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NY Governor Proposes TBED, Economic Development Agency Consolidation

December 17, 2008
Aiming to close a $1.7 billion budget shortfall in the current fiscal year and address a projected $13.7 billion deficit in FY10, New York Gov. David Paterson yesterday unveiled a deficit reduction plan as part of his FY 2009-10 executive budget request. The combined executive budget and deficit reduction plan propose consolidating the state's three economic development agencies and redirecting funds to support a new grant and loan program for targeted investments in select industries.

As part of the proposed restructuring plan, the New York State Foundation for Science, Technology, and Innovation (NYSTAR) and the Department of Economic Development will be consolidated within the Empire State Development Corporation (ESDC). The executive budget includes $31.6 million to support the university-based matching grants and high technology and research development programs administered by NYSTAR. Programs slated for elimination include the Centers for Applied Research and Technology and Syracuse University's Sensing, Analyzing, Interpreting and Deciding Center. Reduction of funding is recommended for the Centers for Advanced Technology for a total savings of $10.4 million across the three programs.

Gov. Paterson outlined proposals for reforming the state's Empire Zone Program based on increased performance measures. The proposal requires all current program participants to reapply for certification and demonstrate a 20:1 benefit/cost standard in order to retain the tax credits. This requirement is an increase over the previous standard of 15:1 for companies certified between 2005 and 2008. Part of the reform proposal calls for reinvesting savings from the program across the following initiatives:

  • $50 million for a proposed New York Growth, Achievement and Investment Strategy Fund targeted to job creation in manufacturing, financial sectors, agri-business, and high-technology and biotechnology fields;
  • A  new R&D tax credit totaling $20 million allocated in 2009 through ESDC that allows credits based upon incremental business grants made to colleges and universities for research; and
  • Expansion of the existing R&D tax credit for qualified emerging companies in 2010 to eliminate the penalty for businesses creating more than 100 jobs and allowing businesses with fewer than 100 employees in New York state but more than 100 worldwide to participate.

Additional key provisions included in the ESDC budget for FY09-10 include:

  • $3.8 billion in reappropriations to support regional initiatives approved by the legislature last year, including city-by-city investments and downstate regional projects (see the April 16, 2008 issue of the Digest) and for economic development, cultural facilities, university development and energy projects administered by the Corporation and Dormitory Authority of the State of New York.
  • $275 million from a total $375 million in projected savings from reduction of "non-essential" projects re-directed for economic development initiatives including: $200 million for strategic new investments by ESDC; $50 million for development of IBM's semiconductor packaging center in upstate New York; and $25 million for the Albany Nanotech initiative.
  • $50 million for continued investment within the Empire State Economic Development Fund, the Entrepreneurial Assistance Program, the operation and development of the Centers of Excellence and other high technology research centers.

As part of his budget reduction plan for the State Education Department in FY09-10, Gov. Paterson recommends eliminating funding for various math and science initiatives. This includes $7 million for a program that provides supplemental math and science summer programs at colleges and universities for students and teachers and $4 million for the Collegiate Science and Technology Entry Program, which provides mentoring programs for college students pursuing degrees in mathematics, science, technology, and health-related fields. Another $3 million for grants to Math and Science High Schools is also slated for elimination.

Following recent approval of a tuition hike from the State University of New York (SUNY) and the City University of New York (CUNY) Boards of Trustees, the governor included in his budget an increase in resident undergraduate tuition of 14 percent annually for SUNY and 15 percent annually for CUNY. Budget documents note the tuition increases would be tied to an investment plan in which SUNY would retain 10 percent of the fiscal benefit from the 2008-09 spring semester increase, and both institutions would retain 20 percent of the 2009-10 full annual increase.

Based on recommendations from the New York State Commission on Higher Education, the governor's budget includes $50 million to help capitalize a default reserve fund for a proposed New York Higher Education Loan Program. The student loan program is expected to provide $350 million annually in loans to 45,000 students pursuing technical, undergraduate and graduate degrees, reports the governor's press office.  

The executive budget recommends $29.7 million in all funds for the Energy Research and Development Authority, with $16.2 million earmarked for energy, research and development programs - down from $18.3 million approved by lawmakers last fiscal year.

Gov. Paterson's FY09-10 Deficit Reduction Plan includes many of the same proposals from his earlier budget reduction plan rejected by lawmakers during a special emergency session last month. The executive budget increases state operating funds by a total $400 million or 0.5 percent over last year, with no percent change in the General Fund.

Corresponding executive budget documents are available at: http://publications.budget.state.ny.us/eBudget0910/ExecutiveBudget.html.

New York