A special legislative session to cut New York's current-year $1.5 billion budget deficit was canceled yesterday after a contentious meeting between Gov. David Paterson and leading lawmakers ended without agreement.
Paterson called the special session last month after new budget revenue projections pointed to a large gap opening up as the downturn in the economy pummeled Wall Street street firms on which the state is highly dependent for tax revenue. The cuts are all but certain to have to wait until January when Democrats, bolstered by this month's election, take over the Senate majority from Republicans.
"New York State is the epicenter of the United State's crisis of finance," Paterson said in opening remarks at the meeting with the majority and minority conferences of the Assembly and Senate in Albany. "A state without a new fiscal plan is going to face downgrades in ratings from the services that provide us with the opportunity to borrow money. We're going to have expenditures that we might not be able to meet in April."
Further pain on Wall Street, including the announcement of a 20% reduction of Citi's worldwide workforce and Goldman, Sachs & Co. and UBS Financial Services Inc. announcing their executives would forgo bonuses make the gap more likely to be $2 billion, Paterson said.
The governor will release a fiscal 2010 budget on Dec. 16, a month earlier than usual, that will have to close a projected $12.5 billion gap. The state's fiscal year begins on April 1.
The likelihood of an agreement between a lame-duck Republican-led Senate, the Democratic Assembly, and the governor diminished over the weekend when closed-door meetings failed to produce agreement.
Last week, Paterson proposed a slate of cuts for the current fiscal year heavily weighted to education and health care spending, which he characterized as reductions in spending growth. That proposal would have cut $800 million from school districts and $572 million of Medicaid.
Senate Majority Leader Dean Skelos, R-Rockville Centre, had insisted that Paterson produce his fiscal 2010 budget before making cuts that would be recurring, but also called on the governor to introduce his spending cuts bill. Without an agreement by the leaders, the bill was unlikely to pass.
Assembly Speaker Sheldon Silver, D-Manhattan, said that the Skelos was playing politics: "Sen. Skelos is not interested in passing bills, he's interested in passing the buck."
The meeting had aspects of the "Albany dysfunction of old," according to Elizabeth Lynam, deputy research director of the Citizens Budget Commission, a business-oriented fiscal watchdog organization.
"New Yorkers should be disappointed in their leadership," Lynam said. "There really isn't going to be any avoiding some of these painful cuts and the sooner people can understand them so they can plan for them, the better."
Laura Porter, senior director at Fitch Ratings, said that the "special session would have been nice but we're still in a position where we're waiting to see what they do, how they act to resolve the shortfall."
"There's a tremendous amount of uncertainty because who know's what's going to happen," Porter said. "It could get much worse."
Paterson said he plans to go to Washington, D.C., today to press for federal aid for the state.
