Rest of State Watches as N.Y. Budget Drama Nears End

As Albany’s tortured budget negotiations near their end this week, the rest of New York is assessing how they will be affected.

The Legislature Monday night passed the final bills needed to complete the expense portion of the state’s budget almost three months after the start of a troubled fiscal year. Lawmakers are expected to vote on the revenue portion of the budget on Thursday.

Gov. David Paterson said he would use a line-item veto on 6,900 appropriations that lawmakers added to the budget to restore cuts. Paterson already vetoed about $420 million of education spending in the budget bills.

Most of the budget was passed over the last 13 weeks through bills that kept the state operating in the absence of a completed budget for the fiscal year that began April 1. The bills also included budget appropriations. One part of the budget that was passed on time was debt-service appropriations. A full tally of operating and capital spending was not available Tuesday. Paterson’s proposed budget would spend $135 billion in fiscal 2011.

The delayed budget caused the state to postpone a $1.3 billion personal income tax bond deal to be issued by the Dormitory Authority of the State of New York scheduled for this month

“Deals will move forward, but not imminently — probably the sales will resume in early August,” Division of Budget spokesman Erik Kriss said in an e-mail. “We need to update our financial disclosures when the enacted budget is finalized.”

Despite the state’s fiscal woes, local issuers are not having trouble accessing the debt market.

“Rates continue to be very low,” said Richard Tortora, president of financial advisory firm Capital Markets Advisors. “We’re still seeing a lot of action on our deals, it’s not unusual for us to get a half dozen bids routinely on bond issues.”

North Hempstead’s $9.5 million of bond anticipation notes sold earlier this month priced at the lowest rate Tortora said he has ever seen. The winning bid on was 0.2957%.

“It seems kind of just normal,” said John Shehadi, chairman of Fiscal Advisors & Marketing Inc. “It’s certainly a whole lot better than we were in September of ’08 when the credit crunch was going on.”

The state has delayed payments to local governments and school districts as it managed its cash flow problems. Uncertainty around delays in state education aid to school districts prompted many to set up contingency plans that ultimately were not needed, Shehadi said.

Erie County Comptroller Mark Poloncarz on Tuesday said the state’s budget woes have caused cash-flow problems for the county. The state now owes Erie County $131.5 million, mostly for reimbursements for mandated programs, he said in a letter to lawmakers on Tuesday. 

Robert Lowry Jr., deputy director of the New York State Council of Superintendents, said school districts had taken into account the slashed funding when they crafted budgets that went for voter approval in May.

“Superintendents and boards made the best choices they could,” Lowry said. “Most districts presumed that they would get no more aid than what the governor proposed.”

The fact that the state has been talking about reductions for months made cuts easier to cope with, Tortora said. “Some of the reductions are significant but there’s been a long fuse on this one,” he said.

Counties saw some funding cut retroactively, said Mark LaVigne, deputy director for the New York State Association of Counties. The state cut reimbursements to counties for human services costs by $113 million, of which about $50 million was retroactive to October, LaVigne said.

“They delivered [the services] and paid for them and they will have to absorb those cuts,” he said. “Some counties are looking to dip into reserves other counties are looking to short term borrowing.” Counties are also considering furloughs, program cuts and staff cuts, he said.

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