NY governor's plan would raise tuition, expand wine sales

ALBANY (Reuters) - New York residents would pay higher tuition at public universities and increased sales taxes on items of clothing under $110 under the governor's latest deficit-closing plan unveiled on Friday, but they could buy wine at grocery stores.

Charitable deductions for wealthy residents would be halved to 25 percent, a move the plan expects would raise $100 million.

These are some of the pillars of the $1.2 billion of revenue-raising measures, Budget Director Robert Megna told reporters.

The cash-starved state will also slice $250 million from state agencies whose total cut will top $950 million, he said.

"I think the governor has gone very, very far in taking most of the cuts on his shoulders," Megna said. The legislature will not have to decide which agency programs to cut, he said.

Public schools would lose about $1.22 billion. In a bid to win the approval of the Democratic-led Assembly, Governor David Paterson revised his demand for nearly $1.5 billion in cuts.

Public universities would lose $180 million of state aid, down from the $210 million reduction Paterson had sought.

Though counties, cities and towns -- like the state -- have seen the recession shrivel tax revenues, Paterson's new plan to close the $9.2 billion deficit would prevent them from raising property taxes by more than 3 to 4 percent a year.

After first exempting school districts from this cap, the governor is now applying it, Megna said. New York has some of the country's highest property taxes and school districts account for 65 percent of this unpopular tax.

Paterson is not running for election in November -- unlike all other state politicians -- and Senate Democrats pushed for property tax relief in a bid to keep their two-seat majority.

For four years, universities would be able to raise tuition by as much as 4 percent to 8 percent a year. To shield low-income students, tuition assistance would rise by half the percentage of the biggest increase in tuition.

Starting in October, sales tax would be assessed on clothing that costs less than $110.

Next year, clothing under $55 will become exempt; the exemption returns to $110 in the following year. In the first two years, this measure would raise $330 million, Megna said.

Liquor stores would be protected from their new grocery store rivals with a "medallion" system, Megna said, without offering details. This plan would raise $150 million.

New York will also start saving $1 billion in a contingency fund, in case the U.S. Congress does not extend extra Medicaid dollars, Megna said.

Paterson's next weekly emergency spending bill will include all of these plans, Megna said.

New York has only dodged a government shutdown by enacting emergency bills after missing its April 1 budget deadline.

The Senate and Assembly can still devise their own budget plan over the weekend, he added.

Referring to Paterson and the two legislative chambers, the Senate Democratic Majority Conference Leader's spokesman said: "We're working to achieve a three-way agreement."

Democratic Assembly Speaker Sheldon Silver said in a statement: "We are committed to sparing our schools from the most devastating cuts, ensuring that our higher education system remains accessible to all New Yorkers and providing much-needed property tax relief."