United States: New York Legislative Session Update - April 6, 2016

Labor policy

Minimum wage

The minimum wage proposal included in the budget will increase the minimum wage at different schedules, and to different maximum wage rates, depending on the region of the state. For workers in New York City employed by large businesses (those with at least 11 employees), the minimum wage will rise to $11 at the end of 2016, with an increase of $2 each year after, reaching $15 in 2018. For workers in New York City employed by small businesses (those with 10 employees or fewer), the minimum wage will rise to $10.50 by the end of 2016, then increase by $1.50 each year after, reaching $15 in 2019. For workers in Nassau, Suffolk and Westchester Counties, the minimum wage will increase to $10 at the end of 2016, then $1 each year after, reaching $15 in 2021.

In Upstate New York, the minimum wage would increase to $9.70 at the end of 2016, then increase by 70 cents each year until reaching $12.50 on December 31, 2020. Once the $12.50 threshold is reached in 2020, the minimum wage will increase on an indexed schedule to be set by the director of the Division of Budget in consultation with the Department of Labor, with a maximum increase to $15.

The minimum wage provision will maintain lower wage thresholds for tipped workers. In 2014, Governor Cuomo established a wage board that raised the tip wage to $7.50 an hour, or 83 percent of the $9 minimum wage at that time. The legislation included in this year's budget will change the minimum wage for tipped workers to "two-thirds of the minimum wage"—meaning that even in regions of the state where the minimum wage will raise to $15, tipped worker rates will hover around $10.

Finally, the state budget director will have the authority, after conducting an annual analysis of the economy in each region, to suspend the scheduled wage increases if economic conditions require.

Paid family leave

The final budget also includes an aggressive paid family leave proposal. Under the final bill, starting in January 2018, employees would be eligible to earn up to 50 percent of their average weekly wage, but not to exceed 50 percent of the statewide average weekly wage, while on leave to care for an ill relative, to bond with a newborn child or when a family member is called to active military duty. Beginning in 2021, employees will be paid 67 percent of their average weekly wage, and again would be capped to 67 percent of the statewide average weekly wage. The program is to be funded through employee paycheck deductions, which will start at 70 cents a week, and eventually increase to $1.47 once fully phased in. The bill requires that the employee work for six months with their employer before qualifying.

Health care

The governor's effort to shift Medicaid costs on to New York City, arguably the biggest-ticket health item in the budget, was successfully fought off by the New York City-dominated Assembly. The governor's proposal would have shifted $250 million in Medicaid savings onto localities, arguing that by assuming a share of the program's cost growth, the state would foster added accountability at the local level. However, those savings are not identified in the final budget agreement, meaning that the state remains on the hook for the growth of the Medicaid program. Other proposed cuts from the governor, that were ultimately restored in the final budget by legislative leaders, include a proposed $25 million cut to the excess medical malpractice pool, as well as the elimination of spousal refusal. The governor's proposals to control drug costs related to specialty drug reimbursement and prescriber prevail rules also fell out of the budget.

Notably, the final budget did not include a hotly debated guaranty fund to repay providers for losses related to the collapse of Health Republic Insurance. The state did, however, establish a fund where money from the liquidation of Health Republic will be kept and distributed by the comptroller and superintendent of the Department of Financial Services (DFS) to health care providers with unpaid claims.

Finally, the budget includes $200 million in capital funds for projects that replace inefficient and outdated facilities as part of a health care merger, consolidation or acquisition, and nearly $700 million for vital access providers (VAP) and distressed safety net hospitals.

