* Budget to make deadline for third consecutive year
* Minimum wage set to rise
* High-earner surcharge extended
* Utility tax to be phased out
By Edward Krudy
NEW YORK, March 21 New York state's leaders have
agreed to a tentative $135 billion budget deal that raises the
minimum wage, gives tax breaks to middle-class families and
businesses, and extends a tax on high earners.
The deal for fiscal year 2013-14 was announced in Albany,
the state capital, late Wednesday after days of closed-door
wrangling as lawmakers sought to reconcile three separate
The agreement paves the way for a vote by the legislature
this weekend, setting this year's budget on course to be the
third in a row to be passed on time. The budget could be the
earliest since 1976.
State Governor Andrew Cuomo, a Democrat, said the deal was
still subject to minor changes, but said the vote could take
place on Saturday or Sunday - well ahead of the deadline of
April 1, when the new fiscal year begins.
"For the first time in almost three decades our state is
poised to pass its third on time fiscally responsible budget in
a row," said Cuomo in a statement. "A feat that is restoring
public and investor confidence in our state's finances and
There is a Democratic majority in New York's state
legislature but a power sharing agreement with Republicans in
the state Senate can complicate negotiations.
The state's minimum wage, now at $7.25 an hour, would rise
to $9 an hour by 2015. That would be accompanied by a business
tax cut that includes phasing out a tax on utility companies
over three years, starting in 2014-2015. The business tax cut
includes breaks for businesses that employ young people and
Raising the minimum wage is an important issue for Democrats
who see it as matter of workplace fairness. New York's proposed
hike is in line with President Obama's push to increase the
minimum wage, an initiative that the Labor Department has been
promoting around the country.
But free-market and business groups say the move will
overburden businesses and could mean companies cut back on lower
paying jobs or offer existing employees fewer hours.
"This deal on the minimum wage is the worst kind of
compromise, where a terrible policy is paired with token tax
breaks in the hope that the latter will minimize the damage of
the former," said Michael Saltsman, a research director at the
Employment Policies Institute.
Middle-class families with children will get a tax cut of
$350. The agreement defines middle class as those earning
$40,000 to $300,000 per year. The middle class tax cut will
reduce revenues by $1.1 billion over three years.
A surcharge on high-earning couples, making over $2 million
a year, or single filers making over $1 million, is being
extended. Introduced in 2011, it was set to expire in 2014.
The tax deal is already reigniting a longstanding debate
about how taxpayers should share the burden of funding
cash-strapped public services, and whether tax cuts are
affordable as many municipalities struggle to close budget
Carol Kellermann, president of the Citizens Budget
Commission, which describes itself as an independent budget
watchdog, faults the extension of the surcharge on wealthy
earners to fund tax cuts in other groups rather than using it to
"It makes it pretty clear that there's no such thing as a
temporary surcharge. Everything becomes permanent," said
Kellermann. "There is still a structural deficit problem in New
York and this is not being used to address that."
The surcharge adds abut $1.9 billion in revenue per year to
Cuomo's budget takes the view that tax breaks help spur
growth. Some Republican-controlled states, such as Louisiana,
propose ending income and corporate taxes, and replacing them
with sales taxes, a move most Democrats say would unfairly
burden low and middle income earners.
Although New York is recovering from the financial crisis
but still faces other longer term economic problems such as the
loss of industry in the north and a slimmer securities industry
on Wall Street. Unemployment in the state is around 8.4 percent
compared to 7.7 percent nationally.
The plan includes a program aimed at stabilizing pensions
that targets relief for local government where pensions
contributions can be a serious burden on local finances.
The budget also includes an increase of almost $1 billion in