Thank you very much. Thank you all, thank you very much. Thank you all for being here today. First let me begin by thanking and acknowledging probably the hardest working man and most effective working man in state government, Lieutenant Governor Robert Duffy. Let’s give him a round of applause.

We are joined by our great Comptroller Tom DiNapoli, a pleasure to be with you today as well Mr. Comptroller. Majority Leader Dean Skelos, a big round of applause for the Majority Leader Dean Skelos. Majority Leader Jeff Klein, a pleasure to be with you Jeff. Speaker Sheldon Silver, welcome sir. Democratic Conference Leader Andrea Stewart-Cousins and Minority Leader Brian Kolb, a pleasure to be with you. And to my colleagues who are here today a pleasure to be with you today, thank you for your work.

Well thank you, and again it is an exciting part of the year. The State of the State was exciting and now we are talking about the budget and we will be adding some more facts and meat to the discussion. I would like to start by taking half a step back before you do an exercise like this to remember what it is all about and what we are trying to accomplish. What we are trying to accomplish is to provide the people of the State of New York with a government that performs efficiently and effectively for them. For the people. It forges community, lowers taxes, provides relief and restores economic opportunity that is everything that we are trying to do in a very simple paragraph. The budget process is in many ways the sentimental moment in almost any government, and it is no surprise that Washington gridlocks when they go to do the budget. Why? Because that is where the money is, right? Why do you rob banks? Because that is where the money is. That is where the buck stops or in the case of the budget, more accurately that is where the buck actually starts. That is where all the rhetoric strips away and that is when it becomes very real, in the budget, where you are putting the people’s money. And our budget process in many ways followed that model and has been a metaphor for New York’s past problems and it has also been a metaphor for the success that we have had in reforming government.

For the past thirty years, twenty three budgets have been late an average of fifty days. Just think about that. That was the track record for state government. Thirty years, twenty three late budgets, and not a little late, fifty days. And then you wonder why the people in the State of New York thought the government wasn’t working. New York State Government was gridlock on steroids. And the budget was manipulated by special interest pressures which drove spending ever higher. Spending outpaced inflation for fifty years and outpaced income growth for fifty years. The spending transcended politics during those fifty years you had democratic governors, republican governors, you had democratic Senates and you had Republican Senates. You had George Pataki, Mario Cuomo, Nelson Rockefeller and the spending remained the same. And it was a rate that was unsustainable.

Think about this, if the state was spending at the same level of personal income growth, where we would be in 2010, $84 billion was the state budget, $45 billion if we would have stayed within personal income growth. Staying within personal income growth means raising the state budget at the same rate that the people of the state were earning. So if you just spent what the people were making at the same rate, it would be a dramatically different situation. When you spend allot of money guess what you have to raise taxes to pay for it and we raised taxes. At the same time, the investments we were making were not the most efficient, they were not the most effective, and they weren’t necessarily accomplishing a lot of things for the people of the state. You spend a lot of money and you get a lot done that would be one thing and we were spending a lot of money and not getting great results. The net effect was we were seeing businesses and people actually leave the state.

But that was yesterday and this is today and we are in a much more different place, we have held spending below 2% for three years. We brought down the level of State debt at the same time. And we have gone from a $10 billion deficit to a $2 billion surplus. I don’t know if I would have told you that was possible when we started this journey together. Let’s give yourselves a round of applause for really a great piece of work. Government works for the people and it actually performs for the people New York created 380,000 jobs over the past three years. Number two in the nation in creating jobs since the recession, just think about that, number two in the nation in creating jobs since the recession. And we made government work all across the board. Teacher evaluations, economic development, road and bridge construction and a emergency management system that has literally been saving lives. We walked into a situation where all the arrows were pointed in the wrong direction. All the news was bad. We turned around the spending, we turned around the taxes, we turned around the employment and we turned around the jobs numbers and we turned around the direction of the State of New York, all thanks to your good work.

