ALBANY — Gov. David A. Paterson, in a brief and rare live televised address, said Tuesday evening that New York is facing a fiscal crisis in the wake of Wall Street’s meltdown, and he called on the Legislature to return next month to grapple with a budget deficit that will grow to $26.2 billion over the next three years.
Mr. Paterson gave few details about what actions he would take, but he told the public that his administration would examine an array of difficult potential steps, including reducing the state’s work force, cutting additional spending in state agencies and selling or leasing public assets.
“Our economic woes are so severe that I wanted to talk to you personally this evening about where we stand,” the governor said in a speech from the Capitol that lasted roughly five minutes. “The fact is, we confront harsh times. Let me be honest, this situation will get worse before it gets better.”
The governor, who is legally blind and delivers speeches from memory, sat at a mahogany table in the Red Room.
Even as he called on New York and other governments to “cut up our credit cards,” he said he would push for two major initiatives that could cost the state money. One would place limits on school property tax increases, possibly increasing pressure to increase state aid to local governments and school districts, and the other would increase home heating assistance to poor and elderly residents.
The governor’s speech amounted to a call to arms to prepare the public for difficult times ahead and to put the Legislature on notice that it must rein in spending. Just four months into his job, the governor, a liberal Democrat who spent more than two decades in the Senate, is also trying to establish himself as a fiscal disciplinarian as he tries to head off opponents for his expected bid to be elected in his own right in 2010.
Speculation about potential challengers has included politicians with more established financial credentials, including the Nassau County executive, Thomas R. Suozzi, and Mayor Michael R. Bloomberg of New York City.
“I’m asking for the state leaders in the public and private sector, in labor, those who serve in Washington, owners of business and others to join us in this great effort,” Mr. Paterson said. “The era of buy now, pay later and later is over. The faster we address this crisis, the faster and stronger we will emerge from it.”
The state’s potentially staggering shortfall stems largely from the financial woes on Wall Street, which accounts for a fifth of the state’s revenue. A recent review by The New York Times of the latest statements by large financial firms based in New York said they were likely to hand out $18 billion less in pay and benefits this year than they did last year.
In his speech, the governor said taxes collected on 16 of the state’s largest banks fell 97 percent between June 2007 and June 2008, to $5 million from $173 million.
“The damage on Wall Street is infecting all of our communities, and its effects on our New York State finances are devastating,” Mr. Paterson said. At the same time, he said, the projected budget deficit for the fiscal year that begins April 1, 2009, has grown to $6.4 billion from $5 billion in just the last three months. The projected three-year shortfall has also grown sharply, to $26.2 billion from $21.5 billion.
Though the governor’s speech was light on further detail, he and the state’s budget director, Laura Anglin, are expected to lay out an updated financial plan on Wednesday.
The governor is not planning to lay out his own plans for cuts beyond those that can be achieved administratively, aides said, meaning deeper cuts will have to emerge from rapid negotiations with lawmakers.
The governor, who has the power to order the Legislature into session, said he was calling for “an emergency economic session” on Tuesday, Aug. 19.
Already, the Democratic-led Assembly and Republican-led Senate were drawing lines in the sand in their responses to the speech.
Senate Republicans have said they will come back to Albany ahead of the special session to pass the governor’s property tax cap, and urged him on Tuesday to support their bill calling for a ceiling on overall budget increases.
“Now that the governor has identified an economic crisis and is calling the Legislature back to Albany, it’s time for him to embrace our spending cap, put it on the agenda and urge the Assembly to follow suit,” said the Senate majority leader, Dean G. Skelos.
Assembly Democrats, by contrast, said they would pass a school property tax cap only if they were convinced that there would be no cuts to school aid.
“In every period of economic decline, the call for cuts and caps gives rise to the same important questions,” the speaker, Sheldon Silver, said in a statement. “What programs will be cut?”
Some budget and political analysts have been surprised by some of the governor’s recent statements, which have had a slightly scolding tone toward the Legislature in a year when all 212 seats come up for a vote this fall.
Edmund J. McMahon, the director of the Empire Center for Public Policy, a conservative research group, said he was encouraged by the speech.
“The usual rules of the game are that you don’t interrupt the Legislature’s summer vacation in an election year to bring them back to Albany to deal with a trivial matter like a severe fiscal downturn,” he said with a touch of irony.
“Has he put details on the table? No. But he’s saying, ‘We have big trouble, and I want them to come back and think about this with me,’ ” he added. “It’s their election year, and he’s making fiscal problems an issue.”
The governor’s rapport with Assembly Democrats, in particular, is showing signs of strain.
“If it turns into a tax cap tap dance, nothing is going to happen,” said Assemblyman Richard L. Brodsky, a Westchester Democrat.
“If this is about adjusting to fundamental new realities, then I’m assuming we’ll get his fundamental new proposals 10 days ahead of the session. There’s no way that you can have a serious conversation about issues this big in 48 hours.”
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