Safely assured of a third term as governor of New York, George Pataki must tackle the state’s worst fiscal mess in at least a dozen years.

Effective today, Albany’s official tune on budget matters changes from “Don’t Worry, Be Happy” to “A Hard Rain’s A-Gonna Fall.”

With tax collections continuing to erode, “It is now becoming more likely that the state will experience a decline in its revenue situation in 2002-03,” the governor’s budget staff warned in a widely overlooked report last week.

The state’s $710 million rainy-day fund should be enough to cover this year’s possible shortfall. But next year’s gap will be that much worse: Anywhere from $5 billion to $8 billion seems entirely possible.

Of course, New York isn’t the only state to have encountered financial trouble in the wake of the 2001 recession, the busting of the stock market bubble and the 9/11 attacks. What’s really unique about the Empire State (and about New York City as well) is the extent to which its elected leaders have been able to postpone the tough choices necessary to fix the problem.

Last spring, the governor and Legislature agreed to burn up their accumulated surplus and plunder most of their remaining reserves in order to push the problem beyond Election Day – ensuring it will be even worse next year.

For example, while Pataki declared a hiring “freeze” last year, there’s been little evidence of a concerted effort to significantly reduce the state workforce.

To the contrary: The latest payroll records from the comptroller’s office indicate the state government’s estimated total headcount of more than 234,000 employees remains larger than it was in the fall of 2000. This, despite the early-retirement buyouts offered to thousands of state workers last summer.

Can the governor find a way to close New York state’s growing budget gap without resorting to economically damaging tax hikes or to fiscal gimmicks that would drive the state bond rating even lower? Yes – but only if he returns to the kind of spending discipline that characterized his first term.

That means going beyond a slushy “freeze” and really reducing the payroll through attrition and more buyouts if at all possible and demanding concessions from state employee unions when their contracts expire next spring.

And workforce savings are just the start. He will need to rein in school aid, and reverse his recent expansion of the costly Medicaid program.

Eight years ago, when Pataki closed a $5 billion budget gap without tax hikes in his first budget, some religious leaders denounced his proposal as immoral.

Labor unions spent millions on TV ads attacking him, hunger advocates predicted starving in the streets, SUNY students staged mock funerals outside the Capitol and Al Sharpton walked from New York to Albany to dramatize the unfairness of it all.

If the news media is reporting on similar developments next spring, you’ll know the governor is finally getting serious about this budget problem.

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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