New York governor takes $1.6 billion in emergency cuts, cash transfers to pay December bills

NY governor takes $1.6 billion in emergency action

ALBANY, N.Y. — Unable to get the Legislature to agree on how to address a $3.2 billion deficit, New York Gov. David Paterson said he’s taking $1.6 billion worth of temporary, emergency measures to cover the state’s December bills.

While he continues to negotiate, he may have lost some leverage. Several lawmakers have sought the executive branch actions to provide more time to wait for revenues to rebound after Jan. 1 and to avoid Paterson’s cuts to powerful special interests in public schools and hospitals.

“I feel that we have to start making the deficit reductions on our own, hoping the Legislature will join us,” Paterson said in a teleconference with reporters on Sunday. “This is the point where other states went off the cliff. This is where they should have acted and didn’t.”

He referred to even larger deficits in California and other states where officials were forced to borrow long term, miss payments that hurt their credit rating, issue IOUs, layoff workers, release prisoners early and close most libraries.

“Pushing any more problems down the road is unacceptable to me,” he said, criticizing the Legislature for lack of action on the deficit since September. “My question is, when are they going to do their job?”

Not among Sunday’s actions is Paterson’s proposed 4.5 percent cut in remaining school aid that the Senate promised to block. Most of Paterson’s immediate action involves shifting money from state agencies to the general fund, which must be returned to the agencies within four months under law. He also says he will temporarily use some cash from previously scheduled borrowing for capital projects. The plan includes his already announced cuts of $500 million through 11 percent cuts to state agencies, $150 million in improved Medicaid fraud collections and management efficiencies.

Two major pieces are less certain. He plans to get $200 million from the group yet to be chosen to put video slot machines at Aqueduct race track, a process delayed for years. He also seeks $250 million from the Battery Park City Authority, but that requires approval from City Hall.

He said he held off taking the action because his goal was that it would be part of a three-way agreement to share the pain in addressing the full deficit.

“Senate Democrats agree there are administrative measures the governor should take to provide immediate relief while a sensible solution to the budget gap is negotiated,” said Austin Shafran, spokesman for the Democratic majority. He said the Senate will continue to seek a “fiscally prudent deficit reduction plan that protects jobs, prevents tax hikes and saves critical funding for our schools.”

The goal of the Democrat-led Assembly remains a three-way agreement to reduce a serious deficit with difficult choices including spending cuts, said Dan Weiller, majority spokesman.

Given the Legislature’s failure to agree on measures to address the deficit, Paterson’s actions on Sunday were “pretty much inevitable,” said E.J. McMahon, director of the Empire Center for New York State Policy, part of the fiscally conservative Manhattan Institute.

“The bigger concern here is that we have every reason to believe the deficit is closer to $4 billion than the $3.2 billion targeted,” McMahon said Sunday.

Paterson’s plan also matches the broad perspective of the Legislature: Make administrative cuts and tap all agency and “rainy day funds” to avoid program cuts that could result in layoffs that would hamper recovery from the recession, and accept a narrower margin of cash while banking on rising tax revenues as the economy improves.

In December, some of the state’s biggest bills are due, including billions in aid to public schools. But in January, the state begins to take in more than it spends as early tax returns are due, said Frank Mauro, a fiscal analyst for the union-backed Fiscal Policy Institute.

He said that provides the state with more options, including delaying school aid rather than cutting it and risking a further “drag on the economy.”

“There are obvious arguments for what the governor is proposing,” Mauro said in an interview last week. “That doesn’t mean he shouldn’t have to take into consideration the economic impact of what he is proposing.”