Gov. Paterson’s second Executive Budget is not nearly as tough as his rhetoric (or the headlines) would imply. But in dollars and cents terms alone, it is relatively restrained and almost fiscally conservative — by Albany’s low standards, that is.

The problem is that Paterson has shifted some of the state’s fiscal problem to the local level without seeking fundamental, long-overdue reforms to reduce the impact on heavily burdened local taxpayers.

The risk now is that we’ll see a repeat of last year’s budget process — resulting in a bloated and unbalanced spending plan that digs a deeper hole while raising taxes and fees by even more than the governor has already proposed.

Paterson’s plan for 2010-11 would add $745 million to the nearly $80 billion state operating budget. This would keep spending growth below the projected 2 percent inflation rate, which is a minor achievement. However, it’s still a perilously high starting point for negotiations with his fellow Democrats in the Legislature, who were reluctant to cut spending even when he warned them the state was running out of cash last month.

Paterson now says the deficit for this fiscal year (which ends March 31) has grown by another half-billion dollars. He intends to push this problem into the following year — by delaying some tax refunds, if necessary. Including that red ink, Paterson’s budget is designed to avert a shortfall of $7.3 billion for the 2010-11 fiscal year — which would still leave nearly $30 billion in cumulative budget gaps over the following three years.

Nearly three-quarters of his gap-closing plan, or about $5.3 billion in savings, could fairly be described as fiscal restraint — mainly avoidance of spending hikes now set to occur. Close to a billion more would be generated by higher tax audit targets, one-shots and a troubling plan to delay paying a portion of the state’s pension-fund bill every year for up to 10 years.

The rest would come from the revenue side. The good news is that the governor relies far less on “revenue raisers” here than in his initial proposal last year. That plan included dozens of tax and fee hikes — and ultimately morphed into a record increase of $6.1 billion, including a $4 billion “millionaire tax” hitting filers with incomes as low as $200,000.

This year, Paterson proposes another $1 billion in new taxes and fees, mainly from three sources: a $465 million “syrup tax” on sugared sodas, a $210 million ($1 per pack) hike in cigarette taxes and $216 million in added assessments on health-care providers.

Paterson could have avoided proposing any tax and fee hikes if he’d been willing to make bigger changes and deeper cuts in his own state agencies and a number of areas — including public-health programs, which he targets for a relatively modest $1 billion in savings. In fact, his budget calls for a net 8.3 percent increase in state-funded Medicaid spending.

But the big flashpoint is his proposal to cut school aid by $1.1 billion, including a $469 million reduction for New York City.

A cut is certainly justified: The last decade has seen phenomenal growth in K-12 school spending; school aid now accounts for a third of the state operating budget and a large share of projected budget gaps.

There’s precedent, too. Under similar circumstances in 1991, then-Gov. Mario Cuomo proposed a 10 percent cut in school aid. Paterson’s cut, by contrast, would be just 5 percent — which, he notes, translates into a 2 percent reduction in overall K-12 school revenues.

But Paterson is offering the city and school districts almost nothing in the way of relief from state spending mandates to help them offset the aid cuts — and he has abandoned the school-tax cap he once championed to protect suburban homeowners from the threat of untrammeled tax hikes.

For all his inconsistency, Paterson — like his recent predecessors in both parties — remains a paragon of fiscal responsibility compared to the Legislature. His wise insistence on maintaining a reserve cushion of just over $1 billion may be the only thing that stands between New York and a credit-rating downgrade — although it may happen anyway, if the 2010-11 budget becomes a blowout.

The governor complains a lot about how “painful” it is for him to reduce spending, but balancing an Executive Budget is not all that difficult compared to what lies ahead. Now comes the hard part.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

Hochul Tells It Like It Is

Presenting her budget this week in Albany, Gov. Kathy Hochul delivered more than just a financial plan. She gave the state a refreshing dose of fiscal honesty. “The truth is,” Hochul said, “we can’t spend like there’s no tomorrow, because tom Read More

Putting Hochul to the test: Will the governor use her budget powers to protect New York’s fiscal future?

“We will not be raising income taxes this year,” Gov. Hochul declared in January at the opening of New York’s 2023 legislative session. Read More

What Gov. Hochul must do to prevent a coming fiscal crash

The pandemic and its fiscal aftermath have given rise — temporarily — to a state budget trend unique in New York’s history. Read More

Bear market spells big trouble for NY state and city budgets

Wall Street generates an outsized share of New York’s tax revenue, so the recent drop in stock prices should worry both Gov. Kathy Hochul and Mayor Eric Adams. Read More

Calling Tax Cut “Theft,” Cuomo Continues to Push For Federal Bucks With Phony Math

The results of this week’s Georgia Senate runoffs, assuring Democrats will soon control both houses of Congress, as well as the White House, had to come as a huge relief to Gov. Andrew Cuomo. Read More

Students Need Reforms, Not HEROES

Families and businesses are watching their bottom lines and stretching each dollar. But House Democrats are pushing a plan to prevent America’s schools from doing the same thing. Read More

Washington shouldn’t fund NY’s “normal” budgets

With the coronavirus lockdown continuing to erode tax revenues, Gov. Andrew Cuomo has turned up the volume on his demands for a federal bailout of the New York state budget. In a weekend briefing, the governor repeated his estimate that the Empire State will need help closing a deficit of $10 billion to $15 billion. “I don’t have any funding to do what I normally do,” he said. Read More

Cuomo’s Plate Spinning

Governor Cuomo’s license plate design contest was a PR ploy masking a nickel-and-dime revenue raiser. Read More