those costs.

Estimated Cost: $8 million

DEPARTMENT OF AGRICULTURE & MARKETS

Ø Reject the Governor’s proposal to establish a program of risk-based inspections of retail food stores, replacing the current annual inspection program. This will reduce the number of overall inspections of retail food stores by the Department of Agriculture & Markets. (Delete Part Y, S6459/A9559)

Recent events have demonstrated clearly the need for protecting the public health by a vigorous system of inspection to prevent the spread of diseases that can affect animals and the food supply. In SFY2006-07 A&M will lose 21 positions in their Agriculture Business Services program which are food inspector positions according to the Assembly Ways and Means Committee. This proposal will likely result in fewer inspections of food stores, which can only increase the risk to public health.

Estimated Cost $1.1 million, the stated savings in the Executive Budget

ECONOMIC DEVELOPMENT

Ø Reject the Governor’s proposal to make the Urban Development Corporation (UDC) loan powers permanent. (Delete Part DD of S6459 /A9559).

The UDC (aka Empire State Development Corporation) is a public authority with most of its operations “off-budget” and beyond public oversight and accountability. These types of unaccountable off-budget entities need to be subjected to greater public disclosure and control. The same functions with the exception of bonding can be performed as efficiently within the Department of Economic Development using professional civil servants with expertise in this field.

Estimated Cost: None

STATE EDUCATION DEPARTMENT

Ø Reject the proposal to establish a Cultural Education Trust. (S6458/A9558 Part K )

The Executive Budget proposes to establish a 10 member Cultural Education Trust within the Education Department to “advance and promote” the public missions of the State Museum, Library and Archives. It also creates a Cultural Education Trust Account within the Miscellaneous Capital Projects Fund of the State to support the projects of the Trust.

The Executive Budget’s justification for this new Trust is that it would promote greater public awareness and accessibility to State Museum, Library and Archives. It is unclear how the Trust would accomplish this objective any better than the Board of Regents and State Education Department and the various methods currently used to attract funding and volunteers. It is also unclear why it is necessary to create the Trust and the new Cultural Education Trust account in order to provide funding necessary to enhance these entities’ public display of their collections and exhibits ($20 million State Operations appropriation) and to create a new storage facility ($20 million Capital Projects appropriation). These funds cannot be spent under the Executive Budget until a joint plan is agreed to by the Cultural Education Trust, the State Education Department, and the Division of the Budget, which is set forth in the appropriation language authorizing these expenditures.

The Executive branch would control the Trust as the Governor appoints five members of the ten member board and its chair. The Trust’s veto power over how the State Education Department will spend $40 million on State Museum, Library and Archives projects is an unjustified and unnecessary involvement of the Executive and would diminish the independence of the State Museum, Library and Archives. While the Trust appears not to have any operational role its establishment could also set the foundation for the creation of a Cultural Education public authority controlled by the Executive; a proposal that the Legislature has rejected for the last six years.

Estimated Cost: None

Ø Reject the proposal to give the Office of Mental Retardation and Developmental Disabilities greater oversight over residential programs the State School for the Blind. (S6458/A9558 Part H, Section 63 )

Last year the Executive, without legislative authority or approval, transferred the authority to run the Intermediate Care Facilities (ICF) at the School for the Blind in Batavia from the State Education Department (SED) to the Office of Mental Retardation and Developmental Disabilities (OMRDD). This action resulted in the layoff of ICF employees from SED and their subsequent rehire by OMRDD in job titles that preserved their current salaries but would result in lower future salaries. This action eroded the authority and regulatory mission of SED. This new proposal needs to be examined in light of last year’s actions.

Extending OMRDD’s oversight authority to all residential programs at the School for the Blind would impede the School’s primary mission of education. OMRDD currently has oversight and management authority for the two Intermediate Care Facilities (ICFs) at the school. All of the children in the ICFs are developmentally disabled. There is no requirement that students in the five day residential program be developmentally disabled, and as such, that program should not be overseen by OMRDD. Employees report that since management of the ICFs was turned over to OMRDD, paperwork demands have become so overwhelming that less time is spent with the students in the daily routines of the residence that are closely linked to their educational programming. The five day program has operated without problems and does not need additional oversight which may conflict with the education of these students.

Enactment of this proposal will also set a bad precedent and undermine SED’s responsibility to manage and oversee the operation of the School for the Deaf in Rome.

Estimated Cost: None

TAX CUTS

Ø Reject the proposed tax cuts that benefit wealthy New Yorkers at the expense of working families.

