Civil Service Enforcement/

Research Department

TO:                 Executive Board Members and Statewide Labor-Management Chairs  

FROM:           Thomas Cetrino, Susan Mitnick, Stephen Connolly, Jeff Waggoner, Kristie Sammons, Michael Marinello, Ryan Delgado, and Brian Curran

DATE:           December 19, 2008

RE:                 Executive Budget SFY 2009-10 – Summary of Major Provisions

STATE WORKFORCE IMPACT

Under the proposed SFY 2009-10 Executive Budget, the State workforce will decrease by a net of 3,108 full-time equivalent (FTE) positions to 196,292 FTE positions.  521 of these reduced positions will be abolished though the layoff process. It is estimated that at least 250 of these layoffs will be in the PEF bargaining unit.  Chart 1 is the Division of Budget’s (DOB) Workforce Impact Summary Report for Executive Branch agencies in SFY 2008-09 (all charts are located at the end of the memo).  It details the workforce changes for each Executive Branch and “off-budget” agencies.  Overall the SFY 2008-09 Executive Budget would lose 4,205 FTE positions through attrition and 521 FTE positions through abolition/layoffs offset by 1,618 new positions . According to the Executive Budget to maintain current services the State workforce would need to be at 201,365 FTEs

Based on the information in Chart 1, the following agencies have the largest net decreases in positions in SFY 2009-10:

·         Department of Correctional Services: -1,342 FTEs all through attrition, which primarily reflects anticipated facility closures (-554 FTEs), and sentencing and parole reforms that will reduce the inmate population by 1600 inmates (-750 FTEs). The Financial Plan states that these changes will reduce the prison population by 1,900 inmates during SFY 2009-10 and an additional 200 inmates by SFY 2011-12.  Overall there will be 1,503 FTE positions eliminated through attrition offset by 161 new FTE positions including 10 in the Correctional Industry program and 5 in the Health Services program. 140 FTE positions will be eliminated in the Program Services program.   The Executive Budget proposes a June 2009 closure date for Camp Pharsalia, Camp Gabriels, Camp Georgetown and the camp at the Mt. McGregor Correctional Facility. To accomplish these closures Article 7 legislation would change the current 12 month notice law to 90 days when there is an economic crises and would eliminate correctional facility annexes and special housing units from all closure-notice requirements .

·         Office of Children and Family Services: -288 FTEs including 127 FTE position abolitions/layoffs which reflects the net impact of closing or downsizing eleven youth facilities (-255), the elimination of 39 positions in various programs, and an increase of 6 positions associated with the child abuse legislation passed in 2008. Effective June 2009 the following closures will occur: the Great Valley, Cattaraugus and Adirondack non-secure centers (-75 beds, -75 FTEs); the Rochester and Syracuse Community Residential Homes (-17 beds, -16FTEs); the Pyramid Reception Center  (-47 beds, -90 FTEs); and the evening reporting centers in Albany, Buffalo and Syracuse (-30 slots, -22 FTEs).  The Tryon limited secure center and Allen non-secure center will also be downsized by June 2009 (-65 beds, -52FTEs). According to the Executive Budget 241 of the 255 positions to be eliminated were filled as of November 2008.  To accomplish these closures Article 7 legislation would eliminate the current 12 month notice law.  We believe that all the position abolitions/layoffs will be from the Youth Facilities programs and will impact employees working in the facilities to be closed or downsized.

·         Department of Economic Development (DED): -200 FTEs including 83 FTE position abolitions/layoffs and the attrition of 117 positions.  Five of these positions are “normal” attritions and an undetermined amount of the remaining 112 attritions will be merged into the Empire State Development Corporation (ESDC) effective March 1, 2009.  The merger will also include the Foundation for Science, Technology and Innovation (NYSTAR) but its 26 FTE positions will be abolished and subject to layoff. Executive Budget documents claim that this merger will save $11.1 million in SFY 2009-10 and $11.8 million in SFY 2010-11.  However when we add the State Operations and Local Assistance SFY 2008-09 Enacted Budget appropriations for DED, NYSTAR, and ESDC it totals $158,938,000 and the proposed State Operations and Local Assistance appropriation for ESDC is $151,030,000 or $7,908,000 less than the combined SFY 2008-09 enacted appropriation for all three agencies.  Other Executive Budget documents show a $186 million SFY 2008-09 State Operations/Local Assistance disbursement for Economic Development and a $176 million appropriation for SFY 2009-10. The true savings needs to be discussed at labor-management.

