ALBANY — The State Legislature approved a $122 billion budget on Wednesday, increasing spending by nearly 5 percent despite warnings that the weakening New York economy will leave the state unable to afford the expansion.
The increase comes as other states are planning to cut back spending and trim their payrolls. The New York budget relies on $1.5 billion in new revenue generated by closing tax loopholes and expanding taxes and fees on items including cigarettes, museum souvenirs and manicures.
The $1.25 a pack tax increase will make cigarettes in New York City the most expensive in the country, according to antismoking groups.
Legislative leaders said the increased spending, which includes more state aid for public schools, was needed to spare essential programs from painful cuts, but many legislators expressed concern that the budget was bloated and predicted that they would have to cut spending later.
Although Gov. David A. Paterson has publicly complained for two weeks that the budget was too generous, his role seemed to be minimized as the Senate majority leader, Joseph L. Bruno, and the Assembly speaker, Sheldon Silver, pushed through hundreds of millions of dollars in spending.
Mr. Paterson is expected to sign the budget. Legislators said that it was responsible and that the new taxes and fees would pay for the expanded spending.
“I don’t want to be one of the pessimists who says the sky is falling, we’re going over a cliff, it’s doomsday,” Mr. Bruno said Wednesday. “I don’t buy that.”
Legislative leaders pointed out that former Gov. Eliot Spitzer had proposed an even bigger budget in January. Mr. Spitzer’s plan was presented before the full emergence of the problems of Wall Street, which is New York’s biggest source of revenue.
The budget, for the fiscal year which began April 1, calls for $121.7 billion in spending, including both state and federal dollars. That amounts to about $6,400 for each New Yorker and is 4.9 percent higher than the budget for last fiscal year. The state’s operating budget, which excludes federal funds, will grow 4.5 percent this year to $80.5 billion.
“They really didn’t act like they were in belt-tightening mode,” said Elizabeth Lynam, an analyst for the Citizens Budget Commission, a nonprofit group that works for fiscal discipline. “There was quite a bit of larding on.”
The budget will increase aid to public schools by $1.75 billion over last year, and more than a third of the new money is to go directly to New York City. There is also $6 billion for capital projects at the State University of New York and the City University of New York.
Legislative leaders and Mr. Paterson, who took office only two weeks before the budget deadline, faced a trying set of circumstances as they tried to reach an agreement. In addition to the worsening situation on Wall Street, they were distracted by Mr. Spitzer’s resignation last month and a last-minute push from Mayor Michael R. Bloomberg and Mr. Bruno to approve a divisive traffic-reduction plan for New York City.
Still, not even the budget’s biggest champions were calling it austere. Some 2,000 new workers will be added to the state’s work force of 200,000. Each legislative chamber will receive $350 million in funds — derided by critics as pork — to dole out for capital projects across the state. And lawmakers perpetuated their widely criticized practice of handing out state money for various projects in their districts.
The Legislature also rejected a plan from Mr. Spitzer that would have closed four prisons upstate that the administration said were not full enough to keep open.
The taxes and fees will touch consumers as well as corporations. Raising the tax on a pack of cigarettes to $2.75 from $1.50 will generate $265 million annually, according to government estimates. And $102 million more will come from increasing the income tax cap on financial services companies that have a profitless year; their tax liability goes to $10 million from $1 million.
Another $50 million will come from requiring online retailers like Amazon that do not have a physical presence in New York to collect sales taxes on purchases made by New Yorkers and remit them to the state.
An array of smaller tax law changes — requiring nonprofit organizations like museums and advocacy groups to collect sales taxes on T-shirts, mugs and other items, for example — will bring in more modest amounts.
In New York City, an additional sales tax on health clubs memberships and purchases at beauty salons, massage parlors and weight loss centers, which was set to expire this summer, will instead be extended through December. The city has said the tax generates $1.1 billion a year, but the extension was not popular among beauticians and barbers.
Jose Lopez, 29, who owns the Jordan Sport barber shop in the High Bridge section of the Bronx, reacted angrily to the news.
“We’re not getting rich cutting hair, it’s a tough business,” he said. “Why are they taxing us? It’s not right.”
“I’ve got a family to support, and all these guys need jobs here,” he said, gesturing to a half-dozen barbers in blue shirts cutting hair in the shop, which is named after Michael Jordan and is decorated with dozens of photos of Mr. Lopez cutting the hair of pro baseball players.
A plan to raise income taxes on New Yorkers who earn more than $1 million a year, which had been championed by some labor groups, was not included after strong opposition emerged in the Republican-led Senate.
Mr. Bruno stressed that the budget would help preserve the quality of life for New Yorkers in difficult financial times. Slashing services, he said, would drive residents away.
Still, analysts were left looking for evidence that lawmakers recognized the severity of the financial situation.
“They’re doing their pork, and they’re not doing any significant cutbacks,” said E. J. McMahon, director of the Empire Center at the Manhattan Institute, a conservative research group. “It’s very, very shortsighted. I get the feeling that legislators are knowingly burning the furniture in advance of an election.”
Even on the other side of the political spectrum, experts were questioning the wisdom of not making more cuts now.
“They’re not taking the difficult actions now to make the budget balanced over time,” said Frank Mauro, executive director of the Fiscal Policy Institute, a left-leaning research group.
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