By JOSEPH SPECTOR
Gannett Albany Bureau
ALBANY _ State lawmakers are battling over whether they can include $1 billion in property-tax relief to homeowners this year, a proposal that has quickly become a major sticking point in budget negotiations.
Senate Democrats are pushing a measure that would either restore property-tax-rebate checks to middle-class homeowners or provide tax exemptions to property owners based on household incomes.
The proposal, Democrats said, would likely impact 1 million homeowners and provide tax relief headed into a critical election season this fall, when the seats of all 212 legislators will be on the ballot. Democrats hold a slim 32-30-seat majority in the state Senate.
The issue has appeared to stall budget talks. Lawmakers Monday were expected to pass emergency appropriation bills to keep state government operating. They missed the April 1 deadline to pass an on-time spending plan for the 2010-11 fiscal year.
But Senate Deputy Majority Leader Jeff Klein, D-Bronx, who represents parts of Westchester County, said property-tax relief needs to be part of any budget agreement.
Gannett's Albany Bureau detailed Sunday how Westchester County has the highest property taxes in the country, and many upstate counties pay the highest property taxes compared to home values in the nation.
"We feel that having property-tax relief in the budget and meaningful property-tax relief - actually putting more money back in people's pockets -- is more important than an on-time budget," Klein said.
But Senate Democrats have yet to detail specifically how to pay for the program, and critics questioned how the proposal could be funded when the state already faces a $9.2 billion budget deficit.
Klein called it "the 1 percent solution," explaining that the sides should be able to agree on a way to fund a proposal that accounts for less than 1 percent of the state's proposed $136 billion budget.
Last year, the Democratic-led Legislature ended the STAR property-tax-rebate program because of burgeoning budget deficits. The program provided annual rebate checks to homeowners ranging from $250 to more than $900 per household, but the proposed program would be targeted to the middle class, Klein said.
Senate Minority Leader Dean Skelos, R-Nassau County, warned that Democrats may look to increase state borrowing or raise taxes and fees to pay for the property-tax relief, instead of seeking cuts in spending.
"What they are doing is trying to cover the political heat they're getting at home for the elimination of the STAR rebate checks," said Skelos.
Assembly Speaker Sheldon Silver, D-Manhattan, confirmed that property-tax relief is being discussed, but he also questioned how it could be funded.
"We have a $9.2 billion deficit, it's very difficult to make big commitments to anything," he said.
Assemblyman Kenneth Zebrowski, D-New City, Rockland County, said the Assembly is first trying to restore $600 million of the proposed $1.4 billion in cuts Paterson has proposed to schools.
"It's naive to think we can just gut education by $1.4 billion, force the school districts to raise taxes and then try to give it back in a rebate," Zebrowski said. "The public is not going to be tricked. That's a gimmick."
Paterson has also knocked the proposal, saying in a letter e-mailed to constituents Sunday that lawmakers are wrongly talking about borrowing and higher spending instead of cutting costs.
"Some lawmakers are even talking about borrowing money, only so they can turn around and give it away as a tax rebate," Paterson wrote.
"This is an unequivocally terrible idea. While everyone supports the goal of property tax relief, we simply cannot create a property-tax-relief program by spending money we do not have."
Sen. Stephen Saland, R-Poughkeepsie, said some Republicans would likely back a property-tax-relief measure - which he sponsored when it was introduced in 2006.
But Saland, former head of the Senate Education Committee, said, "I hope this is not merely a cover-your-derriere charade to try to placate a very angry electorate."
Austin Shafran, a spokesman for Senate Democratic Leader John Sampson, D-Brooklyn, said property-tax relief is needed because New Yorkers are losing their homes because of high taxes.
"We need a fair and responsible budget that provides meaningful property tax relief to overburdened New Yorkers across the whole state," he said. "The costs of inaction are simply too high."
Last month, the state Senate passed legislation that would put a cap on school property taxes, tie property taxes to household incomes and restore rebate checks only to some income-eligible senior citizens.
Paterson has called for a cap on state spending along with a school property-tax cap. Senate Republicans passed a school-property-tax cap in 2008 when the GOP held the majority, but the Democratic-led Assembly didn't back it.
Meanwhile, education groups, unions and the Working Families Party are calling on state leaders to seek to temporarily tax Wall Street to generate $6 billion a year for two years in state revenue.
The proposal calls for including a payroll tax on bonuses paid to Wall Street employees in the face of record profits last year, advocates said.