[NYAPRS Enews] D&C: Paterson Sees NY on Brink of 'Cataclysmic' Budget Disaster

[Harvey Rosenthal]

Paterson: State On Brink Of Disaster

Meaghan M. McDermott Rochester Democrat and Chronicle October 1st 2009

Calling for a spending cap, pension system reform and an end to unfunded
mandates, Gov. David A. Paterson warned of "cataclysmic" consequences if
lawmakers don't rein in the state's ballooning budget deficits.

"We are in a crisis and it is time for us to all wake up and realize
that," he said. "We risk losing the state's economic sovereignty by not
addressing these issues."

Paterson spoke Wednesday at the annual meeting of The Business Council
of New York State, held at the Radisson Hotel Rochester Riverside.

With revenue down by more than 35 percent, the state is facing a budget
gap this year of between $2.9 billion and $3.5 billion, he said. The
state's $131.9 billion budget was balanced when adopted on April 1.

"The good news is that the Legislature leaders all agree with this
deficit and have all said they want to address it," he said. "But the
proof will be when we actually do it."

But Paterson said the state's financial problems run deeper than
plugging the hole in this year's plan and balancing next year's budget.

He called on the business community to help get out his message of
reform.

"The long-term problem is that we continue to outspend the revenues the
state is producing," he said. The state cannot rely on Wall Street to
"backstop exponential spending on the part of the Legislature and the
governor. No longer can we support the profligate spending that comes
out of Albany."

He decried "special interest groups" insisting on perpetual funding
increases despite the state's economic troubles.

Other states in financial crisis have resorted to issuing IOUs, mass
layoffs, releasing prisoners and even putting state assets up for sale,
he said.

New York has not had to take such drastic action, something Paterson
called both a blessing and a curse.

"Maybe New Yorkers don't truly understand the terrible truth that's
being experienced by other states right now," he said.

Paterson said although Federal Reserve Chairman Ben Bernanke has said
the national recession is over, New York lags and predicted it would be
at least 15 months before the state sees a major turnaround.

Then, and if the state's overall budget is under control, more resources
can be devoted to job creation, he said.

Kenneth Adams, president and chief executive officer of The Business
Council, said Paterson is "sounding the alarm" about how close the state
is to crisis.

"I think it will be really hard to get the Legislature to accept this
new fiscal reality if we don't mobilize residents," he said. "What we
need is a chorus of New Yorkers - 19 million strong - crying out for a
new direction."

http://www.democratandchronicle.com/article/20091001/NEWS01/910010328/Pa
terson++State+on+brink+of+disaster 

 

Paterson: New York Faces "Cataclysmic" Troubles

Joseph Spector Gannett News October 1 2009

Gov. David Paterson continued his theme last night in Rochester
<http://www.democratandchronicle.com/article/20091001/NEWS01/910010328/P
aterson++State+on+brink+of+disaster>  that he has made tough choices in
the face of the state's fiscal troubles, saying that New York hasn't had
to resort to laying off workers or furloughs like other states and has
kept itself solvent.

And as he did in his speech earlier Wednesday to state Democrats in
Buffalo, he started his remarks with a joke about his own political
troubles.

"Good evening, I'm David Paterson and tonight all of you are very lucky
that you're not," he said to laughter.

In Buffalo, he started his speech
<http://www.stargazette.com/article/20090930/NEWS01/909300392/1117/news/
Cuomo++Paterson+and+Democrats+discuss+state+s+future>  by asking the
crowd, ""So, how was your week?"

In the Democrat and Chronicle this morning, Paterson called for a
spending cap, pension system reform and an end to unfunded mandates and
warned of "cataclysmic" consequences if lawmakers don't rein in the
state's ballooning budget deficits.

"We are in a crisis and it is time for us to all wake up and realize
that," he said. "We risk losing the state's economic sovereignty by not
addressing these issues."

http://polhudson.lohudblogs.com/2009/10/01/paterson-new-york-faces-catac
lysmic-troubles/

 

 

 

Is Anyone Willing to Cut the State Budget? 

David King Gotham Gazette October 2nd 2009

Gov. David Paterson fancies himself a financial doomsayer -- the man
with the intestinal fortitude to stand up and shout the bad news. "The
economy stinks and we have to cut the budget!" 

