Paterson Proposes Cuts to Close Deficit

By DANNY HAKIM

ALBANY — Gov. David A. Paterson proposed billions of dollars in spending cuts on Thursday and raised alarms about New York’s financial health as the state faces a deficit of nearly $50 billion over the next three and a half years.

The governor’s plan, which seeks to close a deficit for this fiscal year projected to be $3 billion, includes cuts to education and Medicaid as well as a grab bag of other strategies, including creating a tax amnesty program and raiding the state’s environmental protection fund.

The plan, which needs legislative approval, also includes a $2 billion reduction in spending for the next fiscal year, which starts in April.

The Metropolitan Transportation Authority, which recently went through an arduous process to close a budget deficit, would see its aid sliced by $113 million.

School aid would be cut by $686 million for the remainder of the school year, or an average of 3 percent per district, though wealthier districts would be hit harder under a formula devised by the Paterson administration that is sure to be the subject of a legislative fight.

New York City faces a $223 million cut in school aid in the current school year, or about 2.6 percent of the state’s school aid. The city’s schools have already had to wrestle with a budget gap, and many schools have cut after-school programs and left vacancies unfilled.

Cuts to schools in the middle of the year would be particularly difficult for principals, who have already planned their spending for the rest of the year.

Mr. Paterson’s plan would also cut $471 million from Medicaid and other health and mental health programs. The plan includes a previously announced $500 million cut in the budgets of state agencies, the only part of the broad proposal that the governor can accomplish without legislative approval.

The plan also assumes the state will reap $200 million from a long-delayed effort to settle on a bidder to build a casino at the Aqueduct racetrack in Queens.

The Paterson administration and budget watchdogs are growing concerned that Albany has yet to reckon with the recession. The governor and state lawmakers used federal stimulus money to continue New York’s heady spending increases in the budget passed in the spring, leaving the state with unprecedented projected deficits over the next five years.

The governor had previously avoided proposing specific spending cuts, fearing a backlash from special interest groups, and indeed his plan was criticized by a variety of advocates, though proponents of fiscal conservatism praised Mr. Paterson’s move. But his effort to tackle a worsening financial crisis was met with indifference by the fractious State Senate, whose Democratic leaders are on what they have billed as a 10-day trade mission in China.

“New York is ground zero for the fiscal crisis,” Mr. Paterson, referring to the state’s reliance on Wall Street revenue, said during a press conference. “This is a very painful plan, but we will share the burden. This budget deficit has affected all of us, and all of us are going to have to sacrifice.”

Hundreds of programs face cuts — libraries stand to lose $3.3 million, summer programs for special education students face a $10.4 million cut, and more than $14 million would be cut from Child Health Plus, a public insurance program. At least 31 H.I.V./AIDS programs also face cuts.

Though the state approved a tax increase on the state’s highest earners to balance the budget last spring, Mr. Paterson ruled out further tax increases.

The governor said he would like to call a special legislative session on Oct. 27, but the Senate appears unlikely to act soon. The chamber said in response to the governor’s proposal that it would hold statewide budget hearings starting Oct. 26. Timing is critical since the longer the state waits to implement cuts, the deeper it must cut into various programs.

Senator Carl Kruger, a Brooklyn Democrat who is chairman of the Senate Finance Committee, said he did not agree yet on the administration’s deficit forecast.

“We require an accurate fiscal forecast based on the midyear report to be released in two weeks,” he said. “Once that information has been provided, the Senate will continue to move forward by holding budget hearings and further negotiations.”

Assembly Speaker Sheldon Silver, a Democrat from the Lower East Side, said he wanted to move quickly. He will meet with Assembly delegations in New York City, Buffalo and Albany early next week, and the Assembly will hold two hearings on the matter afterward.

“The governor did what he had to, he took the bull by the horns,” Mr. Silver said. “I believe the quicker we move the less painful it will be.”

New York’s predicament resulted from a host of problems, chiefly the crisis on Wall Street. Though there have been signs of a recovery at some big banks, the landscape of Wall Street has changed permanently, with thousands of jobs lost.

As Mr. Paterson predicted, several prominent interest groups lost no time assailing his plan.

Kenneth E. Raske, president of the Greater New York Hospital Association, and George Gresham, president of 1199 S.E.I.U. United Healthcare Workers East, called the cuts “astonishing in their disregard for New York’s health care community and the patients they serve.” Michael Mulgrew, president of the United Federation of Teachers, said, “The children in New York City’s classrooms should not have to bear the brunt of these cuts.”

Others were supportive. Kenneth Adams, president of the Business Council of New York State, said Mr. Paterson offered “a bold and realistic plan,” while Mayor Michael R. Bloomberg said, “The governor has tried to bring some needed sense of fiscal responsibility to Albany.”

Even if an agreement can be reached on the plan, it may not be enough. While the state budget division is forecasting a $3 billion deficit, the comptroller’s office said on Wednesday that the deficit this year was actually $4.1 billion and projected a gap of nearly $50 billion through March 2013.

“The situation is dire,” Mr. Paterson said, adding, “even the comptroller estimates that there still may be more to do.”