Infrastructure

The budget dedicates more than $55 billion in statewide transportation investments, including $27.14 billion for State Department of Transportation (DOT) and Thruway programs and $27.98 billion for the Metropolitan Transportation Authority (MTA) programs. The $27 billion DOT capital program includes $21.1 billion for capital improvement of highways, bridges, rail, aviation infrastructure, non-MTA transit, and DOT facilities throughout the state. The budget also includes $2 billion in Thruway Stabilization funding to support capital improvements on the entire Thruway system and the New Tappan Zee Bridge, which is expected to allow the Authority to freeze tolls on the system until 2020. The $27 billion MTA Capital Program includes $26.6 billion for improvement of capital facilities operated by the New York City Transit Authority, Long Island Rail Road, Metro-North Railroad and MTA Bus. Part of the $27 billion will be $1.5 billion for Phase II of the Second Avenue Subway.

Building and construction

Despite reports that the governor's proposal to create the New York State Design and Construction Corporation (NYSDCC) as a subsidiary of the Dormitory Authority of the State of New York (DASNY) had fallen out of the budget, the provision was included in the final budget agreement wrapped up last Friday. According to the budget language, NYSDCC's role will be to "provide additional project management expertise and oversight on significant public works projects undertaken by state agencies, departments, public authorities and public benefit corporations . . ." and to "make provisions for contractual requirements concerning . . . public works projects having a total or aggregate construction value in excess of fifty million dollars . . . ." For those projects falling under its jurisdiction, NYSDCC would have the authority to require review and oversight, in whole or in part, of any project, and make recommendations regarding required corrective or other action to any state agency, department, public authority or public benefit corporation in connection with that project.

Education

The 2016-17 state budget included an array of education-related budget initiatives, including a $1.3 billion increase in school aid and full restoration of the Gap Elimination Adjustment (GEA). The budget also provides an $85 million increase in funding for the SUNY and CUNY systems and freezes their tuition for one year. The budget will provide $24.8 billion in school aid, a 6.5 percent increase over 2015-16, while foundation aid will be increased by $627 million. Elimination of the GEA in the next year will cost the state $434 million.

The charter school sector won a significant funding boost in this year's state budget. The sector received $54 million in additional funding in the budget, which translates into an additional $430 in per-pupil funding for charter students. In addition, potentially devastating legislation for the sector advanced by the Assembly one-house budget that would have penalized charters for not meeting enrollment targets for high-needs students did not make it into the final budget.

The highly controversial proposal from the governor to shift $485 million in annual operating costs for CUNY back to New York City was removed from the budget after strong blowback from downstate legislators. The budget includes $7.2 billion for higher education, which is a 2 percent increase from the previous year. As noted above, by not extending the SUNY 2020 rational tuition plan, the budget freezes SUNY and CUNY tuition. The budget provides an $85 million increase in state funding to SUNY and CUNY, falling short of the approximately $100 million the systems said they would require to cover the freeze. Finally, the budget also includes $1 billion for the Tuition Assistance Program.

Environment

The final state budget was also a win for environmental groups, with a total of $500 million included for clean water and environmental protection programs. The budget will allocate $200 million in additional funding for water infrastructure improvements and $300 million for the Environmental Protection Fund. An additional environmental-related provision in the budget included in the final agreement despite opposition from legislative leadership is the transfer of the Canal Corporation to the New York Power Authority (NYPA). The governor had pushed for the transfer, arguing that the Canal Corporation with its small hydropower capacity is a better fit with NYPA, rather than its current association with the Thruway Authority.

Taxes

The budget will lower personal income tax rates for middle-class New Yorkers. In 2012, the state lowered rates for taxpayers in the $40,000-$150,000 income bracket from 6.85 percent to 6.45 percent, and for those in the $150,000-$300,000 income bracket to 6.65 percent. The budget will begin to further lower the income tax rate in 2018, culminating in a 5.5 percent rate over a period of years. Income tax reductions were pushed by the Senate Republican majority as part of the deal for the minimum wage increase included in the budget.

Total spending

The final budget includes $96.2 billion in spending on state operations, a 2 percent growth; School Aid: $24.8 billion in spending on school aid, a 6.5 percent growth; $18.5 billion on Medicaid, a 3.4 percent growth; and $7.2 billion on higher education, a 2 percent growth.

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