Paterson blames his historically low approval ratings on the economy and
the "tough choices" he has had to make to keep New York out of
devastating financial straits -- along the lines of what California is
suffering through. New York has yet to issue IOUs to its debtors as
California has done, and Paterson has trumpeted that fact -- even
taunting his potential opponents, daring them to get off their "deck
chairs"
<http://www.nydailynews.com/blogs/dailypolitics/2009/09/news-of-the-day-
583.html>  and join him in the "ocean" with the sharks. But while
Paterson has repeatedly sounded the alarm, he has not yet presented any
kind of concrete plan to close the state's multibillion spending gap.

The state faces a mounting budget deficit but accounts of its size vary.
Early estimates pegged the gap around $2.1 billion, but because income
tax revenue has been lower than anticipated, Paterson has said
<http://www.nypost.com/p/news/regional/gov_drops_fresh_budget_bomb_IlsgR
VqmPwdc56ORVPAtKK>  the gap could reach $3 billion or more. 

Earlier this summer Paterson promised to introduce a budget plan in the
fall. In a July report
<http://www.budget.state.ny.us/pubs/press/2009/press_release09_FPQ1_upda
te.html> , his Division of the Budget said: "To address this issue, Gov.
David A. Paterson today announced that he will work with Lt. Gov.
Richard Ravitch to develop an Economic and Fiscal Recovery Plan that
will eliminate the current-year budget deficit and improve the state's
long-term fiscal health. The governor's plan will be released in
September." September is now officially over. 

As summer wore on, Paterson spoke of having a special legislative
session
<http://statepolitics.lohudblogs.com/2009/09/14/gov-calls-meeting-on-2-1
-billion-deficit/>  in the fall to address the deficit, but legislators
countered that they wanted to see a plan before returning to Albany.
Paterson also readied what seemed to be his financial super weapon:
Ravitch, whom Paterson asked to review
<http://www.bondbuyer.com/issues/118_156/-306377-1.html>  the state's
finances. Paterson continued to push for the legislature to return to
address the deficit but to no avail.

Finally, Paterson called a public leaders meeting
<http://www.gothamgazette.com/blogs/wonkster/2009/09/23/the-3-billion-qu
estion/> . The meeting featured Paterson, Ravitch, Senate Conference
Leader Sen. John Sampson, Senate Minority Leader Dean Skelos, Assembly
Speaker Sheldon Silver and Assembly Minority Leader Brian Kolb. The
meeting was designed to get the leaders to publicly agree at least on a
path toward finally addressing the budget gap. 


Meeting of the Minds


During that meeting last week, Paterson spoke again of his desire to
make real cuts to spending rather than using the state's rainy day fund
or raising taxes. If such cuts are not made, he said, "We would face the
peril of being unable to meet our obligations, having our credit rating
reduced, and getting ourselves into serious economic trouble." 


Rather than returning for a special session the attendees agreed that
staffers from Paterson's office and the legislature will meet to
formulate a plan. Beyond that it seemed the attendees didn't find much
common ground -- even on the size of the deficit. Skelos reportedly said
it was only $1.6 billion. The Democratic leader, Sampson, responded to
Paterson's $3 billion claim by saying his conference "doesn't believe in
government by guess work. We need real numbers to provide real
solutions." Silver and Kolb indicated they agreed with Paterson's
projections. 

This may be where Ravitch comes in. At the leaders meeting the new
lieutenant governor said little except to suggest leaders look for
common ground before looking for solutions. ""If we start off, hopefully
with a common view of the numbers that we have to address, then we can
talk about solutions in the context of that agreement, rather than
fighting about solutions because we disagree with what the underlying
numbers are," he said.

Critics like E.J. McMahon, director of the Empire Center for New York
Policy <http://www.empirecenter.org/> , say
<http://www.nypost.com/p/news/opinion/opedcolumnists/california_here_we_
come_zl87BZQ27ySjOleHEbkZIO>  that Paterson, despite his flagging poll
numbers, needs to lead -- he has to present a plan and shepherd it
through the legislature while taking the heat for tough cuts. 

"You have to lay something on them," said McMahon. "You have to push for
it and have to give them cover. You have to say it was hard but it had
to be done." 

McMahon said that having legislative and executive staffs negotiate over
the size of the deficit and solutions to cut it is simply futile.
"Legislative staffs don't work that way. They are reactionary; they
don't initiate," he said.

