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Tax cut clash looms as New York begins budget negotiations

New York State Governor Andrew Cuomo delivers his fourth State of the State address from the New York State Capitol in Albany, New York, Jan
New York State Governor Andrew Cuomo delivers his fourth State of the State address from the New York State Capitol in Albany, New York, Jan

By Edward Krudy

ALBANY, New York (Reuters) - New York state lawmakers kicked off what looks set to be an intense two weeks of negotiations over the state's $140 billion budget on Monday, with clashes looming over tax cuts and education spending.

They aim to bridge significant differences in their spending plans and pass a fourth consecutive on-time budget, something that has not happened in nearly 40 years, but getting a deal done before the end of the state's financial year on March 31 could be a tall order.

Both the Senate and the Assembly have advanced budgets that propose spending more than Governor Andrew Cuomo, a Democrat up for re-election this year who has committed to cutting taxes by more than $2 billion over the next three years, with $500 million of that slated for 2014-2015.

"Each house wants to have a lot more spending than the governor," said Elizabeth Lynam, a specialist in New York's state budget at the Citizens Budget Commission, an independent budget watchdog. "The governor is going to have to work hard to keep them reined in."

Senate and Assembly leaders held the first general conference on Monday. Leaders of both houses committed to meeting the March 31 deadline and appear intent on maintaining the state's new-found enthusiasm for timeliness after years of dysfunction when it came to passing a budget.

"Our members are ready to resolve the differences between the Senate and the Assembly budget plans and work with Governor Cuomo to enact another on-time budget," said Senator Dean Skelos, the Republican co-leader of the Senate majority coalition, a sentiment echoed by his Democratic partner Jeffrey Klein.

The Senate is governed by a coalition of Democrats and Republicans while the Assembly is run by Democrats.

"Our budget resolution, adopted on Wednesday, is a $143.4 billion document which accepts or modifies much of what the governor proposed in his exemplary budget," said Assembly leader Sheldon Silver. He, too, voiced a commitment to deliver an on-time budget.

A fourth on-time budget may not sound like much, but in a state that has passed only 14 on-time budgets in the last 40 years it is being seen as a considerable achievement. In 2010 the budget ran into July, and in other years it has been held up even into August.

The last time the state passed four on-time budgets in a row was from 1974 to 1977, a period spanned by two governors. The last governor to preside over four on-time budgets in a row was Nelson Rockefeller, who ran New York for 14 years until 1973 before going on to become vice president of the United States.

That could be a good omen for Cuomo who has long been linked to presidential ambitions.

While Senate and Assembly leaders met, Cuomo held a news conference boasting cross-party support from more than 150 local elected officials for his $1 billion property tax cutting plan that ties tax relief to local authorities consolidating overlapping services.

"After the success of the property tax cap, this year the state is in a position to deliver more than $1 billion in tax relief to millions of New Yorkers by cutting property taxes.

"In order to do that, the legislature must make property tax relief a reality in this budget, and our local governments must take steps to become more cost-effective," Cuomo said in statement.

Neither the Senate nor the Assembly has fully backed that plan. The Senate has proposed $1.4 billion to freeze property taxes for school districts and local governments that stay within a 2 percent tax levy cap, but has not explicitly tied the credit to local government efficiency programs.

The Assembly is focusing on providing tax relief to home owners and renters whose property tax bills exceed a percentage of their income. The proposal does not require any cost cutting or efficiency savings by local officials.

Both the Senate and the Assembly are asking for more spending on school. The Senate's proposal increases school aid by $811.9 million, including more than $541 million restoring cuts, known as GAP elimination adjustment, introduced in 2009. The Assembly is asking for over $400 million more for school aid than provided in the executive budget.

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