Paterson Softens School Cuts in New Plan

ALBANY—It appears there’s some  compromise in David Paterson’s deficit reduction bill.

The 440-page document proposes to soften the proposed cut to schools by “spinning up” funds appropriated in the federal stimulus package that were set aside to reduce education cuts next year. The new cut is $295 million; Paterson originally proposed a cut of $686 million to school aid. That’s a $391 million spin-up, also included in a plan offered by Republicans in the State Senate.

It also changes the nature of the health care cuts, which in the original proposal may have affected federal matching dollars. The cuts to these two areas have been the principal source of disagreement between Paterson and legislators.

“I think it’s a great indication that we’re moving closer to where we were,” Assembly Speaker Sheldon Silver told reporters. “I think it’s part of the negotiating process. There are a lot of things in this that were not in his original proposal–he’s reduced the education cuts, he’s changed the nature of that, he’s changed some other things in there that are important. We’re going through it — it’s a big bill, and we’re trying to see where those changes are and how we can bring a three-party agreement. That’s our focus, and that’s what we want. Hopefully we can make that happen.”

“At this point, it’s a large bill, our staff will be reviewing it, and we’ll be back here Monday.”

An official explanation of the changes is below.

The Deficit Reduction Plan legislation that Governor Paterson has submitted today for introduction modifies his original proposal in the areas of School Aid and health care, as well as with regard to a General Fund transfer from the Battery Park City Authority. These modifications are outlined below.

 

School Aid

 

The original DRP proposal included a $686 million 2009-10 school year ($480 million fiscal year impact) “Gap Elimination Adjustment” (GEA) that was implemented through reductions ranging from approximately between three and nine percent to each school district’s state aid allocation (excluding Building Aid, Universal Pre-kindergarten, and EXCEL).

 

The legislation submitted today reflects a $295 million 2009-10 school year ($206 million fiscal year impact) Gap Elimination Adjustment. This is implemented through an across-the-board 1.58 percent reduction in state aid to each school district (excluding Building Aid, Universal Pre-kindergarten and EXCEL).

 

Additionally, the legislation submitted today includes a Supplemental Deficit Reduction Assessment, which reduces State funds by an additional $391 million for the 2009-10 school year ($274 million fiscal year impact). The Supplemental Deficit Reduction Assessment will be backfilled with Federal ARRA Education Fund monies and will therefore not alter the overall level of funding received by school districts. 

 

Together, the Gap Elimination Adjustment and Supplemental Deficit Reduction Plan Assessment included in the legislation submitted today will produce $686 million in 2009-10 school year savings ($480 million fiscal year impact).

Health Care

 

The original Deficit Reduction Plan included a $287 million reduction to Medicaid. Due to an associated loss of federal matching funds, this proposal would have had an overall impact on providers of approximately $740 million.

 

To minimize the impact on providers, Governor Paterson has modified his approach to achieving health care savings. The legislation submitted today achieves $223 million in state savings, but has an overall impact on providers of only $282 million. This $282 million impact on providers is approximately equivalent to the $287 million in state Medicaid savings included in Governor Paterson’s original DRP proposal.

 

Key elements of the $223 million in state savings include the following targeted actions:

 

  • Reflecting the elimination of 2010 inflationary increases for hospitals, nursing homes and home care providers ($11.5 million State savings);
  • Administratively reducing Medicaid and EPIC pharmacy reimbursement rates to account for the terms of the First Data Bank litigation settlement ($18.5 million State savings);
  • Increasing the current .35 percent assessment on hospital inpatient monthly revenues to .75 percent and allowing the incremental amount to be reimbursable under Medicaid ($45.2 million State savings);
  • Reducing current year nursing home rebasing payments and delaying the implementation of the new nursing home regional pricing reimbursement system until March 1, 2010 to give facilities more time to transition to the new payment methodology ($60.5 million State savings);
  • Reducing Anti-Tobacco spending in the current year ($10 million State savings);
  • Delaying scheduled HEAL NY spending in the current year ($45 million State savings);
  • Authorizing nurses to increase the supply of prescription medicine for home care patients from 8 days to 15 days, thus lowering the frequency of necessary visits ($2.7 million State savings) ;
  • Lowering the State General Fund subsidies for the cost associated with mental health parity coverage by 30 percent ($20 million State savings).
  • Reflecting a reestimate of expected health care costs ($9.3 million).

 

Battery Park City Authority

 

The original Deficit Reduction Plan proposal included a $300 million transfer from the Battery Park City Authority to the state General Fund.

 

The legislation submitted today authorizes the Battery Park City Authority (BPCA) to contribute $200 million to the General Fund.   Additionally, the bill authorizes BPCA bonds to cover a new $100 million Affordable Housing Program for the City of New York.