The $121.4 billion fiscal 2009 budget New York passed this month contains an unsustainable level of spending, significantly increases the state's debt, and includes risks that could create a nearly $1.5 billion shortfall if revenue doesn't materialize, according to a preliminary analysis released Friday by Comptroller Thomas DiNapoli's office.

"It's clear this budget continues New York's long but not-so-glorious traditions of spending more than the state takes in and borrowing too much," DiNapoli said in a press release. "The reality is that the economy is in rough shape and the worst may still be around the corner."

The report criticizes an increased reliance on state debt that is projected to increase by $14 billion to $67 billion by fiscal 2013. Debt service payments would rise by 50% to $7.5 billion annually, the report said. The fiscal 2009 budget and five-year-capital program contain $11.5 billion of new debt, of which $9.3 billion would be issued for the State University of New York and the City University of New York. About $1.73 billion of debt would be used for economic development.

The fiscal 2009 budget relies on $2.5 billion of one-shots and $100 million of new off-budget spending for housing. The budget also includes $250 million of debt issuance that will be used to expand the Aqueduct Race Track to allow video lottery terminals in the facility. The state expects to receive a $250 million payment from a future operator of those lottery terminals to help balance the fiscal 2009 budget, according to the report.

Last week Gov. David Paterson called for the Legislature to look for mid-year budget cuts and announced that he was creating a working group that included state budget director Laura Anglin and other senior staff and division of budget staff to identify cuts and recurring savings for next year's budget and beyond.

"The governor shares the comptroller's concerns about New York's financial future, took significant action to address the fact that New York spends too much and relies too heavily on borrowing, and initiated a review of state spending to begin reducing costs for next year," division of budget spokesman Jeffrey Gordon said in a statement in response to the report. "As the national and state economies continue to slide, New Yorkers are experiencing the pain of rising costs and government must do all it can to tighten its belt and ease the burden on residents."

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