Last year we said that if government works right, then the budget is an easy process. It only gets traumatic when things go wrong. In the past we have had a lot of trauma. Last year was simple and straightforward and this year will be relatively simple and straightforward.

The state operating budget will go up $1.5 billion which is 1.7% because we hold ourselves to a 2% limit. The all funds budget, which means the state budget plus federal funds and etcetera, without the Sandy Aid and the Affordable Care Act goes from $135 billion to $137 billion; it goes up $1.8 billion for a 1.3% change. Main spending areas, spending overall goes up 1.7%. We raise Medicaid about 4%, and you will see why it is about, which is about the personal income growth formula that we have put in the law for Medicaid. School aid goes up about 4%. The executive agencies are basically flat, a half of a percent, in the executive agencies we have done a lot of work with consolidation and streamlining etcetera. The rest of the budget basically flat; 2%. And then we have $500 million to invest in tax expenditures. That does not take into account in the education numbers, a $2 billion smart schools initiative that was spoke about in the state of the state. But this year the budget is more than just the budget, it is more than just dollars and cents, it is more than even the one year birthdate of budget baby Leo Megna.

The man makes a pretty budget but he makes a prettier baby. That baby looks like his momma thankfully. I’m just kidding Bob. I can see you’re all over that child’s face. Anyway, this budget will enact a specific action agenda. More policies and more program development than in previous years as you will hear from my colleagues. Why? Well the bad news is there will be more work to get the budget passed, because there is more than just a budget document, there is a lot of program work. The good news is that it will make the rest of the session simpler. So the budget does more work than normally, the good news is the post budget, will actually have a better session. We started with a very simple process of a to-do list, what are the toughest problems facing the state, whether it was a structural problem facing the state and we have been checking them off. And the out of control spending, cut taxes, ended gridlock, redesigned the state Medicaid program passed pension reform capped property taxes, enacted real economic redevelopment, put in place teacher evaluations systems and now tackle the proliferation and expense of local governments.

We propose a property tax freeze, it is a relief to homeowner, but it is also something else. It is an opportunity to fundamentally address the structural cause of high property taxes. The tax that is main burden in this state is not the income tax, it is the property tax. We collect about $50 billion in property tax, about $40 billion in personal income tax. When you hear people complain it is about the property tax. Why is the property tax so high? Because we have too many level of local government period. You don’t need any calculator to figure it out. Figure this out, when you have as many levels of local government as we have and you are supporting that many subdivisions the cost is going to be high. So we want to freeze the property tax. Number one to provide relief to struggling homeowners but number two to incentivize consolidation and shared services.

Homeowners will be eligible for the property tax freeze if one, the local government stays within the 2% cap, so it is an incentive for the locality to stay within the cap. But number two, the local government implements an approved plan to save at least 1% a year for three years and a total of 3% reduction in cost. So what this really then lays out is a five year plan. Year one, there will be a freeze if the local government lives within the cap. Year two, the state will credit to a freeze if the local government puts in a plan to save 1% per year for three years. And then year three they would save 1%, year four 2%, year five 3%. These would be county wide shared services for consolidation plans which would save in the aggregate 1% per year of the total tax levy, not the operating budget, the total tax levy for three years.

So for example, Erie County, 1,000 governments in Erie County, 1,000. The total tax levy of those one thousand forty four governments in Erie County is $1.6 billion in tax levies. Again, not operating expense doesn’t include sale tax etcetera. Just the property tax levy is $1.6 billion. You see the column of what the governments actually are 427 lighting districts, 144 drainage districts. We say to the county executive, to the local government officials sit down, come up with a plan, figure out shared services, figure out consolidations figure out where you can find savings, it can’t be that everyone has to do everything in every government. It can’t be, it can be easier, it can be more politically advantageous but it can’t be that there are not economies of scale in that size universe. Abutting jurisdictions, find a way to save 1% of the levy per year, for three years. 1% would be $16 million; savings over three years would be $48 million.