·         Department of Environmental Conservation: -241 FTEs all through attrition.. According to DEC management approximately 50 position reductions of the goal of 241 have been achieved to date and the remaining will be achieved by March 31, 2010.  The position reductions occur in the following programs:

ü    Administration (-23 FTEs);

ü    Air & Water Quality Management (-20FTEs);

ü    Environmental Enforcement (-40 FTEs);

ü    Fish , Wildlife & Marine Resources (-42 FTEs);

ü    Forest & Land Resources (-23 FTEs);

ü    Operations (-22 FTEs);

ü    Rehabilitation & Improvement (-30 FTEs);

ü    Solid & Hazardous Waste  (-41 FTEs)

This information contradicts the workforce charts on Page T-110 and T-111 in the Five Year Financial Plan (Chart 1). This chart shows that  DEC is only losing 40 FTE positions this year (from 3/31/09 to 3/31/10) through attrition and according to Chart 2 by March 31, 2010 DEC will be down 273 FTE positions from their March 31 2008 FTE total. There is a disagreement between DEC management and DOB as to whether these reductions will occur during the last quarter of SFY 2008-09 or in SFY 2009-10.

·         Office of Mental Retardation and Developmental Disabilities: -53 FTEs including the abolition/layoff of 110 FTEs, and the attrition of 174 FTEs, offset by 231 new fills.  The eliminated positions include -133 FTEs in the Institutional Services program,-65 FTEs in the Central Coordination and Support program, and -18 FTEs at IBR.  It is unclear which position eliminations will be subject to layoffs.  The 231 new fills are associated with: community development for special units (+84 FTEs), transition from developmental centers (+64 FTEs), nursing home rundown (+30), and opportunities for difficult to serve individuals (+31 FTEs), as well as 22 FTEs for additional nursing staff to accommodate the mandatory overtime law. OMRDD management has indicated that they will use layoffs to achieve reductions only as a last resort but stated all position eliminations must occur by October 1 2009.

·         Office of Alcoholism and Substance Abuse services: -47 FTEs including 20 FTE abolitions/layoffs, 31 FTE attritions, and 4 new positions. Forty of these position reductions (and presumably all of the abolitions/layoffs) are due to the proposed closure of the Manhattan Addiction Treatment Center, which will save $4.6 million and avoid $14 million in capital costs. The Executive Budget does not contain an effective date for this closure but we believe it is to be closed in the first or second quarter of SFY 2009-10. 11 additional positions will be eliminated through attrition and aggressive controls on hiring and non-personal service spending which will save $2.1 million.  The Executive Budget does not identify which program will get the four new positions.

·         Office of Real Property Services: -30 FTEs including 12 FTE position abolitions/layoffs and 18 FTE position attritions.  According to PEF leaders at ORPS this will affect at least 5 PEF members and probably more. The position reductions are attributed to continued application of the hiring freeze and reduced staffing needs from a restructuring of agency administrative support functions including human resources.  Specifically, the Executive Budget proposes a host agency arrangement for the ORPS with the Department of Taxation and Finance.  According to PEF leaders at ORPS the process of moving these functions to T&F has already begun. The Agency Presentation states this arrangement will reduce overall costs for administrative support by approximately $700,000 on a full annual basis.

The Executive Budget proposes to fund most of the Office’s operations directly from the General Fund, discontinuing the use of a Special Revenue account that has experienced a deficit in recent years.  This accumulated deficit, caused by declining revenues from a real property transfer fee that supports agency operations, is addressed by increasing the fee from $50 to $100 for housing cooperatives, from $75 to $125 for residential property, and from $165 to $250 for commercial property.  35 FTEs will still be funded from Special Revenue Other accounts.

