New York lawmakers reached a deal to close the state's $1.6 billion currrent year deficit, Gov. David Paterson announced yesterday.
"We have a long way to go before we close the projected $13 billion deficit for next year but this is a good start," Paterson said in a statement. "Half of the $1.6 billion package includes recurring savings that will help us in the future as we continue to put measures in place to strengthen our financial position."
Paterson rejected calls to wait for a federal economic stimulus money.
The national recession and plummeting Wall Street profits have hit the state's revenues hard. The state receives about 20% of its revenue from the downtown financial sector.
Paterson said that the deficit reduction included $359 million of health care savings, cuts to economic development, environmental protection and raising annual tuition at the State University of New York system by $620.
The deficit reduction did not tap into the state's rainy day fund.
The rainy day fund "really needs to be held for emergencies and touching our rainy day fund would hinder our credit rating," Paterson told reporters in Albany.
Paterson said that $800 million of the revenue actions would be recurring, reducing the fiscal 2010 deficit to $13 billion.
"When we close the other $13 billion we will pretty much be throwing everything but the kitchen sink at this deficit," Paterson said.
Fitch Ratings analyst Laura Porter said the resolution of the current year budget deficit was positive because it would have gotten more difficult to fix as the fiscal year nears its March 31 end.
"It certainly seems to be the intent to try to address the things as they come up," Porter said. But the projected fiscal 2010 deficit is "still a big budget gap so it's still a very dificult situation."
The political equation in New York has been upset since Democrats won a majority in the state Senate from Republicans, giving the party control of both houses of the the Legislature as well as the governor's office.
Senate Minority Leader Dean Skelos, R-Rockville Centre, criticized the process as well as the outcome of the deficit reduction measure.
"Instead of keeping his promise of greater openness and transparency, Gov. Paterson has proposed a deficit reduction plan that was developed in complete secrecy," Skelos said. He said the deficit reduction plan will raise health care taxes on businesses, families and individuals and will have "a disastrous impact on businesses and families across the state."
Skelos also criticized the transfer of almost $500 million from the New York Power Authority which he said could have been used for capital projects or to reduce energy costs.
