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On Time State Budget Provides Significant Long Term Relief for Counties

The 2012-13 State Budget, passed this week, will begin to reduce the annual escalating costs of Medicaid for counties and county property taxpayers beginning in 2013.

The local Medicaid contribution, paid for by counties and the City of New York in weekly installments, has grown from $112 million in 1966 to more than $7.4 billion in 2012. Since 2005, the local Medicaid costs have increased, statutorily, by 3 percent or $180 million a year.

Addressing a major unfunded mandate on counties, the Senate and Assembly voted in favor of Governor Cuomo’s proposal to phase out that 3 percent increase over a three year period, locking in local contributions at just over $7.6 billion beginning in 2014. The State will fund any increase in the Medicaid program from then forward.

Amendments were offered in both chambers to enhance local Medicaid relief. Senate Democrats proposed a 10 year State takeover of local Medicaid costs and Assembly Republicans proposed accelerating the phase out of increased local costs. Both amendments were defeated in procedure.

“This budget represents real progress on the mandate relief front. It wasn’t everything we asked for, and counties are certainly not out of the woods, but progress has been made and there is significant long term savings here. We must continue working together, and with our colleagues at the State level, on behalf of our mutual constituents,” said NYSAC President Mary Pat Hancock, chairwoman of the Genesee County Legislature.

Other significant longer term mandate relief came in an off-budget action on pension reforms that created a Tier VI in the State’s retirement system. These reforms were extensive and are expected to save all local governments and the State about $80 billion over the next 30 years. More details on these mandate relief measures can be found below.

Medicaid Cost Growth Takeover

The Enacted Budget begins the phase out of the annual three percent increase paid by counties in 2013 by using each counties 2012 total Medicaid payment and then growing that by two percent. Under the enacted budget (Governor Cuomo’s original proposal), the scheduled payment by counties to the State in the first year of the takeover would be reduced from $183 million to $148 million ($35 million lower than the current law annual increase).  In 2014, the payment to the State would be determined by increasing the annual 2013 payment by one percent.  For 2015 and thereafter, the payment would be the same as it was in 2014.  The Governor estimates the enacted budget would lower payments made by counties to the state for Medicaid by $1.2 billion over five years. NYSAC estimates come in slightly lower over the 5-year period at just over $1 billion. The chart below highlights the difference in County Medicaid payments under the Enacted Budget compared to current law.

Comparison of Annual County Medicaid Payments Under Enacted Budget vs. Current Law
Current Law Payments by Counties to the State Enacted Budget Payment Schedule Enacted Budget Difference from Current Law
2012 $7,409,894,321 $7,409,894,321 $0
2013 $7,592,478,986 $7,558,092,189 ($34,386,797)
2014 $7,775,063,651 $7,633,673,111 ($141,390,540)
2015 $7,957,648,316 $7,633,673,111 ($323,975,205)
2016 $8,140,232,981 $7,633,673,111 ($505,559,870)
Total 2012-2016 $38,875,318,256 $37,869,005,843 ($1,006,312,412)

Source: NYSAC Estimates

Medicaid Administrative Cap

The Governor’s Budget also included a proposal that establishes a cap in reimbursement to counties for Medicaid administrative costs to amounts reflected in the state financial plan for the close of calendar year 2011. This administrative reimbursement cap was accepted by the Legislature in the final budget, but was modified to include a NYSAC initiated amendment. The modification to the Governor’s budget clarified that to the extent that there are aggregate savings in the state financial plan due to the cap in reimbursements (which is expected based on the higher level of growth anticipated in the State estimates) that counties that may have Medicaid administrative claims higher than their cap level could have those costs reimbursed through the pool of excess savings. A separate appropriation of $23 million is provided as funding for the administrative pool in case funding is necessary.

Early Intervention Reforms

The Governor proposed good government reforms to this program that included requiring:

  1. third party insurance coverage
  2. an arms-length relationship between program service evaluators and providers,
  3. that providers be part of insurance networks, ensuring insurance companies maintain adequate networks of providers, and
  4. the establishment of a statewide fiscal agent to handle all early intervention contracting, billing and third party collections (removing counties from this role).

The Legislature rejected all of these proposals but retained the statewide fiscal agent proposal, which should provide important administrative relief to counties.

Pre-School Special Education Reforms rejected

The Governor proposed reforms similar to those in early intervention related to the preschool special education program integrity, but also required school districts to make more fiscally responsible placements to help lower costs in the program or take fiscal responsibility for those placement decisions above a certain cap.  All of these proposals were rejected in the final budget.  Counties (outside New York City) lost $100 million in mandate relief savings over the next five years.