·         Department of Labor: -15 FTEs including 3 FTE position abolitions and 12 FTE position attritions.  The entire decrease comes from the State Employment Relations Board (SERB), which the Executive Budget recommends abolishing and transferring its functions to the Public Employment Relations Board (PERB). Three of the positions will be abolished, and 12 will be lost through attrition.  Elimination of SERB and transferring its functions to PERB will result in a General Fund savings of $1.7 million. According to PERB’s budget only 1 FTE position will be added to assume the responsibilities of SERB

·         The Office of Mental Health (OMH) will abolish 120 FTE positions which are subject to layoffs most of which reflect a shift in beds to community-based programs and the remainder presumably in the Forensic Services program and will lose another 410 positions through attrition, but has a net increase of 56 FTE positions to the addition of 586 new positions. 450 adult inpatient beds (11% of capacity) will be closed.  Staffing associated with 150 beds will be shifted to community based programs.  300 beds will be converted to the “Transitional Placement Program”, which is a less staffing intensive outpatient level of care. This initiative will reduce the state workforce by 153 FTEs, of which 73 will be abolished.  Over 75% of the savings will be reinvested.  These actions will save  $6.1 million in SFY 2009-10.  Controls on hiring and non-personal services will save an additional $10.1 million.

Chart 2 (located at the end of the memo) is derived from the Executive Budget 2008-09 and 2009-10 Agency Presentation books and includes FTE changes in all State agencies which have employees represented by PEF, including FTE changes that occurred during SFY 2008-09.  Overall these agencies have 4,333 fewer FTE positions than what was proposed in the SFY 2008-09 Executive Budget.  These changes are due to the failure of the Legislature to approve various SFY 2008-09 Executive Budget proposals, the hiring freeze, and/or to the ten percent agency-wide cuts implemented during the fiscal year.  The value of this chart is that it allows us to see the number of FTE positions State agencies were below their authorized FTE level during SFY 2008-09.  It is important to note that Column ‘b’ in Chart 2 is the SFY 2008-09 Executive Budget’s estimate of the size of the agency’s workforce on March 31, 2009, Column ‘c’ is the SFY 2009-10 Executive Budget’s estimate of the size of the agency’s workforce on March 31, 2009, and Column‘d’ is the SFY 2009-10 Executive Budget’s estimate of the size of the agency’s workforce on March 31, 2010.

Based on Chart 2 the agencies with the largest decreases between the March 31, 2009 FTE level forecasted in the SFY 2008-09 Executive Budget and the March 31, 2009 FTE level estimated in the SFY 2009-10 Executive Budget (column (c-b)) include the:

• Office of Mental Retardation and Developmental Disabilities (-1,200 FTEs), 899 of these reduced positions are the Community Services program.

• Office of Mental Health (-963 FTEs), 663 of these reduced positions are in the Adult Services Program.

• Department of Transportation (-696 FTEs), 707 of these reduced positions are in the Design and Construction program which are offset by minor increases in other programs. 339 of these reductions are related to the Legislature’s rejection in 2008 of the proposed $15 increase in the Motor Vehicle Law Enforcement fee.

It is likely that further reduction in state agency FTE positions will occur during the last quarter of SFY 2008-09 particularly in agencies where the Governor has proposed further workforce reductions. It is important to remember that the Governor does not need Legislative action to reduce the state workforce. For this reason, it is important for Statewide Labor Management Chairs to get regular information from their agency management regarding the agency’s current fill level and compare it to the agency’s budgeted fill level as shown on Chart 1.

The Executive Budget projects that the State workforce will increase by 620 positions in SFY 2010-11 to 196,912 FTEs.  It is projected to remain at that level through SFY 2012-13. We should not put much faith in these projections as the SFY 2008-09 Executive Budge projected the state workforce would be 201,388 in SFY 2009-2010.

PROPOSED LEGISLATION THAT MAY AFFECT STAFFING

Staffing levels in DOCS, OMH and the Division of Parole (-29 FTEs lost through attrition) levels will be affected by several Article VII proposals regarding sentencing reforms and the Sex Offender Management Treatment Act (SOMTA).  Legislation based on preliminary recommendations of the Commission on Sentencing Reform in conjunction with continued population decline are projected to reduce the prison population by approximately 1,600  inmates. The Financial Plan states that these changes will reduce the prison population by 1900 inmates during SFY 2009-10 and an additional 200 inmates by SFY 2011-12.

