Well, better late than never.  But given recent state revenue trends in New York, Governor Paterson’s latest deficit reduction plan may be a day late and a dollar short.

Make that a billion.   Just a day after state Comptroller DiNapoli released figures in support of his own plausible estimate that the 2009-10 budget shortfall has grown to $4 billion**, Paterson unveiled gap-closing measures that would total $3 billion this year, with $2 billion “recurring” in 2010-11.

[** More precisely, in his press release yesterday, “DiNapoli said the current deficit could reach $4.1 billion if present trends continue without action.”   But the $3 billion gap estimate is based largely on actual revenue shortfalls to date–and there’s a considerable risk that tax collections during what’s left of the fiscal year, which ends March 31, will continue to fall short of Division of the Budget (DOB) projections.]

Joining the governor at his press conference today, Lt. Gov. Richard Ravitch strongly and effectively warned against viewing the stock market’s rise and reports of improved financial sector compensation as evidence that revenues will bounce back soon.  This was all the more reason why the governor should be proposing bigger cuts and savings at this stage.  Instead, Paterson stressed the “pain” of the exercise so much that it begged the question of whether he’s up to the much larger challenge of restructuring and balance the state’s finances in years to come.

Today’s package consists of roughly $1.8 billion in immediate 2009-10 spending reductions, including $500 million in administrative non-personal service cuts announced earlier this month, plus local aid and Medicaid reductions.  The remaining $1.3 billion in current-year savings would come mainly from tax amnesty ($250 million), revenue spin-ups and “sweeps” of reserve funds in off-budget accounts.

But why isn’t the governor seeking to cancel nearly $112 million in unspent legislative pork-barrel “member items”?  Why is he seemingly overlooking billions in potential savings suggested by Senate Republicans?  When, if ever, will the governor get around to credibly demanding significant concessions from state employee unions, whose members are still collecting raises and are due for further increases in their paychecks next spring?

In key respects the latest Paterson plan is eerily reminiscent of former Gov. Mario Cuomo’s December 1990 gap-closing package, complete with a mid-year cut in school aid of $487 million.   The proposed school aid reduction is both defensible and essential, for all the caterwauling it will bring from the education establishment.  But Paterson should be simultaneously pushing steps to protect local property taxpayers while giving school officials the tools and flexibility they need to cope with the impact of the reduction.   The cut should be linked to adoption of (a) the property tax cap Paterson proposed last year (not this year’s watered-down version), and (b) mandate relief, especially repeal of the Triborough Amendment that requires school districts to pay salary “step” increases even after contracts expire, along with reform of the “3020-a” teacher discipline provisions as well as of statutory and regulatory impediments to contracting out support services.

The Governor’s promise today not to propose further tax increases to balance the budget would have been more reassuring if it hadn’t come from the same man who repeatedly said much the same thing before agreeing to a record $6 billion in new taxes and fees as part of the 2009-10 budget.

To his credit, Paterson did at least mention his “Tier 5” pension proposal; too bad that plan would only represent a modest, incremental change in the current system and not the fundamental reform the state needs to cap pension costs once and for all.    He also repeated his call for a rather ineffectual and pointless spending cap.

The governor suggested adoption of his proposed cuts would put the state back on the road to recovery.

If only it were true.  The mid-year deficit-reduction plan boils down to a lot of wheel-spinning designed to prevent the financial plan from sliding further downhill–closer to an out-year fiscal abyss.    The risk now is that the Legislature won’t do even this much.

About the Author

E.J. McMahon

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

Read more by E.J. McMahon

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