Deficit Grows Even Larger

By Karen DeWitt

Albany, New York – The state's budget deficit has grown yet again, and has now reached $8.2 billion dollars, says Governor Paterson, who says another $750 million dollar hole has opened up in the past couple of weeks.

Paterson, saying "January was a difficult month", says a decline in personal income tax collections, due to uncertainty over Wall Street bonuses, and higher than anticipated Medicaid costs, contributed to the new deficit.

"When you put the two together, you get a $750 million dollar shortfall," said Paterson. "In addition to what we'd already projected".

Paterson previously predicted the deficit would be $7.4 billion dollars, It is now estimated at $8.2 billion dollars.

Just before the governor made his announcement, The State Comptroller released a detailed analysis of the budget proposal. Comptroller Tom DiNapoli says he found the governor's revenue projections were "unrealistic".

"We've been warning for a number of months now that the budget has been built on unrealistic budget projections," said DiNapoli.

State legislators, who have an increasingly tense relationship with the governor, were quick to criticize Paterson's miscalculations.

Assembly Speaker Sheldon Silver, in a statement, said it's clear now that the governor's budget proposal, released on January 19th, "did not present an accurate picture of the state's finances". Senate Democratic Leader John Sampson said he shares the Speaker's concerns, and he urged Paterson to "provide reasonable and responsible revenue estimates" when the governor releases his budget amendments in a few days.

Senate Finance Committee Vice Chair Liz Krueger says it's a "surprise" that the $750 million dollar gap opened up so quickly. But she says it's no secret that there's political pressures on investment firms to reduce cash bonuses, or substitute non-taxable stock payments instead. Senator Krueger says like it or not, the state depends on 20% of it's revenues from the financial industry.

"When Wall Street catches a cold we get the flu," Krueger said, quoting a long- time adage.

Senator Krueger admits that with so much volatility in the economy, revenue estimates might be changing from month to month.

Governor Paterson once again admonished state lawmakers, saying they needed to stop talking about ways to restore the cuts in his budget, and start thinking about reducing spending instead.

"We're only hurting ourselves, because there isn't enough money," Paterson said.

The governor says he's going over options on how to close the additional three quarters of a billion dollar deficit, and will reveal the plans in his 21 day budget amendments, due by February 9th.