Pension Reforms will provide longer term savings

The Governor’s original proposal assumed state and local government savings of nearly $120 billion over the next 30 years. Most of the Governor’s proposals were accepted in some form. However, some were adopted with significant modifications which reduce overall savings estimates.  Major differences include:

  • Defined Contribution Option—the Governor proposed a defined contribution option for all new hires.  The final proposal will limit this option to nonunion new hires that earn more than $75,000 annually.  The new defined contribution option would be managed by the current SUNY TIAA-CREF program.
  • Member Contributions—The Governor proposed higher member contributions of up to 6 percent depending on a worker’s salary.  The salary ranges and related employee matching amounts were raised from the Governor’s original proposal.
  • Risk Sharing—The Governor also proposed new risk sharing arrangements that required higher contributions (or lower) depending on returns in the common retirement fund. These reforms were not included in the final bill.
  • Retirement Age—The Governor proposed 65 years as the retirement age.  The final legislation provided for a retirement age of 63.

Other Budget Actions of Interest to Counties


Local Assistance Program Funding was held flat from 2011/12 levels with the legislature announcing restorations to several important programs, including the Farm Viability Institute, Farm Net, Northern NY Agriculture Development, Tractor rollover, Maple Producers, Cornell Rabies and Cornell integrated pest management.

Community Colleges

The Legislature provided an additional $31.3 million ($22.1 million for SUNY and 9.2 million for CUNY) in support for local community colleges, raising base aid from $2,122 to $2,272 per full-time equivalent student from last year’s budget.

The budget bill also directed that an extensive study to be completed and submitted by CUNY and SUNY regarding the laws and current practice of community college chargebacks.  This study is due back by September 1, 2012 to the Senate and Assembly Subcommittee on Higher Education.

Economic Development

New York Works Task Force—The final budget agreement establishes the New York Works Task Force to coordinate capital plans across 45 New York State agencies and authorities, oversee investment in projects and access to funding, and facilitate the creation of tens of thousands of jobs. The New York Works Task Force will consist of fifteen members. Nine of the members will be appointed by the Governor and six by the Legislature. All major state agencies and authorities will participate in an implementation council to coordinate capital planning.

Second Round of Regional Council Awards—The Budget authorizes a second round of funding for the Regional Councils, including $220 million to implement regional strategic plans – $150 million in new capital funding and $70 million in tax credits from the Excelsior Jobs Program. In addition, resources from a wide range of existing agency programs will be available to businesses and sponsors for economic development purposes that are consistent with Regional Council plans through the innovative Consolidated Funding Application.


Environmental Protection Fund—Funding for the EPF was held constant at $134 million, the same as the 2011-12 levels. Some categories under the EPF are now being used by the regional councils to fund regional economic development projects through the newly created consolidated funding application. A proposal advanced by the Senate and Assembly to remit unclaimed bottle deposit funds into the EPF was not part of the final budget agreement. The legislature announced approval of an additional $1.25 million in funding from the conservation fund including $750,000 for invasive species and $500,000 for fish and game stocking.

Human Services

Public Assistance Grant Increase—The Budget Agreement will phase in the full implementation of the final scheduled public assistance grant increase from one 10 percent increase in July 2012 to a five (5) percent increase in July 2012 and another five (5) percent increase in October 2012, thereby increasing the public assistance grant for a typical public assistance family to $770.

Child Support Enforcement Administration—This budget agreement will eliminate State funding for child support enforcement administration provided to local social services districts as proposed by the Governor. The State would allow districts to retain certain child support payments currently sent to the State, and would also provide new Federal resources to districts in an attempt to ensure there is no local financial impact.

2012-13 Cost of Living Adjustments (COLAs) and Trends—The Executive Budget eliminated the planned 3.6 percent COLA scheduled to take effect in 2012-13 for OCFS programs including Foster Care, Adoption, Bridges to Health, and New York/New York III. This proposal would also eliminate administrative trends in various programs including Foster Care. A new program will be established for 2013-14 which will provide increases based on appropriate provider costs and meeting performance outcomes.  The Legislature did not fully support the increased authority to the Executive to determine future grant awards and included language in the final budget that would provide COLA’s for these human service providers in 2013-14, 2014-15 and 2015-16 at the USDOL CPI for those years. This COLA will require an increased country contribution for providers.

Child Welfare Financing—Child Welfare funding at the current 62 percent State/38 percent county share was set to expire in June 2012.  The final budget agreement extends these shares until June of 2017.

Indigent Defense

The Budget agreement provides $77 million in funding for indigent defense services provided by counties, plus an additional $4 million to help counties address quality issues related to caseloads.

Mental Hygiene

Restoration of Individuals Incompetent to Stand Trial—The final budget agreement adds a new provision to the criminal procedure law which defines “appropriate institution” for the purpose of restoring those deemed incompetent to stand trial. Included in this definition are hospitals operated by the Office of Mental Health and centers operated by the Office for People with Developmental Disabilities. Also included are hospitals licensed by the Department of Health which operate a licensed psychiatric unit which agree to house such individuals. The original language naming local jails as an appropriate institution has been eliminated. However, a district attorney may consent to restoration on an out-patient basis at a local mental health facility.