Expand Eligibility To The Shock Incarceration Program And Merit Time 

The Shock Incarceration Program will be expanded by:

• Making general confinement inmate eligible for the program if he or she is within three years of parole release or eligible for conditional release;
• Raising the age of eligibility to participate from 40 years of age to 50 years of age; and
• Expanding eligibility for limited merit time (a single six month allowance) to previously excluded class A-1 (non-drug) and violent felony offenders (not including murder in the first degree or any sex offense).
• SFY 2009-10 savings:  $4 million; SFY 2010-11 savings:  $16 million.

Allow Alternative Facility Options And Courtroom Procedures For Sex Offender Management And Treatment Act (SOMTA) Respondents

Authorizes respondents under SOMTA to be retained in DOCS facilities or on parole after their probable cause hearing but before their trial and by authorizing video teleconferencing for certain court proceedings. SFY 2009-10 savings:  $2.0 million.

Delayed SHU Expansion 

Delays the expansion of mental health program authorized by the SHU Exclusion Bill by 3 years (until July 2014), allowing DOCS to evaluate the effectiveness of the Residential Mental Health Unit at Marcy and reassess need.  The legislation further restricts mental health services requirements of the SHU bill to only level 1 and 2 DOCS prisons.  SFY 2009-10 savings:  $19 million, SFY 2010-11 savings:  $27.4 million for both DOCS and OMH.

Graduated Sanctions

Allows the Chairman of the Board of Parole to consider the implementation of a graduated sanctions program for parole violators that utilizes a risk and needs assessment that is administered to all inmates eligible for parole. Such a graduated sanctions program could include more intensive supervision immediately after an inmate’s release, alternatives to incarceration and the use of enhanced technologies. The bill allows the Parole Board to utilize a risk and needs assessment in determining which inmates may be released to parole supervision.  Also provides that individuals are not required to divulge information about arrests or prosecutions terminated in favor of the accused, youthful offender adjudications and sealed violations. SFY 2009-10 savings: up to $11 million, SFY 2010-11 savings: $44 million.

In addition to the Article VII SOMTA changes, staffing levels in the SOMTA program in OMH will be reduced from the current level of 2.0:1 to standards used in other states’ civil confinement programs (1.5:1). 

Reduce Subsidy for SUNY Hospitals and SUNY Flexibility Legislation

The Executive Budget includes $129 million for annual subsidy payments to SUNY’s hospitals at Brooklyn, Stony Brook and Syracuse. This reflects a $25 million reduction from the 2008-09 Academic Fiscal Year level. (SFY 2009-10 Savings: $24 million; SFY 2010-11 Savings: $33 million)

Article 7 legislation is also introduced that will give SUNY greater flexibility in purchasing, real estate transactions, and contracts

Office of Procurement Services

A new Office of Procurement Services will evaluate and improve the state’s procurement policies, coordinate purchasing among state agencies, develop new approaches to leverage the buying power of the state, and assist in the development of an e-procurement system as part of the statewide Financial Management System. The new Office will be led by a Chief Procurement Officer (CPO) following a model used by the private sector and other states to capture savings through “an ongoing identification of strategic opportunities to partner with sellers of goods and services.”  This bill amends the State Finance Law, primarily the Procurement Stewardship Act, to transfer authority for the State's procurement function from the Commissioner of General Services to the Chief Procurement Officer.  In addition, it changes pertinent Office of General Services statutory references to the Office for Procurement Services.

PROPOSED STATE EMPLOYEE “GIVEBACKS”

The Governor has made several proposals to reduce current and retired public employee salaries and benefits which are contained in S56/A156.  Unlike the proposals made for the November Special Legislative Session, the Governor will implement the Salary Deferral and 2009-10 Salary Increase Elimination by notwithstanding collective bargaining agreements through legislation that must be approved by the Legislature.  PEF believes such an action is unconstitutional and illegal.  The Governor’s current position and proposal contradicts his position in November, where he said such changes were subject to collective bargaining.

These “giveback” proposals include (the section of the bill these proposals are located and the General Fund savings is also included):

Table 1

Five day Salary Deferral (Part EE)

Defers 5 days worth of salary payments in SFY 2009-10 until an employee leaves state service.  Upon separating from state service, employees would receive five days of payments at the rate they are paid at the time they leave state service or on April 1, 2011 unless the Director of Budget finds, on an annual basis, that continuation is necessary to address exigent financial circumstances. In no event will the lump sum payment be less than the amount of salary originally withheld. All Funds Savings:  $390 million in SFY 2009-10 only (this includes $58 million for unsettled contracts with state employee unions which is also included in the $180 General Fund savings outlined in the table above).