Monroe County: 624 local governments, interestingly the same level of tax levy, $1.6 billion. Potential savings 16 to 47. Oneida: 350 local governments, $349 million tax levy. This my friends is what is driving up the property taxes and any level of inflation in these numbers is devastating to a home owner. Westchester County: number one taxed county in the nation, Westchester County. Many of our counties are in the top 15 of the highest taxed counties in the nation. But Westchester is number one. 425 local governments, $4.4 billion in government services. Suffolk: 404, $4.5 billion. $57 million in first year savings, $171 million.

The budget recognizes and believes that tax relief is an economic growth strategy that has been working for our state. Our tax package includes a corporate income tax cut from 7.1 to 6.5 %, a manufacturer’s tax credit, a corporate income tax rate for upstate manufacturers for an additional incentive for upstate New York growth, a renter’s tax credit, a circuit breaker for property tax relief for low and middle income homeowners and it freezes property taxes as we just discussed. Our tax package is not an advocacy statement when you make a proposal about taxes you get a whole range of opinions. It is one of those topics that everybody is an expert and everybody has an opinion and everybody has a perspective. So when you start talking about taxes you get republican theories and democratic theories and liberal theories and conservative theories and everybody has a theory. And everybody criticizes the part of the package that they don’t like. This is a balanced package and it is not a package that has been put together to provoke, it is a package that has been put together to pass. It is a package that reflects the views of the Senate and the Assembly. Of people who are Upstate and Downstate, business and labor, homeowners and renters, we purposely put together the Pataki-McCall tax commission. Former governor George Pataki and former comptroller Carl McCall, one republican, one a democrat, we put them together last year knowing that this year was an election year and we wanted to come up with a very balanced package and a balanced approach. It is a package that works for all New Yorkers and a package that we can make a reality.

Our jobs agenda goes forward with global New York, we are very excited about the startup program which is the most aggressive relief that you can bring, period. We want to start marketing Start-Up zones internationally. We are excited about our jobs agenda in the regional startups. In the North Country we have a number of economic development projects that we believe are going to spur the economy. Whiteface Mountain, Trudeau Institute partnership, capital improvements at Orda. In the Mohawk valley we are investing $180 million in Nano-Utica which is very exciting it is our second major hub of nanotechnology. In the Capital Region after talking about it for years and years, we are investing in an Albany convention center for $64 million. In the Finger Lakes and Rochester we are investing $40 million in the Eastman business park, which has been a problem for the Rochester area and we believe we are going to convert it into an asset. Western New York the next step is a $100 million genome research center. In the Southern Tier, they have been talking about building a SUNY school of Pharmacology for many many years; we want to make it a reality this year. In Central New York, $30 million for the Onondaga lake economic revitalization area, which is a very ambitious and exciting project to develop the side of the lake, Lake Onondaga.

We also believe that the best long term economic development strategy is the best education system. Common Core is an issue about which there has been allot of dialogue. I have heard allot of feedback from parents. I think it is fair to say about Common Core, that we all agree we need to set real standards for our students, a meaningful teacher evaluation system, I support the Common Core agenda, New York is one of forty five states to adopt common core, but the way that Common Core has been managed by the board of regents is flawed. There is too much uncertainty, confusion and anxiety. Parents, students and teachers need the best education reforms which include Common Core teacher evaluations but they also need a rational system that is well administered. We will assemble a panel that includes education experts and members of the legislature; I think that this is something that we can work on together. Let’s get recommendations for corrective action by the end of this session, let’s pass a package of corrective actions by the end of this session and let’s end the anxiety that the parents and teachers and students are feeling all across the state.

We need testing to measure performance in the classroom but too much testing can hurt not help. There is no reason why a school district should make a five year old take standardized tests. It is not how our young children learn. I propose limiting standardized testing for all students in K to 2 and we will ask our panel to review this proposal and make recommendations on this topic as well.

