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Campaign for Fiscal Equity

Wed, Oct 29, 2008

Gov. Paterson Outlines More Budget Woes

Rick Karlin, Albany Times Union

State deficit now pegged at $47 billion over four years.

New York's budget deficit is expected to mushroom to $47 billion over the next four years, Gov. David Paterson said Tuesday.

That's an eye-popping increase from the $26.2 billion shortfall for the same period that was projected in July.

Similarly, this year's deficit now stands at $1.5 billion, up from earlier predictions of $1.2 billion. Paterson had said, however, he would like to cut $2 billion when the Legislature returns to Albany on Nov. 18. He said the $2 billion figure is needed for a cushion.

Paterson also warned of growing problems in the 2009-10 budget, addressing a likely $12.5 billion deficit, which represents cutting 22 percent of a $56.1 billion general fund. The fund contains tax money raised in the state.

"These are going to be very hard cuts," Paterson said, adding that no sector will go unscathed. "We are really going to feel the pain."

Paterson is scheduled to appear before a House Ways and Means Committee meeting today to make a case for special federal help for states. The governor will cite New York's pivotal role as the nation's financial center as a key reason why aid is needed.

In a Tuesday news conference from his New York City office, Paterson said he expects legislators to put politics aside when they return for an emergency economic session on Nov. 18: "To do this, we'll need the full cooperation of our Legislature."

"We have one more week until the election, and that's fine," he said, adding that election-year "poetry" will have to give way to the harsher "prose" of grappling with the state budget.

On one level, the state's predicament is simple: Wall Street's tumble and the malaise affecting the broader economy have sharply reduced the state's tax coffers.

Echoing a theme he's repeated since early summer, Paterson noted the housing slump is expected to last for 15 months — longer than the similar housing downturn during the Great Depression.

Combine that with a drop in consumer spending that hasn't lasted this long since World War II, and Paterson said the state will likely lose 160,000 jobs in the near future.

As a result, general fund revenues are expected to fall 5.8 percent next year, while spending is projected to grow at 11.9 percent, based on current commitments.

Paterson has his work cut out for him — not only in deciding where to cut, but in convincing lawmakers to go along.

Shortly after the governor's remarks, Senate Republican Majority Leader Dean Skelos reiterated his opposition to cuts in school aid, which he said would amount to "offloading" expenses to local school districts and could raise property taxes. Senate Republicans, who are fighting to retain their one-seat majority, said earlier this month they wouldn't go along with cutting aid to local school districts, a sum budgeted for $21.4 billion this year.

Education and health care were largely spared during an earlier special session in August that resulted in cuts of $1.2 billion.

As lawmakers suggested they wouldn't cut school aid, a coalition of 90 nonprofit, education and health care groups renewed their call for a tax increase on those earning more than $1 million.

Assembly Democrats called for a so-called "millionaires tax" last summer, although Assembly Speaker Sheldon Silver backed away from the proposal earlier this week — at least as a possible item for the Nov. 18 session.

"We must ensure that the burden of New York's fiscal crisis is not borne exclusively by working families and the middle class," Silver said Tuesday.

"To take money out of the classroom or out of the services children need in their homes without even proposing that the wealthiest New Yorkers pay their fair share in these trying times would be unconscionable," added Geri Palast, executive director of the Campaign for Fiscal Equity, which is closely aligned with the state's powerful education lobby.

Others suggested trimming next year's School Tax Relief (STAR) exemption, and this year dipping into the state's $1 billion-plus Tax Stabilization fund, a "rainy-day" resource intended to settle unplanned deficits at the end of the fiscal year.

"Obviously, it's raining," said Ron Deutsch of New Yorkers for Fiscal Fairness, which is also pushing the millionaires tax.

Tapping the fund is seen as a last resort, said Matt Anderson, a Division of Budget spokesman. "What we have to focus on right now is reducing spending."

State Budget Director Laura Anglin spoke of the "reverse wealth effect," in which consumer spending is falling due to their paper losses in stocks, 401(k)s and other investments.

The governor's office wasn't the only source of bad news on Tuesday.

Comptroller Thomas DiNapoli announced the state retirement fund has lost 20 percent of its value or about $30 billion since April 1, when it was at $153.9 billion.

He stressed retirement benefits are not in danger, and local governments through 2010 shouldn't be see any change in contributions. "Like every investor, the fund has felt the impact of the global credit crisis," DiNapoli said.

Rick Karlin can be reached at 454-5758 or

Red ink rising
The economic reversals recent weeks have caused the state Division of the Budget to radically revise its deficit projections:


Current fiscal year (ending March 31, 2009): $1.2 billion
2009-2010 fiscal year: $10 billion
Total deficit by 2012: $26.2 billion

Current fiscal year (ending March 31, 2009): $1.5 billion
2009-2010 fiscal year: $12.5 billion
Total deficit by 2012: $47 billion


Parents from across the state march on the Capitol in Albany to show support for CFE.
CFE Litigation CFE v. State of New York
In 2006, after 13 years in the Courts, the New York State Court of Appeals affirmed the right of every public school student in New York to the opportunity for a sound basic education and the state’s responsibility to adequately fund this right, but deferred to the Governor and the Legislature to determine the appropriate amount. more >