Paterson travels to D.C. to urge federal help for states
Calls budget crisis worst since the Depession
WASHINGTON — Gov. David A. Paterson brought his message of fiscal gloom to the nation's capital today, saying the federal government must do more to help states avoid "a national crisis of bankruptcy."
In a speech at the National Press Club, he stressed that New York is not alone in facing a financial crisis … and that states and the federal government alike will have to get frugal and spend wisely to survive an economic downturn that could be the worst since the Great Depression.
"The time has come for America to cut up its credit cards," Paterson said.
Repeating the vows he has made to cut state spending to address a ballooning deficit, Paterson stressed that the federal government could ease the state's burden by modernizing its Medicaid reimbursement formula.
In addition, he suggested increased federal infrastructure spending to boost employment.
Paterson, who has met resistence from some state legislators who say it is premature to make draconian state budget cuts, stressed that the state would be far better off to deal with its problems now rather than later.
Asked about other governors who waited to deal with fiscal problems until they grew, Paterson said: "There's a new sheriff in town. I'm gong to make these cuts as soon as they need to be made."
Paterson said earlier this week that the state’s fiscal crisis is hitting sooner than predicted and will force cuts in a broad range of government services in coming weeks.
After recently affirming that the state’s current budget remained in balance, Paterson said it now appears to be running a deficit of $630 million, which will be closed through hiring freezes and additional spending reductions.
Program cuts will not be announced until next week, but they could include everything from reduced hours at state parks to fewer workers maintaining state roads.
But one area that still will increase from last year is the size of the state’s work force.
The impact goes beyond the Capitol. Erie County and Buffalo are expected to receive $10 million less in state “efficiency grants” in the coming year, “due to the timing of spending plan approvals,” a state budget document released Wednesday shows.
The grants had been established to fund ways for the city and county to provide more services more efficiently.
The governor said he will trim $630 million by freezing hiring of government workers and by mandating that more than 70 state agencies reduce spending, affecting everything from the state university system and Health Department to parole and corrections agencies.
“Nothing is off the table right now,” Paterson said, adding that he was asking the State Legislature to help him find an additional $600 million in cuts beyond the $630 million he can trim administratively — just in case state revenues fall short of new projections.
The state budget totals $122 billion, though the state operations portion — such as state agencies — accounts for $56 billion.
Paterson did not rule out cutting state aid to public schools, though the Legislature would bitterly oppose such a move.
State lawmakers, who are up for re-election this year, do not want to alienate voters by appearing culpable for cutting popular education programs.
The push-back to Paterson from legislative leaders, unions and others was swift and illustrates the bigger challenge he will face next year when the deficit already is projected at $6.4 billion.
But both the governor and Legislature have been sending mixed signals. Paterson, for instance, said that when the Legislature returns for a special session Aug. 19, one of the items on the table will be how to increase aid to help lower-income residents cope with the anticipated sharply higher home heating bills in the coming winter.
So, while Paterson is asking lawmakers to trim an additional $600 million in spending, Assembly Speaker Sheldon Silver, the major proponent of the home heating measure, is promoting an $800 million heating package.
In releasing the first-quarter fiscal update for the fiscal year that began April 1, Paterson’s budget aides declared the state officially in a recession. The report shows sharply lower-than-expected collections of business and sales taxes. That means an end, at least in the near term, to relying on hefty increases in such revenue to cover higher spending.
Paterson previously ordered all state agencies to cut spending, resulting in a reduction totaling about $500 million, mostly by slowing hiring and curtailing travel.
But the additional reduction is expected to eat into services provided by dozens of agencies. In the executive branch, only emergency-type spending, such as direct law enforcement, will be spared, officials said.
The cut would reduce spending by about $580 million. Some areas are exempt, including operations independent of the executive branch, such as the attorney general, Legislature and judiciary.
The state’s capital funding programs, which are funded through borrowing, also will not be touched, meaning that a $700 million program to help the upstate economy will not be trimmed, officials said Wednesday.
For now, the governor has ordered no layoffs.
The “hard” freeze that Paterson imposed Wednesday means that the budget office must approve each hiring. Still, the work force is expected to increase to 200,251 this year from 199,754 last year, although the budget had called for a total of 201,170 employees.
The problems with the current- year budget should not surprise officials.
When the $122 billion package was adopted in April, critics warned it was precariously balanced and that Paterson and lawmakers would likely be back later in the year to close gaps. They noted that it called for increasing spending at double the rate of inflation the document itself projected when virtually every economist was warning of trouble for the state’s economy.
But lawmakers are not happy about returning to make cuts.
Silver — a Democrat like Paterson — declined an interview request but told an Albany radio station Wednesday that he was happy to return to Albany to help Paterson deal with next year’s projected deficit.
“But as far as recalculating this year’s budget, I think we can still take a bit of a wait-and-see approach,” Silver said.
State Senate Majority Leader Dean G Skelos, a Republican from Rockville Centre on Long Island, said Wednesday that “everything is on the table” for cutting spending to close the gaps. But he then checked off a list of exemptions — school aid, anything that diminishes “the quality of health care” and state worker layoffs — that he said he would not consider.
But Paterson and Skelos agreed that they want to close the gaps without raising taxes. Silver has pushed for a tax increase on millionaires.
The quarterly financial picture released Wednesday by Paterson’s budget division paints a document of gloom.
It shows an array of expected revenues plummeting. New lottery games expected to bring in additional cash are under-performing.
A new plan to lower Medicaid prescription costs has been delayed at the state Health Department, resulting in $33 million in higher expenditures.
jzremski@buffnews.com and tprecious@buffnews.com
