Department of Taxation and Finance

 

The enacted budget makes no changes to the Executive Budget (analysis as of 4/2/2007)

 

 

The Senate recommends (analysis as of March 16, 2007):

Decreases the Department’s overall budget by $9.9 million as follows: 

• Cuts $5.5 million from personal service appropriation in the Audit, Collection, and Enforcement Program which will deny funding for the 144 new FTEs that the Executive proposed to add to this program and cuts $4 million in travel funds for same program.

• Reduces by $400,000 the fringe benefit appropriation in the Treasury Management Program (SRO) related to the performance of certain fiduciary responsibilities on behalf of certain agencies, public benefit corporations and authorities.

 

• The Senate claims it cuts funding for all of the Department’s new 200 FTE positions included in the Executive Budget

 

 

The Executive Budget recommends (analysis as of 2/2/07):

A FY 2007-08 workforce of 4,966.  This is an increase of 200 FTEs from the adjusted FTE level for FY 2006-07.  The following chart identifies adjustments in the current fiscal year’s FTEs along with the recommended differences in FY 2007-08 FTEs by program (if the FTE’s are the same the program is not listed):

 

Program	FY 2006-07 Adjustment	FY 2007-08 Difference
Audit Collection and Enforcement	-10	+144
Technology and Information Services	0	+56

 

• The total appropriation for Personal Service is $248,388,000, and increase of 5.5%.

 

• An All Funds increase of $4,320,000, (1%) from SFY 2006-07.

 

• Adding 200 positions to improve audit collections. 144 FTEs are in the Audit Collection and Enforcement program. The Executive Budget points out a concern about the variance between taxes owed and taxes paid.

 

• Adding 56 FTEs in the Technology and Information Services program.  This reflects the Executive Budget intention to invest in technology infrastructure and personnel to maximize collections. 

 

• Reducing General Fund personal services by $8.95 million.  Audit Collection and Enforcement receives the largest cut ($6.3 million/ -5.6%) followed by Revenue Processing and Reconciliation (-$1.2 million/-2.8%) and Management Administration and Counsel (-$782,000/-5.1%).  It does not appear that the Department can add 144 FTEs in the Audit, Collection and Enforcement program with a reduced appropriation for personal services.  This issue should be clarified at statewide labor management

 

• Increasing the personal services appropriation in Technology and Information Services program by $443,000 (1.4%) and by $21 million (132.2%) in the Revenue Processing and Reconciliation Program’s NYC Assessment Account Special Revenue – Other Fund.  If the Department is increasing Audit Collection and Enforcement program by 144 positions it would appear that all of these will be funded out of the NYC Assessment Account.  According to the Assembly, General Fund support for processing income tax returns for New York City has been moved to the NYC Assessment Account Special Revenue – Other Fund.  Also, there is not enough funding for the immediate hiring of 56 FTEs in Technology and Information Services.  The purpose of the large increase in funding in the NYC Assessment Account and how the new FTEs in the Audit, Collection and Enforcement program and the Technology and Information Services program should be clarified at statewide labor management

 

• Reducing Nonpersonal Services (NPS) appropriations in:

Ø      Technology and Information Services by $8.2 million (-13%), this was primarily in Supplies and Materials (-$3.4 million) and Contractual Services (-$3 million);

Ø      Centralized Operations Support by $2.5 million (-6.9%), this was comprised of an increase of $13.4 million in Supplies and Materials and a reduction of $16.8 million in Contractual Services.  This may reflect a shift of contractual services to supplies and materials. This issue should be clarified at statewide labor management; and,

Ø       Management, Administration and Reconciliation, by $2.3 million, all of the reduction is in Supplies and Materials.  These decreases in non-personal services are somewhat offset by a $9 million increase in the non-personal service appropriation in the NYC Assessment Account Special Revenue – Other Fund.

 

• Increasing the Nonpersonal Services appropriation in the Revenue Processing and Reconciliation program by $1.9 million (+292.5%).  This was primarily in Contractual Services ($1.1 million).

 

• A decrease of $5.6 million (-10.5%) in the Revenue, Processing and Reconciliation program’s Special Revenue Other - Banking Services Account.

 

• Also discussed in the Executive Budget is the aging workforce at Tax and Finance.  The Budget document says that the Department is experiencing heavy attrition “of its aging workforce.”  To deal with this the Department will (1) continue its management development initiative to plan for succession; (2) continue training programs and opportunities for staff, and; (3) fully utilize existing personnel assets through reorganization, reclassification and redeployment.

 

• The Executive Budget shows that Taxation and Finance employed an estimated 179 employees under consultant contracts in SFY 2006-07 at an estimated cost of $28 million or an average cost of $156,425 per consultant contract employee.  It is estimated that the number of employees employed under consultant contracts will decrease to 173 employees in SFY 2007-08, a decrease of 6 contract employees (a 3% decrease).  Interestingly consultant contract employees will be paid $29.7 million in SFY 2007-08 or an average cost of $171,676 per consultant contract employee, a 9.8% increase over the average cost in SFY 2006-07. The purpose and use of these contract employees and whether they can be replaced by state employees should be clarified at statewide labor management

 

• There were several Article VII bills affecting the Department.  The most significant were: 

Ø        The combined reporting of corporate franchise tax returns.  This is an issue that PEF has been pushing for, along with other organizations, and that is expected to bring to the state $185 million next year and every year thereafter.

 

Ø        Closes a loophole that enables individuals to avoid New York State personal income taxes by placing assets into a Federal S corporation/New York C corporation capital by requiring certain New York corporations that are Federal S corporations to also be New York S corporations.  This is another issue that has been pushed by PEF and others and will bring to the state $100 million a year starting next year and every year thereafter.

 

Ø        Combined the closure of loopholes included in the Executive Budget will result in an additional $449 million in FY 2007-08, $567 million in FY 2008-09, $537 million in FY 2009-10 and $537 million in FY2010-11.