The state has long believed in pre-K, the New York State assembly championed it for years early on, the legislature passed it in 1997 and Governor George Pataki signed it into law. I called for the expansion of pre-K last year in the State of the State and the budget implemented it. This year let’s take it one step forward, this year we propose universal full day pre-K statewide, period. All the educators will tell you this is the single most advantageous reform that a state can make. That the younger you get children into school the more open and accessible their brain, the more they can take in earlier. Incredibly, New York will become just the forth state in the nation to offer State wide universal full day pre-K. The first question we have to answer is what is universal full day pre-K, because pre-K currently varies widely across the state in some school districts it is a little bit more than babysitting. Some school districts have very comprehensive learning programs. Study after study shows it is not just enough to say we will do pre-K, you have to spend the money right and you have to spend the money with the appropriate program.

First we will review the current State standards and teacher requirements to ensure we are providing high quality pre-K programs around the State. The second question will be how do you pay for it? The state will pay for it and the state will be proud to pay for it. It is a priority, we believe in children we believe in pre-K we believe in education, let’s put our money where our mouth is and let’s make it a reality.

This budget includes a fully funded five year plan that covers the additional cost of full day pre-K across the state; we currently estimate the cost at about $1.5 billion over the next five years. We will work with school districts to develop an implementation schedule and the state will move as fast as the districts will move. As a matter of fact we are going to move to encourage districts to move quickly. Because getting to full day pre-K in most districts across the state is going to be a capacity issue. It is not that they don’t want to do it; it is that they don’t have the capacity to do it. They need class rooms, they need non-for-profit organizations that can do it off site, they need teachers they need facilities, they have to build, so it becomes a governmental chore of developing the capacity. We want to encourage the districts to perform, we want to encourage the districts to perform quickly and our saying to the districts will be “as fast as you can move, we can move.” We have the funding, we want it to come online as soon as fast as you can bring it online. Charters schools will be eligible for pre-K funding and we will also reexamine the pre-K inspections and regulations as well as construction codes for facility requirements because we don’t just want to do pre-K, we want to do it great and we will.

We also want to invest in afterschool. Studies show that high quality afterschool programs make a real difference. Our budget proposes a fully funded five year plan to implement a robust after school program statewide, once again we will negotiate district by district each district has a different need, a different desire and a different capacity.

To transform our classrooms, the budget puts the $2 billion smart schools initiative on the ballot for November, it is something I support, it is something I will work very hard to get passed and it is something I believe the people of the state of New York will pass, especially if they know the money will be well spent and the money will be directed to the right causes. The eligible use for the funds; high speed broadband, smart boards, tablets also construction of new pre-K classrooms and school programs based for afterschool as needed so this initiative will work hand in glove with the pre-K and with the after school programs because to the extent that schools are going to have to develop the capacity, they can use the $2 billion initiative to actually fund that capacity, so the two will work together very well.

The budget will continue to incentivize teacher performance with $20 million for the teacher excellence fund; the budget also has $8 million for the full scholarships for SUNY or CUNY College or universities for the top ten percent of graduates in high school. Overall the education investment is done on a two year basis; the two year projected formula growth equals 7%. As you know, we have our education budget dictated by a personal income growth formula. This year the personal income growth formula is 3.1%; next year it is 3.9%. Over two years it is roughly 7%. Our two year budget is 1.23 billion in general support, 75 million for the general performance programs, that is the additional P-Tech programs, that is the teacher bonus that I just spoke about. $460 million on top of that for pre-K and after school over the first two years. That budget ramps up very quickly as the capacity goes online and that budget goes to $2.2 billion over five years. So that is a significant investment and that is why I am confident in saying the State will move as fast as any district will move, as fast as they can develop the capacity is as fast as we can fund it. That adds up to 1.8 billion, which is 8.6% over two years. That compares to the 7% over two years if we had stayed to the formula, so roughly the formula for this year is 3.1, we will be roughly at 4.3, so we are exceeding the formula. That is without counting the $2 billion school bond act, which we suggest would be distributed based on the same way that the education aid is ultimately distributed. So overall if you counted at all, it will be one of the largest investments in education that this state has made and we are proud of that.

