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Stalemate in Legislature Has New York Near Its Last Dollar

November 27, 2009

The New York Times is reporting this morning that the fiscal debacle in Albany is reaching a critical mass, with serious and troubling ramifications for all of us.

Here is the story:

ALBANY — New York State is running out of cash.

Without a budget deal, New York will be left with just $36 million in the bank by the end of December, according to current projections. And the money will last that long, officials say, only if the state chooses to fully exhaust its emergency reserves by tapping several billion dollars’ worth of temporary loans from its rainy-day fund and short-term investments.

For weeks, Gov. David A. Paterson has invoked the shrinking amount of available cash in an effort to provoke the Legislature to deal with the state’s $3.2 billion budget deficit. So far, the specter of such dire fiscal outcomes has been greeted with what amount to legislative shrugs, chiefly in the recalcitrant State Senate.

The stalemate in Albany is familiar, of course, and there are many lawmakers and experts who predict that the Legislature will act at the 11th hour, as it has before, to avoid the worst damage.

But with no end in sight to the negotiations, state officials are beginning to reckon with what could be an unprecedented cash crisis. And many say that even if the current deficit is closed, the state is at considerable risk going forward — less able, for instance, to borrow money because of worsening credit ratings and ill prepared for far more severe deficits ahead.

New York, which has a roughly $130 billion budget, the second-largest behind California, is certainly not suffering alone. The 50 states have faced cumulative deficits of more than $250 billion over their last two budget cycles, according to data compiled by the National Conference of State Legislatures. In New York, the weight of the recession has been coupled with the struggles of Wall Street, the state’s main financial engine.

But New York is by no means California, which has become the national measuring stick of statewide financial ruin. The state is not sending out i.o.u.’s to creditors, students at state schools are not holding sit-ins in dormitories, and Albany, unlike Sacramento, has not had to grapple with relocating a tent city for the homeless. Further, revenue typically picks up in January, when Wall Street bonuses, however diminished from previous levels, start coming in.

But the situation in New York is not good, either.

In modern times, the state’s general fund has never had a negative balance, according to the state comptroller’s office. If New York does in fact run out of cash, it will have to delay paying some of its biggest bills. Chief among the bills the state will face in December are $1.6 billion in aid the state is supposed to pay school districts, $2.5 billion in property tax relief to individual homeowners, and $500 million in general aid meant to go to local governments.

“If you put any of that off, at some point people are not getting the money they are expecting,” said the state comptroller, Thomas P. DiNapoli, a Democrat. “That could affect local governments, school districts, nonprofits, hospitals.”

The governor and his staff have raised the threat of layoffs and furloughs if the impasse drags on, and there is the potential for a partial shutdown of some government services.

“Unless we act, New York will run out of money, even after we delay payments to schools and local governments,” the governor said Tuesday in a brief address via Web cast. “This is an unprecedented fiscal emergency.”

The state’s credit rating is below average and at some risk of a further downgrade. The Paterson administration has already squeezed the budgets of state agencies, an action it can take unilaterally. And this year’s skirmish is considered a prelude to a fierce budget fight in 2010, when the deficit is far larger in what is an election year for the entire Legislature.

There have already been any number of ways that the strain on the budget has been felt across the state. Billions of dollars worth of scheduled increases in school aid, enacted by Gov. Eliot Spitzer to settle a long-running lawsuit over the distribution of school aid, will be stretched out over seven years instead of four. Taxes on the wealthy have been raised, and fees of all kinds have been increased.

For the first time in decades, the state Police Academy probably will not have a new class for either the fall or the spring. The state has closed three upstate minimum-security prison camps and six facilities operated by the Office of Children and Family Services. Hours have been limited and facilities closed at parks including Jones Beach, and parks across the state are mowing fewer lawns to save money. The state ice rink was closed last winter.

Budget watchdogs say far steeper cuts are needed to reckon with deficits that will escalate sharply in 2011 as federal stimulus money runs out and the new wealth tax expires.