Sen. Liz Krueger <http://www.gothamgazette.com/albany/district/senate26>
agreed that the governor should present a plan for the legislature to
consider. "That's why I advised my conference leader not to move to a
date for a special session until we have a plan," Krueger said. 


Who to Blame for the Delay?


Krueger said that criticizing the legislature for holding up a deficit
reduction plan is simply "not a rational objection." 


The legislature actually has a limited amount of input into the budget.
The New York State constitution requires executive budgeting. In other
words, the governor is responsible for presenting a budget plan after
consulting with the appropriate departments. The legislature then can
then strike things from the budget or reduce them but it cannot alter
the budget in other ways. 

Krueger pointed to the 2004 Court of Appeals decision Silver Vs. Pataki
<http://www.statecourtwatch.org/cases/silver_pataki.htm> , which
resulted in a ruling that the legislature had overstepped its bounds in
a number of instances. 

In one example, former Gov. George Pataki argued that the legislature
had overstepped its bounds in trying to postpone a prison project
approved in the budget. After the budget was passed the legislature
voted to bar construction until the project received legislative
approval. The court found that the legislature was acting beyond its
authority. 


Getting Their Way


This does not mean the legislature has no say. During the extremely
secretive budget negotiations
<http://www.gothamgazette.com/article/albany/20090330/204/2872>  last
year, the legislature was seen as having won the budget battle with
Paterson. Many of the large cuts to education and health care that the
governor had sought were restored. To avoid making the large cuts that
Paterson threatened, the budget imposed a tax on the rich and a number
of newly implemented fees and surcharges, and used federal stimulus
money. 


McMahon, whose organization advocates reducing spending on labor
benefits, education and health care, said that Paterson can't expect the
legislature to make the tough cuts needed to actually reduce spending.
"They don't know how to say no to anyone," he said. 


It's Getting Worse


Comptroller Tom DiNapoli bolstered McMahon's argument with his recently
released Financial Condition Report
<http://www.osc.state.ny.us/press/releases/sept09/092509.htm>  for the
2008-2009 year. DiNapoli's report showed that the budget deficit could
expand to $38 billion by the 2012-2013 fiscal year if current spending
and income trends continue. The report finds that spending has increased
21 percent over the past four years and could go up another 22 percent
by the 2012-2013 fiscal years. 


"The state must look to the spending side of the ledger, rather than
raising taxes and issuing large amounts of debt to pay for things it
cannot afford," DiNapoli said in the report. "New York needs a strong
dose of fiscal discipline, which has been lacking for far too long. The
State must make difficult choices today to fix New York's persistent
budget troubles."

As McMahon points out, the legislature never wants to make spending
cuts, especially in areas like education and health care, because of the
cuts can incur the wrath o unions and the Working Families Party. 

Some legislators are delaying making cuts because they hope a new round
of federal stimulus money could save them from making further
reductions. "They've been propped up by stimulus," McMahon said.
However, so far, there is no new stimulus plan and, McMahon said, "You'd
be hard pressed to find anyone in Washington who thinks that" there will
be.

Krueger said the state still is finding that certain money has been
allocated to New York through the stimulus plan, and those funds help.
"I would like to see the stimulus continued," she said, "but it's too
early to tell." Ravitch warned that the state could face "cataclysmic
impact" if the stimulus is not extended past 2010. 

In any event, Krueger said, real cuts must be made -- and quickly. "We
need to make sure the savings is immediate. We can't make cuts that we
find would take six months for savings to start," she said. 

McMahon, who is a strong opponent of the income tax increases in this
year's budget, said he fully expects labor groups and the Working
Families Party to push for another tax increase rather than making cuts
in the budget. "I would bet on it," he said. 

Krueger and Sampson, who both supported the income tax increase, have
publically stated they do not support closing the budget gap with
increased taxes or fees. 

In the end, some say Paterson might desperately want to take the lead on
the budget. He may very well want to make tough cuts and take a stand
for fiscal responsibility, but with an approval rating of 17 percent the
hard reality may just be that Paterson doesn't have the political
leverage to push the legislature to accept any cuts. His only hope may
be to negotiate with the legislature and hope its members understand the
gravity of New York's financial situation. 

"The more Paterson says we can't wait while he does not offer a plan the
more otherworldly this gets," said McMahon. 

http://www.gothamgazette.com/print/3042

 

 

 

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