Eliminate 2009 Salary Increase (Part BB)

Eliminates the contractually mandated 3 percent salary increases scheduled for April 1, 2009.  All Funds Savings:  $264 million which would reoccur in SFY 2010-11

Tier V (Part CC)

Amends several sections of the Retirement and Social Security Law, the Education Law and the General Municipal Law to create a new pension tier – Tier 5.  The new tier, which would apply to members who first join the retirement system on or after March 1, 2009, is similar to Tier 4, but with significant modifications.  The significant differences are:

·         Service credit for accumulated unused sick leave capped at 165 days. We believe this violates Article12 Section 8 of the PEF contract which allows service credit up to 200 days.

·         Overtime excluded from the definition of wages

·         A minimum of 10 years credited service is required for a service retirement or deferred vesting benefit

·         Retirement multiplier (2% per year of service) reduced if credited service is less than 25 years

·         Must be 62 years old to retire

·         3% employee contributions continues after 10 years of service

Establish a Sliding Scale for Retiree Health Insurance (Part Z)  

Effective March 1, 2009, the share of health insurance premiums paid by new retirees would be based on years of service. The State would pay a minimum premium share of 50 percent for individual coverage and 35 percent for dependent coverage for employees who retire with 10 years of service. The State's contribution would increase by 2 percent of the premium for each additional year of service up to a maximum contribution of 90 percent for individual coverage and 75 percent for dependent coverage for employees who retire with 30 or more years of service. The bill would make parallel adjustments in the contributions for employees who die prior to retirement, and dependents of such employees and of employees who die after they retire.

Medicare Part B Premium Sharing (Part AA)

Effective March 1, 2009, requires employees and retirees to contribute toward Medicare Part B premiums.  The contribution rate is 10 percent for individual coverage and 25 percent for dependent coverage. Currently, the State fully pays 100 percent of the Medicare Part B premiums. The Governor’s press statements describe his Medicare Part B proposal as requiring retirees to pay $20 or $80 per year toward these premiums.  However, because the bill language sets percentages but does not set specific amounts, it could allow larger premiums to be imposed in the future.

Additional Fringe Benefit Savings

            The Executive Budget assumes that there will be fringe benefit savings of $7 million in SFY 2009-10 and 16 million in SFY2010-11 due to the workforce reductions proposed in the Executive Budget

CONTRACTING OUT AND CONTRACT DISCLOSURE IN THE SFY 2009-10 EXECUTIVE BUDGET

The Executive Budget provides detailed reporting on the State’s use of outside consulting services by State agency. Chart 3 (located at the end of the memo) outlines the SFY 2008-09 and SFY 2009-10 estimated disbursements for consulting contracts for each State agency, the estimated number of full-time equivalent (FTE) employees employed under these consulting contracts, and the average annual cost per FTE contract employee.  This chart shows that State agencies employed an estimated 12,407 FTE employees under consultant contracts in SFY 2008-09 at an estimated cost of $734.7 million or an average annual cost of $59,216 per FTE consultant contract employee.  It is estimated that the number of FTE employees employed under consultant contracts will decrease to 12,058 FTE employees in SFY 2009-10, a decrease of 349 FTE contract employees (a 3% decrease).  Consultant contract employees will be paid $742.5million in SFY 2009-10.

It is important to note that we believe the number of consultants and the amount of contracting out of consultant services reported by state agencies in the Executive Budget is only a small part of the contracting out engaged in by State agencies.  For example Chart 3 only reports $734.7 million in total contracting by state agencies in SFY 2008-09.  However reports on consultant expenditures filed by state agencies with the Office of State Comptroller for the first six months of SFY 2008-09 show that consultant spending total $1.6 billion.  We estimate that State agencies are only reporting about 17% of the contracting out of professional services.

            Chart 4 (located at the end of the memo) highlights the sixteen State agencies whose SFY 2009-10 contract employee cost will average more than $140,000 per FTE contract employee.  This list is led by the:

·         Insurance Department, which will pay 28 FTE consultants an average of $265,821  annually, which does not include the money the Department pays under direct pay contracts to consultant auditors who perform insurance examinations;

·         Division of Parole, which will pay 6 FTE consultants an average of $233,333 annually;

·         Department of Correctional Services, which will pay 43 FTE consultants an average of $228,349 annually;

·         Department of Environmental Conservation, which will pay 175 FTE consultants an  average of $198,743 annually; and

·         Department of State Police, which will pay 22 FTE consultants an average of $194,108 annually.

