New York Gov. David Paterson yesterday called on the Legislature to either pass a modified $3.2 billion deficit reduction plan or grant him the authority to do it himself. The Legislature is in its third week of an extraordinary session to cut the current-year budget gap but has yet to reach an agreement with the governor.
“I understand many legislators are afraid of the political consequences they will face if they approve this proposal,” Paterson said in a Webcast. “But this is in stark contrast with the fiscal reality that faces New York ... we certainly can’t have the paralysis of these legislators undermining the future of this state.”
Paterson warned that the state would run out of money and could face a downgrade if action were not taken.
Moody’s Investors Service said last week that if actions aren’t taken to close the gap, or if the measures taken are primarily one-shots and revenues fall below projections, the state’s general obligation debt, rated Aa3 with a stable outlook, could be negatively affected.
The state has counted on Wall Street for about 20% of its total tax revenue but the recession and credit crunch have reduced revenue.
Paterson introduced bills for both the deficit reduction and the emergency-powers proposals yesterday, but the emergency-powers proposal seemed to be more posture than possibility. Legislators have balked at some of Paterson’s original budget proposals for cutting education and health care.
Paterson’s bill reduces the cuts to education to $295 million from $686 million and counts on federal aid included in the American Recovery and Reinvestment Act to make up the difference. It also changes the education cuts to an across-the-board 1.58% reduction of local aid rather than a range of 3% to 9%.
Responding to criticism that a proposed $287 million reduction to Medicaid would have had an overall negative impact of $740 million to providers, due to a resulting loss of federal matching funds, Paterson’s bill modified the cuts so that it would achieve $223 million of state savings but have only a $282 million impact on providers, according to a press release from his office.
The modified deficit reduction plan reduces to $200 million from $300 million a transfer from the Battery Park City Authority to the state’s general fund that was to be partially bond financed. It also authorizes a new $100 million affordable housing program for New York City.
Spokesmen for the Assembly and Senate made guarded responses to Paterson’s bills.
“Speaker Silver’s focus is on the [deficit reduction plan],” said Dan Weiller, spokesman for Assembly Speaker Sheldon Silver, D-Manhattan. “The speaker sees the governor’s DRP as an indication we are close to moving toward a three-way DRP.”
Weiller declined to comment on Paterson’s extraordinary-powers proposal.
Senate Majority spokesman Travis Proulx said the Senate was reviewing the deficit reduction bill.
“We expect we can act Monday with the Assembly and take up changes agreed upon by both houses,” Proulx said. As to the emergency-powers proposal, he said the Legislature had a role to play as a check and balance on the executive branch.
Elizabeth Lynam, deputy research director at the Citizens Budget Commission, a fiscal watchdog organization, said it was unlikely the Legislature would grant the governor extraordinary powers but if they can’t agree on a gap-closing measure, then they should.
“The situation is going to get worse,” Lynam said. “Whatever argument [legislators] choose to make in their home district, the reality is they need to make some changes this year. It’s only going to be more drastic later if they don’t take action now.”