A proposal New York Gov. David Paterson announced yesterday to cut local assistance spending by 6% and to cut $506 million from Medicaid spending drew sharp criticism from organizations representing hospitals and municipalities.
Projecting that the state's budget deficit in the current fiscal year will grow even more than the $630 million estimated last month, Paterson called on the Legislature to make $600 million of cuts from a menu of $1.04 billion of spending reductions. Paterson already cut $630 million through executive actions.
"There will be some pain," Paterson said. "We have got to stop this frenzy of spending and lack of accountability. We need from the Legislature real and recurring cuts." The proposed cuts would help close next year's projected $6.4 billion deficit, he said.
The Legislature will return on Aug. 19 for a special session to deal with the state's fiscal problems. The cuts, which also included reductions in executive and legislative programs, would trim $250 million from local government assistance in the current fiscal year.
Daniel Sisto, president of the Healthcare Association of New York State, which represents more than 550 health care institutions, said that the true cost of the Medicaid cuts would be $1 billion since the state would lose federal matching funds.
"We have gone from suggestions of shared sacrifice to making hospitals and nursing homes into sacrificial lambs," Sisto said in a statement.
Moody's Investors Service analyst John Hahn said that the impact on hospitals would depend on how any such cuts were finally implemented and that other states are facing similar pressures.
"Given the current economic trajectory, we're expecting to see a lot of state and local budgetary pressures and clearly Medicaid being such a big piece of that, this wouldn't be surprising," Hahn said. "New York is not unique in that respect."
The cuts to local aid alarmed New York State Association of Counties executive director Stephen Acquario, who said the cuts would cause county governments to raise property taxes.
"They are not cutting aid to counties, they are cutting the reimbursements for programs that we are required - by state statute - to deliver," Acquario said in a statement.
"The local governments are having the same pressures that the state's having," said Colleen Woodell, managing director at Standard & Poor's. "Those kinds of cuts are going to fall through to local governments budgets, and they're going to have to figure out how to deal with them."
Senate Majority Leader Dean Skelos, R-Rockville Center, said that the Legislature should not take any actions that would force local governments to raise their local taxes. Assembly Speaker Sheldon Silver, D-Manhattan, said they would review the proposals.
