New York Gov. David Paterson proposed an austerity budget yesterday that would slash spending and raise revenue through taxes and fees to close a $1.7 billion deficit in the current fiscal year and a $13.7 billion deficit in fiscal 2010, while capital spending and borrowing would increase.

The state would sell $5.6 billion of debt to finance capital projects in fiscal 2010, a $772 million increase over fiscal 2009. Most of the state's bonds, $4.93 billion, would be sold through public authorities rather than as general obligation debt.

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