New York Gov. David Paterson yesterday released a deficit reduction proposal that, if approved by the Legislature, would wipe out the current $1.5 billion budget deficit and also reduce next year's funding gap by $3.2 billion, with education and health care programs absorbing the brunt of the cuts.
The state is facing a $12.5 billion deficit for fiscal 2010, which begins April 1, and officials expect that shortfall to balloon to $47 billion in total over the next four years. The Legislature will begin a special session on Nov. 18 to work on Paterson's proposed spending cuts, yet those plans could have a hard time passing through a lame-duck Senate. Republicans will relinquish their control of the upper chamber once new members are sworn in this January.
Meanwhile, Paterson stressed that lawmakers must find $2 billion in spending reductions from this year's budget to offset the current $1.5 billion deficit and give an additional $500 million cushion in the event that fourth-quarter revenues dip even further. The Democratic governor's proposal also includes $3.2 billion of savings for next year's fiscal plan, which Paterson will release on Dec. 16.
"Our actions that we would take on Nov. 18 can significantly reduce next year's budget while closing the budget deficit at the same time, and we recognize that all areas of government are going to have to suffer some of these cuts," Paterson said during a press conference in Manhattan. "It will be painful. This is the result of our increased spending over years and years and now the downturn on Wall Street - which has bailed us out for a number of years - now the well has run dry. Our families and our businesses around the state have learned to adjust to these budget deficits and now our government will have to adjust as well."
Following the governor's press conference, Senate President Dean Skelos, R-Rockville Centre, called for Paterson to release next year's fiscal plan before Dec. 16 so that lawmakers can assess the proposed spending reductions within the context of a proposed fiscal 2010 budget plan.
"Since the proposed actions announced by the governor today will impact an 18-month period, the governor should give us his 2009-2010 executive budget now," Skelos said in a press release. "Before the Legislature acts, we need to see what the governor is proposing for next year. These important decisions about New York's future cannot be made in a vacuum."
Meanwhile, the Assembly Ways and Means Committee today will begin two days of public hearings on a deficit reduction plan. Potential changes in borrowing could generate savings.
One plan would allow authorized personal income tax issuers to sell PIT bonds on behalf of other PIT issuers, generating a potential $5 million in fiscal 2010 and provide flexibility in the structuring of bond sales in a time of limited market access, according to the special session proposal.
In addition, the state may choose to finance certain housing programs via bonds as opposed to current pay-as-you-go plans, a move that could bring $50 million of savings in fiscal 2009.
The bulk of proposed spending reductions would come from education and health care programs. School districts would receive $800 million less revenue for the remainder of fiscal 2009, reducing that program's spending growth to 5% from 9% compared to last year. Health care programs, including Medicaid, would receive $572 million less this year, cutting that program's spending growth to 1% from the current 2% spending increase over last year's allocation.
Paterson said there are no plans to increase the personal income tax and that, except for New York City, local aid will not be reduced. New York City's $246 million state aid would be reduced by $41 million. Yet the state's budget director, Laura Anglin, said local governments should be prepared for zero-growth local aid payments for fiscal 2010.
In addition, Paterson's plan includes a $600 million annual tuition hike at state colleges and universities, beginning in spring 2009.