Healthcare – New York State has gone from a symbol of waste and inefficiency to a model of reform and innovation. Our healthcare exchange has signed up nearly 330,000 New Yorkers. It is one of the best operating sites in the county; let’s give them a round of applause, Dr. Shah. Our Medicaid redesign team which we started in the first year is a great success, we are providing more and better healthcare at less cost we actually brought the cost of Medicaid down and enrolled more people at the same time, and we have saved $34 billion. $17 billion for the State, $17 billion for the federal government. In 2012, we requested from the US department of Health and Human Services, HHS, what is called a $10 billion federal Medicaid waiver, which is an approval to spend some of the money we saved to continue our reforms to continue healthcare and implement our new system. The way these waivers work, it’s a funny use of the term but the way the waiver works is a State saves money by making changes, the federal government gives the State back some of that money, some of the savings so that they can implement the new system. We requested a $10 billion waiver back in 2012 because we have challenges we are converting the system and we are making serious changes in the system but we need funding to enact those changes that are allowing us to save the money in the first place. Our most serious situation is in Brooklyn, where we have Brookdale interfaith medical center, Long Island College Hospital. We have been propping up the system frankly for about 18 months while we have been waiting for the waiver but we need HHS to act on the waiver now, it is a critical situation, we have no alternatives, the numbers are beyond the scope of the State government and this is truly a crisis. In a place called Brooklyn, we want our federal friend to understand that Brooklyn has more people in it than San Francisco, Boston and Washington D.C combined so this is a serious situation affecting a lot of people, you will hear more from Dr. Shah about it, but it is a critical matter for us to attend to this year because this budget does not have resources to keep these hospitals open without this Medicaid waiver.

Providing help to local governments we have been very aggressive in mandate relief and literally taking cost from local governments. The affordable care act and the Medicaid takeover, we assume all the increases in Medicaid, pension reform, early intervention reform, $4.6 billion in total, probably the most aggressive local mandate package in modern political history. This year we will do even more with preschool and special education reforms and data sharing of law enforcement with localities. We have a $100 million affordable housing program; we have a very robust emergency services recreation program, which is very important. You will hear from Howard Glazer we have had about 9 federally declared disasters since I became governor. That is about 1 every 3 or 4 months. As a matter of fact, after this we will be declaring a state of emergency in downstate New York because of the Snow Storm. We have to be prepared for these storms and if you are not prepared people will die, it is that simple. So investing in this technology and this equipment is very important.

We also have a number of initiatives to make New York fairer, we want to continue to build on the MWOB program, and we have had great success meeting our goal of 20%. Funding for our reentry council to stop the revolving door in our criminal justice system. The New York Works tax credit program, that attacks unemployment for minority youth in urban settings and $250,000 for expert services on the raise the age. That is 16 and 17 year olds who are tried as adults in the State of New York. We are also requesting $250,000 to do a disparities study to see if we can get the disabled veterans in our state a set aside on state government contracts so we show them the same loyalty that they have shown to us. And $2.5 million for the route 98 feasibility study, this is a road way that the North County has talked about for a long time, different people have different opinions on whether or not it will work, let’s spend the money let’s do the study and lets find out if it works, because if it does it could make a tremendous difference for the North Country.

Last year I proposed a public trust act, I understand this legislature still does not agree with the act, I have included it in this budget. It has reforms to the board of elections to institute independent enforcement and real oversight. It establishes new anti-bribery and corruption laws and requires the disclosure of outside clients with business before the State. With this budget I am also proposing a public financing system, because I think it is inarguable that the amount of money in politics has created a number of difficult issues.

There has also been a long and troubling pattern of incidents of sexual harassment particularly in the New York State Assembly, it goes back a long time and it seems like it just doesn’t stop. What makes it worse is there have been complaints that people didn’t know where to go and they didn’t know how to make their voices heard. And there have been complaints that people felt that not only were they being victimized, but there was no recourse. That has to stop and it has to stop once and for all. I propose in this budget, JCOPE should have a confidential hotline for complaints of sexual harassment we hope and pray that it stops and it stops today but if it doesn’t stop, the victim needs a place to go and that is what this confidential hotline would do for them.

