Paterson threatens to raise taxes, cut 8,900 jobs
State’s fiscal woes grow more each day
ALBANY — New York’s fiscal problems are growing more dire by the day, leading Gov. David A. Paterson on Tuesday to threaten 8,900 state worker job cuts and the prospect of billions of dollars in tax hikes on residents to help balance the moribund budget.
Just hours after announcing the projected 2009 deficit had grown in just the past month by $2.2 billion, to $16.2 billion — the greatest in state history — the Paterson administration said public employee unions had refused to negotiate concessions and there was no choice but to impose the first layoffs of state workers since the early 1990s.
The cuts can include both layoffs and attrition, and officials did not rule out an early-retirement incentive program to help reduce the layoffs.
The state job cuts will come from among 141,000 workers in the executive branch. But there are sizable loopholes: The cuts do not affect agencies outside the executive branch, leaving safe more than 100,000 workers at the state university system, courts, Legislature, public authorities and other entities.
In all, the cuts would affect more than 6 percent of the work force at agencies covered by the edict.
The announcement came just seven days before the start of the next fiscal year and as officials are in the midst of frenzied closed-door talks to get an on-time budget.
It led critics to charge Paterson was raising the dire news at the last moment as a way to push through a round of major tax increases, including a plan many Democrats favor to impose income tax surcharges on wealthy residents.
Officials said it is not too late for unions to agree to savings to reduce the number of layoffs.
In December, the governor proposed a five-day salary deferral and the freezing of an expected 3 percent salary hike for 2009, which together would save $300 million in the coming year. Other proposals, bringing the total savings to about $350 million in 2009, included a new pension tier in which new hires would contribute to their pensions and government retirees would be required to pay more for their health insurance.
But the unions immediately rejected the Paterson plans and said they would not negotiate any salary freeze.
“This is not a decision that has been reached lightly. However, given the fact that savings through labor concessions were not achieved, Gov. Paterson was forced to make this difficult decision for the good of the entire state,” Dennis Whalen, the governor’s director of state operations, said in a memo to state agency commissioners.
The cuts, to begin this summer, would save $481 million over two years, according to Jeffrey Gordon, a spokesman for the governor’s budget division.
“We’ve been trying to give him the benefit of the doubt, but if Gov. Paterson really believes putting nearly 9,000 New Yorkers out of work is a good idea, he really is out of touch with life on Main Street,” said Danny Donohue, president of the Civil Service Employees Association, the largest state workers union.
The Public Employees Federation, which represents 59,000 white-collar workers, said the union offered ideas to save money. But none of the offers involved any work force reductions or the kind of concessions seen in the private sector. Indeed, it called for hiring more state workers to replace consultants and reduce overtime and raising taxes on “wealthier” residents and on health insurers.
“We will not agree to any changes in our contract that reduce compensation,” said PEF President Ken Brynien. He added, “We are not reopening our contract. We are not going to concede to the state.”
The worsening deficit is driven largely by declining personal income, business and sales taxes as a result of the recession. The administration also blamed $370 million of the hole on Buffalo’s Delaware North Cos., which recently backed out of a deal to pay the state the money for the rights to develop a racetrack casino in Queens.
Just last month, the deficit for the coming fiscal year that begins April 1 was pegged at $14 billion. But New York relies more heavily on the financial sector than other states — 20 percent of the state’s revenues come from Wall Street activities — so it has been particularly hard hit by the recession.
Senate Republicans, cut out of power after last fall’s elections following seven decades of dominance in the Senate, questioned the timing of the new deficit numbers. Several said Paterson may be laying the ground work for massive tax hikes on everyone from wealthy residents and health insurance policyholders to telephone companies and beer drinkers.
“In my opinion, this is a setup for a massive personal income tax increase plus a number of other taxes and fees that the governor has proposed,” said Senate Minority Leader Dean Skelos, a Nassau County Republican.
Asked if the new deficit numbers made income tax hikes more likely, Assembly Speaker Sheldon Silver said, “This budget will be made up of revenues. This budget will be made up of serious cuts and federal stimulus money.”
Secrecy continues to rule the budget process. Gone this year are any public legislative conference committees at which some components of the budget are worked out in open meetings.
Closed-door meetings among Paterson, Silver and Senate Majority Leader Malcolm Smith, all of them Democrats from New York City, raged on for another day Tuesday. The legislators emerged from the talks but declined to provide any specifics.
The state’s economic woes have a direct impact on the state budget.
The state’s unemployment insurance claims have hit 39,000 per week this month — up 20,000 from a year ago, the administration said.
The unemployment rate is expected to hit 8.4 percent by next year, up from 7 percent in January and 4.4 percent in January 2007.
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