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Paterson's budget plan to hit NYers in the wallet

Gov. David A. Paterson delivers his State of

Gov. David A. Paterson delivers his State of the State speech in the Assembly Chamber at the Capitol in Albany. (Jan. 6, 2010) Credit: AP

ALBANY - The 2010-11 budget proposed Tuesday by Gov. David A. Paterson would hit residents in the wallet, from paying more for soda and cigarettes to potentially higher property taxes as school districts seek to make up for a big cut in state aid.

Faced with a $7.4-billion deficit, Paterson called for reducing school districts' aid by $1.1 billion, or 5 percent, and less revenue sharing for towns, villages and cities, $15 million. Some may raise property taxes, though Paterson insisted schools had reserves to make up for the lost aid.

Property taxes also would increase for owners of homes valued at $1.5 million or more, if the group's STAR exemption is done away with.

Lawmakers have rejected some of these ideas in the past, however. School aid is rarely cut and the soda tax was scuttled last year. Tuesday, legislative chiefs seemed even less receptive to the ideas.

To stave off deeper cuts than those he proposed to health care, Paterson hopes to raise $218 million through a $1-per-pack increase in the cigarette tax, making it the nation's highest at $3.75. He also would generate $465 million from a penny-per-ounce surcharge on sugary beverages, adding 12 cents to the cost of a can of nondiet soda.

"The public recognizes that if we can justify where the taxes are going . . . then the public will support it," Paterson said, acknowledging the levies' unpopularity. He added the taxes would spur residents to adopt healthier lifestyles.

Paterson's 2010-11 budget is dominated by spending reductions that lawmakers are loath to embrace even in the midst of recession. The $134-billion plan boosts expenditures by $787 million, or 0.6 percent, primarily because of higher interest payments on the state's debt and medical and retirement benefits for state employees.

In addition to school aid, the other big spending area, Medicaid, is slated for a $1-billion trim to slow its annual growth to 1.8 percent. Hospitals, nursing homes and other health care providers will receive less than the expected reimbursement.

Paterson also hopes to raise $240 million through assessments and surcharges on hospitals, doctors and others. Some of these costs could be passed along to patients through higher insurance premiums.

College tuition could go up as Paterson gives SUNY more latitude to set rates. He has proposed reducing aid to SUNY and community colleges by nearly $152 million. Grants under the Tuition Assistance Program would be lowered by $75.

"These cuts will be difficult, they will be painful and they will affect the lives of our citizens," Paterson said. "But they are necessary. . . . Our revenues have crumbled and our budget has crashed."

He predicted New York's main account for paying bills could be in the red in May and June - as it was last month.

Lawmakers signaled eagerness to amend Paterson's plan.

Assembly Speaker Sheldon Silver (D-Manhattan) said the school aid cuts "go too far" and increases in college tuition "threaten to shut the gates to higher education and a brighter future for middle-class families."

But Republicans generally welcomed the governor's proposal. Senate Minority Leader Dean Skelos (R-Rockville Centre) said he was troubled by the tax increases but urged Paterson to "stand firm and prevent fellow Democrats" from boosting expenditures.

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