"Thank you, Mr. Chairman and ladies and gentlemen, good morning.  This is an opportunity to address the Joint Committee concerning the State Executive Budget for Fiscal Year '08 and '09 and I want to thank you for the opportunity.  Seated with me are Michelle Goldstein, Director of State Legislative Affairs for the City of New York and Mark Page, the City's Director of Management and Budget.  Now budgets are always about choices and even in the best of times these choices we all know are not easy ones. 

"But with a slowing and uncertain economy making the right budget choices becomes more difficult but also more important and our administration has always realized that.  When times were good and New York City enjoyed unprecedented budget surpluses we never forgot that economic booms don't go on indefinitely so we did not squander our good fortune for politically popular but unsustainable spending.  Instead we used billions of dollars in excess revenues to meet our out-year expenses and we prepaid our debt. 

"We also established a $2.5 billion trust fund to begin to meet health costs of future retirees and then last fall when the cloud had begun to form on the economic horizon we acted promptly and prudently to cut City spending and reduce City hiring.  And for these reasons even as economic conditions have worsened we have kept the City's current budget in balance and last Thursday presented a balanced preliminary budget for the Fiscal Year 2009.  Maintaining that balanced budget as well as the City's long term financial health depends on many factors including fair treatment in the State budget and that's what I want to address today. 

"All reasonable people realize that New York City, which runs an imbalance of trade with the State government of about $11 billion a year merits fair treatment and we think that we can come to an agreement with the Governor and with the Legislature that will recognize that we have needs and you have needs but the bottom line is that the economic engine of New York State is New York City and we send roughly $11 billion more to Albany every single year than we get back and it is those monies that go to help the rest of the State.  However, there is such a limit to how much of our taxpayers' money we can send to the State without starting to create such an undue burden on the City's taxpayers that they start leaving our city and reduce the amount of taxes that we collect and the amount of monies that we send up to Albany. 

"Now this year, as we do every year, we made budget decisions in the City based on the expectation and even in many cases the expressed assurances that Albany will honor its commitments to us.  And we have no choice in doing that.  We have to make a budget based on rationality, not just hope, and when the State says they will do something we put it in the budget or take it out of our budget, whichever the case may be, and then we learn to live with that and we make all sorts of other decisions based on those assumptions. 

"There are instances where the existing Executive budget does not fully uphold those commitments but it is within the power of you and your colleagues in the Legislature to help repair those breaches and the people of New York City appreciate the need to make budget reductions in hard times and we're prepared to do our fair share and what we want to do is, with your help and with the Governor's help, make sure that this really is fair. 

"At the outset let me stress that there are many elements in the Governor's budget that we support without reservation.  On the expense side, for example, I commend the Governor's healthcare priorities, particularly in expanding healthcare in communities where it's needed and in continuing the State's efforts to rein in Medicaid fraud and waste.  The Governor's proposal to realign in-patient Medicare reimbursements so that more money can be directed to primary and preventive care at the hospitals that provide those services is an important step in the right direction. 

"I also strongly back the proposed expansion of Child Health Plus.  While it's unfortunate this won't be supported in the federal funds, we cannot let that be an excuse for inaction.  The Governor's efforts to steam- streamline enrollment in public health insurance programs will also increase participation and improve healthcare for eligible children and families and reduce administrative costs. 

"The budget's housing opportunity trust fund makes an historic commitment to financing affordable housing, a top priority if our City and State are to continue to be places where people of all income levels can pursue their ambitions.  And we also welcome the establishment of a traffic congestion mitigation plan that is proposed in the executive budget.  It would ensure that any revenues raised via congestion pricing would not be commingled with other revenue and will be used solely for transportation improvements, which is where it should go.  The proposed reform of the Wicks law would also ensure that we get the most for our money in all our City capital spending.  The changes proposed to this outmoded law would cover more than 70% of City capital projects, meaning construction can proceed more quickly, efficiently, and at considerably less cost.  And while we still support a full repeal of the Wicks law, these reforms are a step in the right direction. 

"On the revenue side the expense budget also takes an essential step in closing a chapter in the City's history: the fiscal crisis of the 1970s.  The Municipal Assistance Corporation bonds are finally being retired this year and now we should, as the executive budget proposes, revert to the status quo before the fiscal crisis with a full 4% City sales tax.  We should also retain one of the valuable legacies of the fiscal crisis period and as the Governor proposes continue the Financial Control Board in its current form with its existing powers.  The City has come a long way from the 1970s.  Our population is at an all-time high and we're expected to have more than a million more people by the year 2030.  A growing city then requires a constantly upgraded infrastructure and the proposed flat cap on the bonding authority of the Transitional Finance Authority is a vital- is vital to helping the city raise the capital funds that it needs to meet its growing population. 

