New York Gov. David Paterson faces the possibility that the state deficit could soar over $4 billion. (AP Photo/Tina Fineberg)
Gov. David Paterson has introduced a plan for "very painful" spending cuts to address the state's ever-widening budget gap which is already projected at $4 billion and climbing.
In a speech this afternooon, a grim-faced governor outlined a two-year plan to cut $5 billion in aid to schools, hospitals and other government funded entities. The largest share of the savings will come in the form of $1.3 billion dollars in reductions in state aid to counties for education and health care. Paterson said that translates into cuts of $686 million for schools this school year, $28 million in social service program, $62 million in higher education and $125 million in transportation cuts.
"We recognize the value of those services and are sensitive to them. The only way to reduce the deficit is to engage in reductions in those areas," Paterson said. "It is pain that is indescribable. But it's the only way to keep this state from going into default."
Paterson has pegged the 2009-2010 deficit at $3 billion, while lawmakers agree only that it is more than $2.1 billion as they squabble over who should take the lead in proposing spending cuts.
However it happens, the governor assured New Yorkers it would get done.
"Not on my watch am I going to allow us to fritter around and make reckless decisions at a time when the citizens of this state need leadership, leadership that looks at the big picture," he said. "We have got to get this budget balanced and i promise the people of New York that we will."
While promising to close the $3 billion deficit and move funds around to reduce the future deficit, Paterson said that there would not be any new taxes, nor would there be any taxes in any budget plan because unemployment and displacement are causing revenues to come in lower than expected.
"New York is Ground Zero for the fiscal crisis. New York is the state that was hit hardest by the Wall Street downturn," Paterson said. "This is a very painful plan but we will share the burden. All of us are going to have to sacrifice in order to save our state."
The governor also announced a targeted tax amnesty program which he estimates will bring in $250 million by March of next year. The program offers people in arrears a break to get them to pay something.
He is also directing Medicaud fraud investigators to recover another $150 million this year. That directive, however, needs approval by the state legislature, which may not happen become some lawmakers think the state forecast is improvement and the state can wait before making cuts.
Lieutenant Gov. Richard Ravitch said it would be irresponsible to wait -- and in a bold show of support for Paterson, added "it takes a lot of cuts for Gov. paterson to propose the cuts he did."
Many may have jumped at the good news this week that the Dow Jones hit 10,000 for the first time in a year. But Paterson said he wouldn't fall for the distraction. While it would be great if the market continued to improve, and Lieutenant Gov. Richard Ravitch pointed out that budget cuts could not be based on best-case scenarios.
Paterson is warning that it's dangerous for some lawmakers to suggest delaying action amid forecasts of big bonuses returning to Wall Street. He said any boost in tax revenue from the Wall Street firms wouldn't come until after January.
If not managed effectively, things could get worse.
New York State Comptroller Thomas DiNapoli says the state budget deficit could reach $4.1 billion if nothing is done to close the gap.
"Today, Governor Paterson proposed a series of budget cuts in an effort to balance the state’s books," DiNapoli said after Paterson's speech. "As I said yesterday, the state could face a deficit of more than $4 billion by the end of the fiscal year if no action is taken. This budget has simply not held together."
State Senate Republican leader Dean Skelos said he was pleased with that the governor had put forward a plan to address the deficit but said that it was "unfortunate that [state Democrats] haven't put any proposals on the table to cut back state spending."
Paterson said the cuts wouldn't affect federal stimulus money coming to state schools. He acknowledged it was unusual to cut school budgets after the year starts, but said the move underscores the importance of closing the deficit as soon as possible.
"A lot of this is a reflection of the national recession. A lot of this, along with the other states, isn't our fault," he said. "But a lot of it is our fault, because we've somehow managed to spend more than we have every single time."
Paterson says he will likely call a special session of the legislature on Oct. 27.