http://www.nytimes.com/2009/11/10/nyregion/10paterson.html

The New York Times

November 10, 2009

‘On the Brink,’ New York Must Cut, Paterson Says

By DANNY HAKIM

ALBANY — Gov. David A. Paterson took the rare step on Monday of addressing a joint session of the Legislature during its traditional off-season and used the speech to underscore New York’s deepening financial crisis.

Mr. Paterson repeatedly used stark language to describe the gravity of the state’s economic health as he prodded lawmakers to make cuts he has proposed to programs long considered sacrosanct. “I will mortgage my political career on this plan,” Mr. Paterson told lawmakers as he warned that New York was rapidly running out of cash to meet its obligations.

"We stand on the brink of a financial challenge of unprecedented magnitude in the history of this state,” he added. “This is a historic moment. We’re going to have to make historic decisions.”

The state’s budget crisis and the negotiations between the governor and lawmakers over how to confront it have raised a fundamental question: Can New York, which is more generous in its social welfare programs than any other state, afford to continue to finance its expansive health care safety net and generous education spending?

New York spends $2,283 per capita on Medicaid, far more than any other state and twice the national average, according to statistics compiled by the state budget division. Second is Rhode Island, which spends $1,659. The state also spends $14,884 per pupil on school aid, more than any other state and well above the national average of $9,138.

Mr. Paterson’s speech came a day before lawmakers will reconvene for an extraordinary session called by the governor to take up his proposed budget cuts and potentially other issues, including legislation to legalize same-sex unions and overhaul the state’s public authorities.

A growing number of budget experts believe that New York can no longer afford to spend so much in the wake of the economic crisis, rising unemployment, the collapse of the stock market and the travails on Wall Street — the state’s main fiscal engine. While the state faces a deficit of more than $3 billion for the remaining four and a half months of this fiscal year, the greater worries among state officials are the unprecedented deficits the state faces in 2011 and 2012, after the expiration of federal stimulus financing and a temporary tax increase on the wealthy.

“We’re going to fall off a cliff unless we get our revenues and our expenditures in true sync,” said Lt. Gov. Richard Ravitch, the administration’s point man in budget negotiations with the Legislature.

He said that the state could no longer rely on its usual strategy of turning to an array of short-term solutions or ask more of the state’s taxpayers, adding, “We’re at the outer limits of the elasticity of our tax system.”

The governor’s budget director, Robert L. Megna, met with top legislative staff members Monday to discuss the state’s long-term prospects, and after listening to an hour of gloomy projections and data, he was not encouraged.

“I didn’t think it was possible,” he said, “but I’m more depressed than when I walked in.”

Education and health care advocates have angrily opposed proposed cuts to Medicaid and school financing, the two largest parts of the state’s budget, and the powerful labor unions that dominate debate in the capital are determined to fight them. They have a ready ally in Senate Democrats, who have balked at the governor’s proposed cuts, making the prospect of any deals to address the state’s long-term problems uncertain.

“Our goal all along has been to close the gap without burdening New York State residents with additional taxes or service cuts, and to turn back midyear reductions to education and health care services,” the chairman of the Senate Finance Committee, Carl Kruger, said in a statement Monday morning. He added in an interview Monday that cutting education “is never the answer.”

The Senate’s plan relies on so-called one-shots that would do little to change the state’s underlying financial situation. While the governor’s spending plan includes significant midyear cuts in school aid along with Medicaid cuts, the Senate plan relies far more heavily on raiding funds from public authorities and would increase New York’s debt burden by restructuring the state’s tobacco bonds.

The Senate is also proposing to expand the hours that gambling is allowed in the state.

“If that’s all they do tomorrow, it would be terribly irresponsible,” said Elizabeth Lynam, deputy research director at the Citizens Budget Commission, a nonprofit organization. “It’s 75 percent one-shots.”

Education advocates on Monday did not rule out waging another court battle against the state if cuts are made to education.

“We’re taking a look at things, we’re thinking about what the ramifications of all these things are,” said Geri Palast, the executive director of the Campaign for Fiscal Equity, an educational advocacy group that in 2006 settled a long-running lawsuit with the state over the distribution of school aid, particularly in New York City.

Billy Easton, executive director of the Alliance for Quality Education, another advocacy group, said “school aid has to be off limits because of the constitutional obligations that are going unmet.”

But a number of prominent Democratic politicians with liberal records said that cuts to education and health care were inevitable.

“To do nothing is not a solution,” said Comptroller Thomas P. DiNapoli, a Long Island Democrat and former assemblyman. “The only way to try to get ahead of it, which we haven’t done for many months now, is to deal with the cuts. Everything has to be on the table.”

The comptroller’s office numbers are more pessimistic than those from Mr. Paterson’s budget office. They project that the deficit for the remainder of the current fiscal year stands at $4.1 billion, with deficits of $7.8 billion and $15.7 billion in the succeeding years.

Mr. Ravitch, who helped steer New York City through its financial crisis in the 1970s, said, “The numbers are real and my own personal view is that they’re going to get worse.”

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