We have included ethics reform in the budget, because hope springs eternal, I am an optimist; you have to be to do this job, trust me. And because this is the right thing to do and in closing let me say this. Government to me is the formula, the capacity of government is, it is competence times the level of trust. Government capacity equals competence times the level of trust. The competence of our state government is inarguable. The lieutenant governor started with a football analogy, I was watching the playoffs this weekend, the Denver Broncos and the New England Patriots and two great teams, in talking about the two great teams they were basically saying they were playing for the record books. Playing for the history books, their records have been that good. You passed three budgets on time. For the first time in thirty years. I don’t want to jinx us but I asked when was the last time four budgets were passed in a row. The last time that four budgets were passed in a row, 1973, the Governor was Nelson Rockefeller; the speaker was Perry Duryea, Senate Leader Earl Bridges. They are all gone now 41 years, many of the people in this body weren’t even alive 41 years ago, that’s how long it is has been. And it is not just that we passed three budgets in a row, this government performed remarkably well for the people of the state of New York.

When you go home and explain to your constituents what you did it is truly remarkable. Three years a $10 billion deficit turned to a surplus, jobs are up, spending is down; unemployment is down in every region of the state of New York. And the sense of pride is up. You go to communities that were long depressed, go to Buffalo and Buffalo which was depress literally for decades and generations and there is a sense of energy and hope and optimism that you can feel on the street. And this was a community that thought they had no future. This is a community that spent generations seeing people leave. You go to the North Country that felt abandoned and isolated, they weren’t even part of New York, they couldn’t even relate to Albany. And it is a different feeling. It is not just that we passed three budgets and it is not just when you look at the statistics that show that you turned the state around, you turned around the feeling. You turned around the energy, you turned around the culture and people are believing in New York.

The one omission is ethics. And it is the one negative they hear over and over because it is a drip, drip, drip of these negative one off stories. And it has to be addressed. Because what ethics reform says to the people of the State of New York is “I get it, I get that that is wrong and that it not me and I don’t tolerate it,” we are going to put a system in place that makes sure that if and when these things happen again, there will be a system to take care of it. Nobody expects that we can stop people from doing silly or venial or stupid or mean things, it is human nature. But they are saying we want to make sure that you have a zero tolerance policy and that you are offended by it and that the victims have a place to go and that you won’t allow it in you midst and ethics reform is that new system. That is what ethics reform is to me.

And I do believe it affects our capacity and we need the capacity, because this year for use is going to be about making it a banner year. It should be a banner year. Building on success, we have had a great three years and we are building on that in this fourth year and we are swinging for the fences in the fourth year. You look at this agenda and what we want to do, it is historic. We are going to do more construction in this state than we have done in over sixty years. A new emergency management system for a new generation to save lives. A new resiliency program that the vice president of the United States said he has never seen before. Economic development projects all across the state that are coming out of the ground. New records in roads and bridge construction. A technology revolution in the school system with this $2 billion initiative. Teacher evaluations are now kicking in. It is all coming together. The tourism numbers are up, you can feel it and we are going to bring it home this session. And I believe we are going to have a session that goes into the record books and that is why that capacity is so, so important. Because we are doing what we came to do, you all come into public service and you get in the car and you drive a long distance to come here for one very simple reason. Because public service said maybe you have the opportunity to make a difference in society.

Maybe you can take your talents and your god given gifts and they can have an impact beyond yourself. And maybe you can take your talents and make your community better and make life better for your children and for your family and you can leave this place a better place. We are doing that. We have done that and we can do that even more and that is what this session is going to prove. I am looking forward to it, I am proud to have you as colleagues, let’s do what the people of this state need done. Thank you and god bless you.