For E.J. McMahon, director of the conservative Empire Center for Public Policy at the Manhattan Institute, state government’s current fiscal predicament is reminiscent of 2002 and the late 1980s/early 1990s. But overspending, rather than a poor economy, bears the most blame, he said.

In the late 80s and early 90s, there was “an enormous and completely unsustainable run up in state spending,” McMahon said on an Albany radio show today. “At the same time, there was a tremendous burst of tax revenues fed by a boom on Wall Street. And there was also a real estate bubble, which burst.”

The state funds portion of the budget has grown about 75 percent in the last 10 years, and by about 45 percent in the last five, McMahon said.

And what we need to do now is undo that (excessive spending), because the $5 billion budget gap that was being projected in May, which the governor no doubt will announce today is worse, that gap was entirely due, almost entirely due, to projected increases in base-line spending,” he said.McMahon said Gov. David Paterson should set more ambitious targets for saving money on state operations, lower “expectations in terms of local assistance” and do something about the state’s Medicaid program for the poor, the most expensive in the country. Other ways to save money include contracting out for different services, setting up a new tier for retirement benefits that would limit them for new employees when they retire, he said.

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