The Executive Budget proposes another round of personal income and business tax cuts that will cost $927 million in SFY 2006-07, $3 billion in SFY 2007-08, $4 billion in SFY 2008-09 and SFY 2009-10, and $4.5 billion in SFY 2010-11. The total value of these tax cuts is somewhat offset by other proposed tax policy changes that would generate revenue. However, it is unlikely that these revenue increases will be enacted. This will leave the State with a huge unfunded tax cut mandate for the next several years. This appears to be an effort by Governor Pataki and his wealthy business allies to copy arch-conservative Grover Norquist’s “starve the beast” playbook by ensuring the State and the next Governor will not have the revenue to comply with the Court of Appeals ruling in the Campaign for Fiscal Equity lawsuit that could require at least an additional $8 billion in annual State school aid to New York City and other urban and poor school districts. The State’s Financial Plan forecasts budget deficits of $1.88 billion and $3.8 billion over the next two years and larger future deficits which will make it very difficult to balance future State budgets. Even the business-sponsored Citizens Budget Commission has admitted that tax cuts appear unaffordable.

Enacting big tax cuts will virtually guarantee future budget deficits. Our first priority should be to put State finances on a long-term stable foundation. Balanced budgets and stable tax rates will do more for our economy.

DOB’s own analysis shows that 24 percent of the personal income tax cuts, credits and rebates would go to New Yorkers who earn $200,000 or more, while more than half would go to the roughly 10 percent of New Yorkers who earn more than $100,000. This does not include the proposal to repeal the State’s estate tax by 2010 which currently only applies to estates worth more than $1 million. This proposal will cost the State $329 million in SFY 2008-09. It is important to note that currently New York taxpayers with incomes over $634,000 annually only pay about 6.5% of their income in State and local taxes while the rest of State taxpayers pay between 10% and 12%. These proposals will exacerbate this difference rather than alleviate it.

Despite the fact that New York’s big businesses pay a significantly smaller share of total State taxes than they paid thirty years ago the Executive Budget proposes additional tax cuts for business which will cost the State $175 million in SFY 2006-07 and grow to $926 million in SFY 2008-09. There is no reason for these tax cuts, particularly when most major corporations pay little or no corporate franchise tax and are not required to disclose how much they pay for any New York State tax. New York’s corporations have a responsibility to pay their fair share of the cost of educating our children, supporting our institutions of higher education, and maintaining the state’s infrastructure, all of which are essential to their ability to make profits.

Estimated Cost: Rejecting some or all of the Governor’s proposals will generate revenue.

WORKERS COMPENSATION REFORM (S6461/A9561)

The Governor submitted, as part of his Article VII budget bills, legislation that would make extensive changes in the Workers Compensation law. Although it proposes an increase in the maximum weekly benefit, this bill would also include limits on benefits for workers, particularly those who have permanent partial disabilities due to workplace injuries. PEF is also very concerned about proposals to expand the use of alternate dispute resolution for workers compensation cases and proposed changes in workers compensation procedures that would limit a claimant’s rights to a fair and full hearing. PEF represents professional employees who staff the Workers Compensation Board (WCB) and the State Insurance Fund.

The most significant concerns for PEF are the following sections of the bill:

Section 6. Allows insurance carriers to contract with medical provider networks for diagnostic tests. This would allow carriers to control the diagnostic process by steering cases to doctors who will favor their position.

Section 9. Allows insurance carriers to “participate in a claimant’s care” and to contract with medical provider networks for diagnostic tests. This would allow carriers to control the diagnostic process by steering cases to doctors who will favor their position.

Section 11. Unfairly limits benefits to claimants with permanent partial disabilities.

Section 18. This section would fundamentally alter the long-standing WCB process by allowing the Chair to deny a party’s right to a hearing. It denies basic due process.

Section 23. This would expand the use of the conciliation process to more cases. We see this as primarily a way to downgrade the professional level at which cases are adjudicated by cutting Administrative Law Judges (ALJs) out of the process. The best way to expedite the resolution of cases is to add enough ALJs and other staff to handle the volume.

Section 24. This would greatly expand the use of “alternative dispute resolution” processes- essentially setting up private adjudication systems that would tend to dismantle the publicly accountable Workers Compensation Board. It will be difficult to protect workers rights in this type of system. PEF strongly opposes it.

Section 45. This would eliminate stenographers, affecting some PEF members and also making it more difficult for claimants to exercise their rights.

Section 51. This may lead to the imposition of medical guidelines that would reduce benefits in some types of cases.

Section 56. This would authorize a pilot program for the “voluntary” delivery of workers compensation benefits and medical care outside the WCB process. Again, this is a step toward dismantling the public WCB process and creating a privatized system where there would be no way to protect workers’ rights.

PEF also has concerns about several other sections of the bill.