"We also applaud the decision to tax cigarillos as cigarettes and we urge the Governor and Legislature to give the City authority to raise our cigarette tax by 50 cents a pack.  New York City has cut the rate of teen smoking by more than half over the past six years.  Raising the tax on cigarettes is one of the best ways to continue that trend and save thousands of lives that would otherwise be lost prematurely.  Make no mistake about it: if you don't raise the tax, we are killing people.  There's no way you would- no other way to view it.  52% in the reduction in teen smoking in our city over the last six years and every study shows that is primarily because if you make cigarettes cost more children can't buy them, young adults can't buy them. 

"Adults, sadly, will find a way to buy them.  But if you can stop children from taking up the habit of smoking you are saving their lives so that they won't get hooked as adolescents and history shows that if you smoke as a child you're very likely to become addicted as an adult.  It is a simple thing to do to save an enormous number of lives and there's no question at this point about the relationship between the level of taxation, the cost of cigarettes, and whether or not young people smoke. 

"Now we ask you to further strengthen the executive budget by ensuring that it treats the people of the five boroughs fairly.  We are for example asking for legislators' help in reaffirming the State's commitment to meeting half the capital cost for City schools.  Similarly we need your help in ensuring that New York City receives our fair share of State revenue-sharing funds, which the executive budget proposes to cut even as revenue-sharing grants to other localities are going up.  We also ask you to prevent more than $100 million worth of inequitable funding cuts and cost shifts in the current and coming fiscal years in the area of human services.  Otherwise the State would in effect abruptly abandon what has traditionally been their responsibility, a responsibility they share with the City and in some cases with other localities as well.  We would be asked to provide a State-mandated level of service with reduced or in some cases no assistance from the State and the effects of these cuts and cost shifts would be compounded by State revenue measures that would increase the tax bill for New York City residents to the tune of tens of millions of dollars a year. 

"Members of the Legislature, in balancing this budget and in promoting the State's economy, we see no need to pit Downstate against Upstate or shortchange one area of New York while subsidizing others.  In repairing the flaws of this executive budget I urge you to make fairness to all the guiding principle.  That commitment to fairness must begin in education, which is the most important thing for New York City.  Let's review recent history.  Two years ago we effectively settled a substantial portion of the Campaign for Fiscal Equity case with an agreement to split 50-50 the capital cost of replacing and modernizing New York City's very antiquated public schools. 

"We reaffirmed that agreement again last year.  State building aid to New York City is the vehicle used to realize this State commitment.  The cornerstone of this commitment is that the payment of State building aid is treated distinct from the City's rightful share of State operating aid for education and I commend Governor on his budget proposal to provide New York City with a 40% share of statewide operating aid for education.  And we appreciate that the Governor's budget includes $100 million in academic achievement grant operating funds for the City. 

"There are, however, strict limitations on the use of these funds and for the City to use this additional funding most effectively we must have more flexibility and the treatment of State building aid for education for New York City is totally unacceptable.  The separate funding to fulfill this State commitment to support the City's school capital funding is noticeably absent.  Now we made a deal with the Legislature.  A deal is a deal.  The State committed to support the City's school capital funding stands on its own. 

"It is not part of the City's share of statewide operating aid and we're counting on you to ensure that this is reflected in the approved State budget.  And if it is not, make no mistake about it, New York City taxpayers have agreed to put $6.5 billion into school construction over five years.  The State promised to match that.  If the State doesn't match it, it simply means we're going to build and renovate half the number of schools.  We just can't create money out of thin air.  The taxpayers of New York City are reaching into their pockets.  That was done with an agreement from the State.  The State doesn't come through, half the number of schools, plain and simple.

"Now I want to turn to an area of revenue-sharing funds and let me once again review recent history.  A year ago the executive budget singled out New York City as the only locality, the only locality in the State that would not be in line to receive revenue-sharing money.  Most of you remember the strenuous objections that we raised and before the budget was adopted $20 million in revenue-sharing funds to the City were restored and a commitment was made in law that we would get our full share of funding in the next budget.  And I might point out that New York City legislators knew what the commitment was and signed onto the budget I can only assume because they also knew that we would be getting full funding for this coming year. 

"Now the coming year has arrived.  It's a year later and we find that instead of this promised full share we're budgeted to receive only half of what we're due and that revenue-sharing grants go to every other town and every other city across the state and are scheduled to increase by a total of $50 million.  We're not asking you for anything other than our fair share, but our fair share we deserve.  We're being promised that this year's revenue-sharing reduction will be a one-time only cut and the next year the City will be made whole. 