The detailed agency analysis spreadsheets sent to Executive Board members for the agencies they represent summarize the consultant contract information for that agency along with an average annual cost per FTE consultant employee.  The spreadsheets also note when we notice a large increase in non-personal service or contractual service appropriations in agency programs and recommend that you ask agency management for an explanation of these increases. This information should be used by agency Labor-Management Committees to get more detail on which programs in their agencies are using these consultant contracts and whether that work can be done by State employees. 

OTHER AGENCY MERGERS AND CONSOLIDATIONS THAT AFFECT PEF MEMBERS

Office of Medicaid Inspector General (OMIG) and Office of Welfare Inspector General  

The Executive Budget proposal recommends the merger of the Office of the Welfare Inspector General (OWIG) with OMIG, and transfers 10 positions and funding from that Office for the prevention and investigation of welfare fraud and abuse.  There is no change in the level of FTEs for OWIG from the prior SFY.  Article VII legislation contains provisions to enable the merger and provides civil service “transfer of function” language that governs the transfer of employees from OWIG agencies to OMIG.  The language does not appear to move this Office out of the DOH but that should be clarified at statewide agency labor management

Division of the Lottery and Racing and Wagering Board 

The Division of Lottery will host administrative operations of the Racing and Wagering Board.  The Agency Budget Presentation for Racing and Wagering attributes a reduction of 3 FTEs to this arrangement in addition to a reduction of 17 FTEs related to the statewide hiring freeze; however, these 3 FTEs are not reflected in either the table of Projected Levels of Employment by Program or the Workforce Impact Summary Report.  The Division of Lottery does not add FTE positions for the hosting arrangements, and will reduce 3 FTEs through attrition. SFY 2009-10 savings:  $225,000.

REVENUE PROPOSALS IN THE SFY 2008-09 EXECUTIVE BUDGET

The Executive Budget proposes new General Fund revenues that would total $3.06 billion in SFY 2009-10 and $3.63 billion in SFY 2010-11, which closes about 22% of the budget gap in those years.  The Executive Budget has adopted proposals that expand the bottle bill and reform the Empire Zone programs which are reforms PEF has urged the Governor to adopt. The following is a list of the tax reforms and increased fees and their revenue impact.

The Executive Budget also proposes charges and assessments for specific industries most of which impact the heath care industry. These actions would generate $651 million in General Fund revenue in SFY 2009-10 and 2010-11 and $2.246 billion in All Funds revenue in SFY 2009-10 and $2.311 billion in All Funds revenue in SFY 2010-1. The Executive Budget also imposes new or increased fines which would generate $78.45 million in General Fund and All Funds revenue in SFY 2009-10, $128.5 million in General Fund and All Funds revenue in SFY 2010-11.

It is important to note that many of these revenue actions are regressive taxes and fees which would disproportionally impact the lower and middle class. The Governor has proposed these revenue actions in lieu of a tax increase on wealthier New Yorkers which could generate between $2 billion and $7 billion in revenue depending on income levels and rates.

THE STATE’S FIVE YEAR FINANCIAL PLAN AND HOW THE SFY 2009-10 EXECUTIVE BUDGET IMPACTS CURRENT AND FUTURE BUDGET GAPS

            The SFY 2009-10 Executive Budget recommends All Funds spending of $122.7 billion, a $683 million or 0.6% increase over last year’s revised budget.  State Operations, which accounts for the cost of running the Executive, Legislative, and Judicial branches of government, is projected to total $19.4 billion in All Funds spending in SFY 2009-109, an increase of $713 million (3.8%) from estimated SFY 2008-09 All Funds spending.  $17.3 billion of State Operations spending is for Executive Branch agencies and $2.1 billion is for the Legislature and Judiciary. The All Funds State Operations spending increase of $713 million is primarily driven by a $437 million increase in non-personal service spending.

