The completion of New York State’s budget was the greatest challenge awaiting David Paterson when he was sworn into office as New York’s governor just two weeks before the start of a new fiscal year, which begins April 1. Paterson inherited the Executive Budget presented in January by former Gov. Eliot Spitzer, who resigned effective March 17 after he was reportedly linked with what federal prosecutors charged was a high-priced prostitution ring. In acting on the executive budget bills, the Legislature has the right to unilaterally eliminate or reduce any line item appropriation; however, added appropriations are subject to the governor’s veto. As Paterson was taking the oath of office, Wall Street was in turmoil following the collapse and sale of Bear Stearns, an investment bank that has long been one of New York’s largest employers and taxpayers. Bear Stearns was the biggest casualty of a credit-market crisis that is expected to lead to mass layoffs of tens of thousands of well-paid investment bankers based in New York City.
The following articles by E.J. McMahon, director of the Empire Center and senior fellow for tax and budgetary studies at the Manhattan Institute, review the key fiscal issues and recommend how Paterson needs to approach the budget in light of these economic strains.