"Do you get that, next year?  It seems like a recurring theme.  Well New York City doesn't need another IOU.  We need $164 million in revenue-sharing funds that we're being shortchanged in the executive budget and we're counting on the Legislature to make good on the State's promise to our city.  Revenue-sharing funds, you should know, are as important to New York City as they are to any other locality, perhaps this year more than ever, when the tax revenues we can expect from many sectors of our economy may grow little or not at all. 

"The fact is that today New York City controls only about 47 cents of every dollar in our budget so like every other city and town we value revenue-sharing funds for the spending flexibility they give us.  Once again, we're not asking for special treatment, only fair treatment.  And once again let me remind you this is in our budget.  We assumed that the State's promise and I still assume that the State's promise will be a promise made, a promise kept. 

"Now let me run through the cuts and cost shifts that I referred to in the human services.  In every instance we are prepared to do our share so long as it is fair and in each instance we need your help in making that fairness real.  First, we're being expected to absorb millions of dollars in new special education costs and some 29,000 pre-kindergarteners with special education needs. 

"Such costs are rising rapidly across the state.  The executive budget responds by capping local responsibility for meeting them, which the State can assume the balance above the cap except for one locality: New York City.  The special ed cap will save the other counties in the state another $31 million in fiscal '09.  We will be stuck with nearly $10 million annually in costs that no other locality will be expected to pay, costs that are sure to grow over time. 

"And let me remind that when you move a cost from localities to the State you're really moving the cost from localities to New York City.  New York City pays 50% of the revenues that you collect, 56% of the income tax, 48% of the business taxes.  So when you cap expenses or reduce expenses elsewhere, and I understand the political reality of having to do it.  But if you say that they are still going to spend money and the State's going to pick up the difference you're really saying New York City taxpayers are going to have to pick up the difference and why any legislator from New York City is going to stand for that I don't know.  You can rest assured I will remind their constituents that they are agreeing to shift the burden elsewhere to us.  We already send $11 billion more to Albany than we collect.  There's just some limit to how much we can do it without starting to drive people out of our city. 

"In addition we're being asked to cover another $32 million in administration and professional evaluation costs for pre-K special education youngsters.  Traditionally the State has borne these costs.  Under this budget, that would no longer be the case. 

"Second, New York City would face $48 million in new expenses if, as the executive budget proposes, the State ends a long-standing 50-50 cost-sharing arrangement concerning children and locally operated juvenile detention facilities.  The State under this budget would completely back out of this relationship; it says that by doing so it will encourage deep institutionalizing of these youngsters.  Well in many cases that is a worthy goal.  In fact, deinstitutionalization of criminal- juvenile offenders is an area in which our City has been a leader and we're very proud of it. 

"Over the past six years our administration has reduced the number of City juveniles going to State detention by some 30%.  But this budget goes about encouraging further deinstitutionalization in a very odd way because it provides no additional funds for alternative programs.  What are we supposed to do? Put the kids out in the street with nothing to do? What kind of a future will our kids have and what will happen to the rest of society? Now, more than 30 years ago, the State did something similar when it deinstitutionalized State mental health patients without providing them the community-based care that they needed. That was a memorable public policy disaster, one that Governor Carey labored to fix. Let us not use it as a model now.

"Third, the budget proposes to shift public assistance costs from the State to the City; this would increase the burden on the City's budget by $40 million. This would be produced by a change in another 50/50 cost-sharing formula, one that has been in place since the passage of the Social Security Act in 1935.

"But through good times and bad, four Republican and four Democratic governors have left that formula in place. That is, until now, because the City - and the State's counties, too - are being expected to start paying 52% of costs. For New York City, this is a prime example of no good deed goes unpunished. Having made extraordinary strides in reducing our welfare rolls; they're lower today than they were nearly half a century ago and we've accounted for the lion's share of the declines statewide.

"The result is that the people remaining on public assistance in our city are, because of their poor health, or histories of substance abuse, or other reasons, the hardest cases - the people whose transition to work is the most difficult. We're already facing tough new Federal standards requiring their workforce participation. Just when we needed more State help, we're getting less.

"Turning to an area outside the human services, the budget also contains another uncalled-for fee increase for administering the City's personal income tax.

"Last year, the State raised by 75%, from 40 to $70 million, the amount it charges the City for this service. This year, it proposes to add insult to injury and increase this charge by another $10 million a year.