But negotiations have been fundamentally stalled — and even irrational at times. Senate Democrats, who have thus far refused to hold a vote to legalize same-sex marriage, have nonetheless floated the theory in negotiations that the state could expect to take in more than $50 million a year in new revenue from the legalization of same-sex marriage, from a combination of marriage license and tourism revenue.

They are also proposing to raid the treasuries of public authorities, to force Native American tribes to collect cigarette taxes, and to restructure the state’s tobacco bonds.

And Mr. Paterson remains politically weak, with a dismal standing in the polls and an inability to provide forceful leadership, critics say.

The impasse involves a fundamental disagreement. The Paterson administration argues that the state must begin to reckon with severe future deficits, and this view appears to have the support of Assembly Speaker Sheldon Silver. Senators prefer to take temporary measures and push off the day of reckoning as long as possible.

Budget experts are paying close attention. They say how the deficit is closed is as important as closing it. Not only will the negotiations affect the state’s enormous future deficits — out-year gaps, in budget parlance — but bond rating agencies are scrutinizing the process.

“The next three months will be critical to the state’s credit rating,” Moody’s Investor Service said last week, in an analytical note that rattled the capital.

“The announcement of out-year gaps is not in and of itself an issue,” Emily Raimes, an analyst at Moody’s, said in an interview. “What we look at is how they solve them. If they solve them with one-time measures, that’s going to increase the gaps in future years, and at some point they get so large it becomes difficult to solve them.”

Read the full story here.
  1. Young Republican permalink
    November 27, 2009 2:22 pm

    It is no secret that our legislator is more dysfunctional than any other legislator in these united states, the question is what do we do about it?

    Rick Lazio says get rid of the senate. I say get rid of the senators. We must throw these bums out of office, and replace them with people that have NYers best interest in mind, not their own. The senate is supposed to serve an important role in our state. They are supposed to be the grownups acting as a check on the assembly, but in reality they are a bunch of clowns who can’t get anything done. The leadership in that chamber is made up of crooks, criminals, and incompetent people. I think starting next November, The Lieutenant Governor should run on a separate ticket than the governor, and his/her main job should be full time head counselor of the senate.

    Carl Kruger, who served in leadership positions under both republican and democratic controlled senates, must be voted out of office. Last year he didn’t even have an opponent on the republican line. He won with 93% of the vote (even in the part of his district that is in the 49th AD he won with 89%) It’s time republicans got their act together and started running candidates against these crooks.

    • Brooklyn Reformer permalink
      November 27, 2009 6:41 pm

      Young Republican
      Please check your facts.
      Kruger has no districts in the 49th.

  2. Young Republican permalink
    November 28, 2009 4:17 am

    Mr. Reformer, who should be checking their facts? In general it’s a good idea to make sure you know what you’re talking about before you post a comment.

    If you’re bored you can check out this link:

  3. Brooklyn Republican permalink
    November 28, 2009 12:22 pm

    Young Republican please accept my apologies, when you’re right you’re right.
    What causes concern should be the fact that there is such a large drop-off in votes, and the fact that Kruger did not have a Republican opponent.
    I smell deal making rats leading our Party in the latter, and complete voter ambivalence on the former.
    Any suggestions Young Republican ?

    P.S. I wish we all had time to be bored.

    • Young Republican permalink
      November 28, 2009 9:31 pm

      We don’t have to let party leaders make deals for us that we don’t like. If we want to run a candidate we can do it without help from the leadership. Anybody can collect the signatures necessary to run, and get on the ballot without an ounce of help from the establishment.

      It’s not easy to get out the vote. Thats why we need people to join the county committee, so we have a strong party on the grassroots level. If there were active republican organisations on the local level, say in every AD, we would be able to run real candidates in every election and maybe actually start winning some too.

  4. Brooklyn Reformer permalink
    November 28, 2009 12:25 pm

    Don’t apologize for me!
    There are too many people impersonating one another on this blog!

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