Paterson: Bad Budget Getting Worse, May Require State Layoffs

Governor Paterson Oct. 28 warned New Yorkers once again of an increasingly bleak economic outlook for the state, saying that with a projected $12.5-billion deficit next year, both government layoffs and the union-supported millionaire's tax are back "on the table."

The Chief-Leader/Pat Arnow BEARER OF BAD TIDINGS: With state Budget Director Laura Anglin looking on, Governor Paterson tells reporters that plummeting revenues from Wall Street have so affected the state's fiscal condition that he can no longer rule out employee layoffs to get the budget in balance.

"For seven months since I've taken office I've been sounding the alarm about the downturn in New York State's economy, and unfortunately the recession our country appears to be in at this particular time," the Governor told reporters gathered at his New York City office, a day before he went to Washington to ask Congress for Federal aid. "I have been encouraging that we recognize that we will face massive deficits in this state and we are going to have to take bold and urgent actions."

KENNETH BRYNIEN: 'Can't cut our way out of problem.'

 

 

 

Sharp Drop in Tax Revenues

The economic outlook for the state, which projects a $47-billion cumulative deficit over the next four years (or nearly double the projection from just three months ago), was part of a midyear assessment by the Division of Budget. Tax receipts, which fund the $120.8 billion state budget, are projected to be down $19.2 billion over the next four years. Governor Paterson, who offered no clear solutions, said he would look to state legislators for answers when he convenes an emergency economic session in Albany on Nov. 18. He has asked Assembly Speaker Sheldon Silver, Senate Majority Leader Dean Skelos and Senate Minority Leader Malcolm Smith to present $2 billion in current-year cuts.

The Governor recently put state layoffs back on the table as the stock market continued to plummet, despite an earlier vow to Civil Service Employees Association President Danny Donohue that any reduction to the size of the state workforce would be done by attrition. Now, with the news that 160,000 New Yorkers will lose their jobs during this downturn, union leaders, it appeared last week, recognized the state was in dire-enough straits that desperate measures were needed.

"He's right — the state does have a problem and we have to do something, and something quickly," said Public Employees Federation President Kenneth Brynien. The union leader disagreed, however, with the traditional slashing of the budget to close gaps. "We can't cut our way out of this problem. He could lay off the entire state workforce and he won't save all that money."

Mr. Brynien pushed for the so-called millionaire's tax, which would add higher tax brackets for people earning more than $1 million, and those with income above $5 million. The union leader said he took Mr. Paterson's statement that nothing was off the table to mean that the tax was now a possibility.

Eyes Corporate Tax Hike, Too

The Governor, asked directly about the tax at his press conference, changed his previous public position opposing higher tax rates for corporations as well as wealthy individuals. "We certainly should be" considering raising taxes for both entities, he said at his Third Ave. office. "I mean, one of the issues in terms of our whole tax liability is that too often we were guaranteed if we were protecting these firms they would be creating jobs for us, and look at what we got, and it's almost like blackmail."

Stephen Madarasz, a spokesman for CSEA, said Mr. Donohue had a productive meeting with Mr. Paterson about the fiscal crisis a few weeks ago. "We recognize the situation is extremely serious," he said. "What we are looking for is fairness."

Mr. Madarasz said the union still meant to hold the Governor to his earlier promises. "We have no indication that their position has changed or that there are no good choices," he said, adding that cuts in aid to schools and localities might be a good way to trim the budget, even though the CSEA represents some of the workers who would be affected.

Mr. Brynien was also optimistic that there would not be massive state layoffs. "I think things would have to get very bad for there to be layoffs," he said. The union leader said he saw $7 billion in savings that could be created for the state in a plan he has shared with the Governor, which included a recouping of lost revenues from recycled bottles and cans. "The problem with trying to lay people off to save this mess is you're creating another mess," he said. "When you are laying people off, they are people who are not paying taxes. You create a problem by fixing a problem."

Appeal to Congress

Mr. Paterson Oct. 29 came before the House Ways and Means Committee in Washington to ask for a bailout for states akin to the one given to Wall Street. "We are cutting all we can and we will cut all that we are able to, but inevitably, the deficit is too voluminous for us to address," he told Congress, on the same day that colleagues from other states, including New Jersey Gov. Jon Corzine, made similar appeals. "Therefore we feel that targeted, sensible action by the Federal Government could provide relief for us now."

The Governor told Federal legislators there was little left to cut without jeopardizing fundamental state responsibilities. "The reductions necessary to close these massive deficits will impact the very core of what we do as states — protecting the public's safety, providing health care for the most vulnerable, educating our children, caring for the needy, meeting the energy needs of our constituents, maintaining our infrastructure, and investing in our economy," he stated in written testimony. "Unfortunately, the cruel irony is that at the time when citizens need their state governments the most, state governments are least equipped to help them because of plummeting revenues."