"The two points we made on this topic last year remain true today. First, the State never reduced what it charges the City for these services even after the commuter tax was eliminated, which significantly decreased the number of City PIT filers. And second, more and more New Yorkers are filing their income taxes electronically, which means that administrative costs should be going down, not up.

"Now when someone's gouging you on price because he thinks he has you over a barrel, I've always thought it's time to find a competitor at a better price. So this year, we intend to put out an RFP, a 'Request for Proposals,' seeking someone to take this contract away from the State. In the process, we may well find a way to administer the State PIT more cheaply in the bargain. Talk about chutzpah, some things just defy description. You couldn't put them in a book, nobody would believe it.

"This brings us to the revenue side of the Executive Budget, and in particular the proposed adjustments to the STAR program. We've long argued that because it's primarily calculated on real estate taxes, with an adjustment on the City Personal Income Tax for New York City residents, STAR represents a net transfer of revenue from the five boroughs to the rest of the State.

"The Executive Budget this year aggravates this already inequitable arrangement with STAR credit delays and adjustments, and the elimination of the STAR personal income tax credit for high-income filers. State budget figures indicate that the result will be more than $80 million in higher tax bills for City residents; this inequality should be addressed.

"I'd also like to comment on the anticipated proceeds from a conversion of HIP and GHI to for-profit status, which are reflected in the Executive Budget. The City believes any conversion should be conditioned on the City receiving a fair share of the proceeds and being assured, through appropriate regulation, that there will be a meaningful cap on rate increases.

"If HIP and GHI are permitted to go private - as you know, we are suing to try to stop that, this is an outrage; you are taking away the City's right to get the best price and best services for its employees. But if it goes through, there will be significant rate increases for City workers and residents covered by these health plans. And because most of HIP's and GHI's business involves City employees, City government is also going to be hit by substantial new health care insurance costs for hundreds of thousands of people.

"Now, the Executive Budget shows the State realizing $284 million from the conversion of these plans this year, and more than $1.5 billion is projected for the following three fiscal years. I think the majority of this money should go to the City to cover the rate increases that will inevitably follow the conversion - a point that Deputy Mayor for Operations Ed Skyler will be making in testimony to the State Department of Insurance tomorrow.

"We're also hopeful that during the next 21 days the Budget will be amended to include - as it did last year - a provision directing State courts to offset personal injury awards with payments from worker's compensation or other "collateral sources." This common-sense reform has had the Governor's support, and it has ours too. Nobody suggests that people shouldn't be fairly compensated but only in this crazy world where we go through the looking glass that people can get a chance to collect twice.

"Before turning to other issues of importance to us, let me also note that the Executive Budget proposes a mixed-bag of reforms to the State's Brownfields Law.

"We support the proposed 10% tax credit for brownfield redevelopment that is consistent with community-based plans. But the elimination of tax credits for certain categories of brownfields will discourage cleanups and redevelopment at other sites in our city. As we proposed in our PlaNYC, we still need a simplified and faster process that provides developers with liability relief for cleaning up small and moderately polluted sites in the city. If we don't give them that they're just going to stay as brownfields, as brownfields that leach their contaminants into our air and our water and the adjoining land.

"Now let me quickly summarize some of the City's principal legislative priorities this year. In the realm of criminal justice, we will ask the State to follow the example set by the Federal government and by a number of European nations, and seek legislation requiring that DNA samples be taken with every felony and misdemeanor arrest. It will keep the innocent out of jail, and take the guilty off our streets. Keep in mind, we take fingerprints right now when you're arrested. If you are not convicted, we wipe them out of the files. DNA is just modern-day fingerprinting. It's fingerprinting that is easier to take and more accurate. And it will keep innocent people out of jail at the same time it will protect the civil rights of everyone. This is a pro-civil rights issue. This is a pro-protection issue. It's not something that is created to hurt people. Quite the contrary, it's ridiculous to argue that anybody gets hurt by it but I can give you an awful lot of cases where if we have had DNA at the very beginning, people never would have gone to trial or gone to jail, or, in some tragic cases as we know in this country, be executed.

"We'll also ask you to pass a law requiring all State agencies to provide mental health records to the Federal Bureau of Alcohol, Tobacco, and Firearms - and we urge you do so before the April 16th anniversary of the Virginia Tech tragedy. Remember, what came out of that tragedy is if the State had had the information, they wouldn't have sold a gun. Now I'm not so sure that that works very well but if it stops one gun from being sold to one person who then uses it on the streets to kill our police officers or our civilians, let me tell you, I think it is worth it.