Public Health

New York Health Benefit Exchange—The Final Budget rejects the Governor’s Budget proposed language to implement a State sponsored health insurance exchange. Last year there was a short lived 3-way agreement between the Governor, Senate and Assembly to adopt enacting legislation that would allow the development of a statewide health insurance exchange and open the door to the availability of additional federal financial support to cover a large share of the costs of building the exchange. The State has already received nearly $90 million for this purpose.

Public Safety

County DA Salary Increase—Certain DA salaries are tied to the April 1, 2012 increase of judicial (State) salaries. This budget allows for $2.812 million for counties to cover 40% of the expected DA salary increase, plus an additional $700,000 for counties to cover the full increase for DA salaries in state fiscal year 2012-13.

Statewide Interoperable Communications Grants—The legislature approved $75 million in funding for the Statewide Interoperable Communications Grant Program within the Division of Homeland Security and Emergency Services. This is an increase of $55 million over amounts appropriated in the 2010/11 State budget and is the fullest amount allowable under State law. Article VII language advanced by the legislature includes a new section that clarifies the distribution of $9 million in funding for local Public Safety Answering Points.

Statewide Emergency Response Protocols for Local Governments—The final Budget agreement includes provisions to improve the State’s readiness to respond to storms, floods and other critical incidents through the Office of Emergency Management (OEM) within the Division of Homeland Security and Emergency Services. The proposal also includes guidelines for local governments regarding the sharing of resources in emergency situations. The legislature agreed to include language clarifying the State would take over control of a local emergency only upon a request from the local government.

Probation—Probation aid was held constant from 2011/12 levels at $44.876 million. A variety of Alternative to Incarceration and other programs through DCJS Local Assistance were funded at a total of $117.852 million, a $9.2 million increase over the Governor’s proposed funding levels. Additionally, a provision that would give flexibility to Judges to Impose Probation Sentences was not included in the final budget.

DNA Databank Expansion Amendments—The newly created DNA databank legislation was amended in the final budget agreement to accelerate the effective date of the legislation. The new law will now apply effective August 1, 2012, two months sooner than established in the original proposal.

Youth Detention—The final budget agreed to a $76.160 million capped appropriation for secure and non-secure detention expenses, for Calendar Year 2012. In keeping with the Executive’s proposal, the final agreement also allocated $8.376 million for supervision and treatment services for juveniles program for 62% state reimbursement to counties and NYC for eligible expenditures for the provision and administration of eligible supervision and treatment services for juveniles programs during the period of April 1, 2012 through March 31, 2013.

Juvenile Justice Reform/Close to Home Initiative—The 2012 enacted budget creates the “Juvenile Justice Services Close to Home Initiative.” This Initiative allows New York City to develop a program to provide juvenile justice services to all adjudicated juvenile delinquents who reside in New York City and are determined by a family court judge to require placement other than in a secure facility. While youth committed to secure level juvenile justice facilities will continue to be in State custody and facilities, New York City youth currently in State non-secure and limited secure facilities will be transferred to City-administered programs and facilities. The goal of this initiative is to provide effective services to these youth including diversion, supervision, treatment and confinement to ensure the most appropriate level of care is provided, consistent with public safety goals while minimizing dislocation of youth from their communities. This program received an $8.614 million appropriation and becomes effective September 1, 2012 when New York City will take over the responsibility from the State for youth in non-secure placements. NYC will assume responsibility for youth in limited secure placements after April 1, 2013. Before these effective dates, the State must first approve a comprehensive plan for each level of youth affected by this new program.


CHIPS and Marchiselli Programs—The Budget agreement would authorize the CHIPS and Marchiselli Capital Aid Programs to counties, cities, towns and villages for State Fiscal Year 2012-13 at approximately $363.1 million and $39.7 million, respectively.

The transportation budget ensures the 11 DOT regional offices will NOT be merged in to six offices in the coming fiscal year. The continued use of CHIPS funds for chip seal, microsurfacing and other treatments is authorized and made permanent.

The budget agreement will fully fund the remaining 3 years of the MTA capital plan and includes the creation of a task force to study financing options for transportation infrastructure and a directive to DOT to develop a 2-year capital plan for 2013-2014 and 2014-2015 fiscal years. The task force is supposed to report by September 1. $100 million in additional DOT capital is authorized for these future fiscal years over the 2012-2013 capital plan level, the spending of which will be pursuant to a memorandum of understanding between the Legislature and the Governor.

The budget agreement includes an Internet revenue sharing agreement between county run DMV offices and the State DMV where the State will share internet transactions totaling $2.1 million over three years.

This entry was posted in NYSAC Weekly Wire for the Week Ending March 30, 2012. Bookmark the permalink.

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