State Begins New Year Nearly Broke
Albany, NY – New York State begins the first working week of the New Year nearly broke, and with plenty of challenges ahead. One think tank is offering some answers to get the state out of its financial bind.
The state begins the New Year with just $283 million dollars in the bank, and that's even after Governor David Paterson withheld hundreds of millions of dollars in payments to schools, local governments, and others. Paterson says he also borrowed from the state's rainy day fund and other short term borrowing pools.
"Our state is spending beyond its means," said Paterson. "Our state is running out of money."
Paterson will deliver his State of the State message Wednesday. He's expected to focus further on the state's fiscal problems, with New York facing an estimated $8 billion dollar projected deficit for the spending plan due in April. And he says the next fiscal crisis could come as early as March, when several billion more dollars in payments are due. Paterson says he'll again "hold the payments back", if the state does not have the resources.
Meanwhile, a conservative leaning think tank is out with a blueprint on how to save the state $30 billion dollars over the next several years. EJ McMahon, with the Empire Center, an affiliate of the Manhattan Institute, suggests slashing Medicaid and school aid, the largest parts of the state budget, and freezing state worker salaries. He would also reinstitute the 40 hour work week, up from the current 37 and a half hour work week.
"This is a report that's packed with ideas," said McMahon.
McMahon, says the governor and legislature will face stark choices in the next two years, with a projected combined budget deficit of up to $17 billion dollars, once federal stimulus monies run out.
"This time really is different," said McMahon, who said the budget crunch "has all the makings of the most severe fiscal crisis the state has ever seen."
McMahon says, the Wall Street revenues that provide one fifth of the state's tax base are not likely to bounce back as they have in the past.
Though the Empire Center is a conservative think thank, and Governor Paterson a self professed long time liberal, the two seem to agree on the need to cut spending. Paterson has already proposed cutting school aid, despite his past support for a court decision that mandated school aid increases. The governor's idea was ultimately rejected by some members of the legislature.
Paterson says he's recently had to make some of the "toughest choices" in his life. McMahon, with Empire Center predicts more hard decisions will be coming.