"And we'll seek legislation requiring gun manufacturers to build "micro-stamping" mechanisms into firearms - another tool that will help the police trace guns used in committing crimes. These are all things that protect the public and hurt the bad guys. How can we be a state without having them?

"To advance our environmental agenda, we will also ask once again to amend the Hudson River Park Act so that the City can establish a recycling maritime transfer station on the Gansevoort Peninsula. This is crucial to our ability to implement the most ambitious recycling program in the nation, and is therefore perfectly in keeping with the spirit of the Act. New York City, I'm proud to say, is trying to be a leader in cleaning up the environment. What this is about is simply letting us drive across a 20 foot wide park to a transfer station which we do not have the ability to site at any reasonable cost anyplace else. And without it, the number of trucks polluting in your neighborhood and my neighborhood throughout the city will continue to send our children to the hospital with asthma rates four times the national average.

"Before concluding, let me underscore a point I made earlier, which is that the State's economic revitalization has to proceed fairly; Upstate and Downstate should benefit mutually. A thoroughbred example is the idea of horse racing.

"Consider the contrast between the financial condition of New York City's Off-Track Betting Corporation and that of the New York Racing Association, NYRA. Currently, NYC-OTB brings in more than $1 billion a year and generates an annual operating profit of approximately $125 million. Its income subsidizes the state racing industry. Last year alone, NYC-OTB paid the racing industry approximately $98 million, of which $54 million went to the Racing Association, and close to $10 million to thoroughbred and harness breeding funds.

"On the other hand, in addition to what it has received from NYC-OTB, the Racing Association has so far also received $51 million from the State. Now, according to their bankruptcy documents, they also owe the State more than $200 million, including some $70 million to the Racing and Wagering Board. And now a State bailout of as much as $75 million for NYRA of is being bruited about.

"By contrast, the only thing NYC-OTB is asking the State for is the ability to do business without so much money being siphoned off its gross revenues. The increased distributions that are legally required to make to the State and to the racing industry are eroding our ability to stay in business.

"If NYC-OTB were to close its doors in June - as at this point it's on track to do, and anybody that thinks I'm kidding doesn't know me very well. This City is not going to subsidize a bookie operation. It's bad enough we have gambling as a revenue source. I understand the need for it. But it's going to be a source for us or we're going to close it. It also, sadly, will affect 1500 people who work directly for it, so its ripples will be felt throughout the state.

"The discussion in Albany about the NYRA franchise ought to prompt some serious consideration and open discussion of integrating the on- and off-track operations in New York State. The current system doesn't work, and the best course may be putting it out to pasture. Now I'm not opposed to subsidizing the racing industry; it is a big industry in the city, it brings people to New York, helps tourism. I happen to own a bunch of horses as well. But the bottom line is, we just can't have a city that doesn't have enough schools, doesn't have enough police officers, doesn't pay its employees as well as we'd like to, can't invest in culturals and parks for the need that we really- things that we really have, doesn't have enough money to improve its environment, and yet we're sending money to a bookie operation. That's just not tolerable.

"When I appeared here last year, I focused then, as I have today, on the need for the City to be treated fairly. And the result was that both houses of the Legislature, I will say, helped craft an adopted budget that was far more equitable for the City. And I wanted to once again say thank you to you.

"We finalized the historic CFE agreement and reached a fairer deal on revenue-sharing.

"The City was granted the ability to double the number of charter schools in the five boroughs, and our Health and Hospitals Corporation was protected from harmful cuts.

"We set a shelter allowance for people on public assistance that finally put our City Housing Authority on an equal footing with private landlords.

"And together we passed significant tax reductions, including eliminating the City sales tax on clothing and footwear, enacting small business tax reforms, and extending the $400 property tax rebate for the City owners. I think what came out of that was more people living in the city paying more taxes, not less. You made the city more attractive for people that wanted to come and for people that were already there. Small tax reductions like those really make a difference to the people who have alternatives as to where they can set up their businesses and where they can leave.

"We are in competition with other cities in America and other cities around the world and that competition is growing, not declining. We have to find a way to make New York City an attractive place if it is going to continue to thrive and if it's going to continue to help other parts of the state that aren't as lucky but also do contribute to us. And I'm confident this year that we can work together, once again, and adopt a budget that treats the City like the partner that it will continue to be.

"Let me also add that I am sympathetic with Governor Spitzer. He is asked to come up with a budget. Everybody wants something, nobody wants to pay. He's got to make his choices. Some of his choices we will agree with and some of his choices we won't be. But this is something that is done in collaboration with the Governor and with the legislature and we look forward to working with both parts of State government. Thank you for your time and I'll be happy to take some questions."