The Executive Budget projects that the State has to close a $1.707 billion General Fund budget gap in SFY 2008-09.  This General Fund gap will be closed with $1.157 billion in non-recurring actions (one-shots). This plan includes:

·         $500 million in Medicaid, HCRA, and insurance savings which will grow to $1.24 billion in SFY 2009-10;

·         $777 million in various fund transfers and settlements including a $306 million transfer from the New York Power Authority (which will make another $170 million transfer in SFY 2009-10) and $106 million in General Fund transfers;

·         $75 million from expanding the bottle bill and reducing payments to and sweeping the Environmental Protection Fund;

·         $100 million in statewide spending controls;

·         $93 million by changing the timing of the New York City STAR payment; and

·         $9 million in various workforce actions including rescinding M/C vacation exchange program ($5 million), implementing the Medicare part B premium proposal ($3 million), and implementing the retiree sliding scale contributions for health care proposal ($1 million)

Table 4 summarizes the actions the Executive Budget will take to reduce the General Fund budget gaps through SFY 2011-12.

Table 4

PROJECTED GENERAL FUND BUDGET GAPS FOR

SFYs 2008-09 THROUGH 2011-12

($ in millions)

It is important to note that these General Fund budget gaps are based on economic forecasts of a deep recession in NY state that projects 60,000 layoffs in the State’s financial sector, double the losses after September 11, 2001, total private sector job losses of about 180,000, a seriously weakened real estate market, and negative impacts on the State’s export related and tourism industries due to the stronger dollar and a weak global economy. 

State employment is now expected to fall 1.5 percent for 2009, with private sector jobs projected to fall 1.8 percent, following growth of 0.3 percent for both total and private employment for 2008.  DOB projects a decline in total State wages of 3.0 percent for 2009, following an estimated increase of 1.2 percent for 2008. Declines in both the wage and non-wage components of income will result in a decline in total personal income of 1.3 percent for 2009, following 2.4 percent growth for 2008.

The impact of the recession on tax collections is expected to begin to register in the high-tax collection months over the remainder of the fiscal year, and especially in the final quarter. According to DOB, tax collections in November account for a small share of annual receipts, especially for PIT and business taxes, and therefore should not be interpreted as indicative of developing trends. Through November 30, 2008, General Fund receipts, including transfers to other funds, were $153 million below the Mid-Year cash-flow forecast. Tax collections were approximately $64 million above planned levels, with modestly better PIT collections and business tax collections offset by lower than expected sales tax and other tax collections. Miscellaneous receipts, including abandoned property receipts, fell below planned levels by $134 million.

FINAL OBSERVATIONS

There are a number of factors that will impact budget negotiations all of which create the potential for difficult and contentious budget negotiations. The speaker has stated that all sectors of the State must share the pain of the current economic crises and he has not directly criticized any of the Governor’s proposals. The Senate Democratic leader, Malcolm Smith, has suggested that the State layoff additional state employees particularly in public authorities. The Senate and Assembly Republicans have expressed concerns about the Governor’s proposed tax and fee increases. The Assembly Republicans estimate that the average family of four with an after-tax   income of $45,343 would have to pay $3,875 in new taxes and fees under this budget.

Assuming the savings of the 3,108 workforce reductions is worth $195 million, the Executive Budget is asking for $551 million in savings from state employees in SFY 2009-10 and $468 million in SFY 2010-11, or about 4% of the projected state budget gap.  This will make it difficult to successfully fight the budget cuts proposed for the state workforce in light of large cuts in funding proposed for education aid and health care.  PEF, other unions, and community groups continue to advocate for increased taxes on wealthier New Yorkers, a cut in consultant spending and other revenue actions that can reduce the proposed budget cuts. There is also the prospect of the state receiving between $2 and $5 billion in additional federal aid this year that could also ameliorate some of these cuts.

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 major State agencies that face layoffs and/or have the most significant changes to their budgets. These agencies include DOCS, OCFS, OMH, OMRDD, OASAS, DED/ESDC, DEC, DOL, OMIG, and the Office of Real Property Service.  This memo and the agency analysis will also be placed on the PEF website.  We will complete our line by line analysis of the State operations budget of all other State agencies by December 30, 2008 and will mail them to Executive Board members and Statewide Labor-Management Chairs as they are completed during next week. These agency spreadsheets will also be posted on PEF’s website as soon as possible. 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.