Paterson: New Budget Deficit is $2.1b

By Karen DeWitt

Albany, New York – Governor David Paterson says first quarter figures for the state budget show that New York will have yet another budget gap of $2.1 billion dollars. The total shortfall will grow to $18.2 billion dollars by 2012.

Governor Paterson did not speak publicly about the new state deficit, but in written comments said that he'll be working, with the help of his newly appointed Lieutenant Governor, Richard Ravitch, to come up with a new budget balancing plan for the legislature to vote on in September.

"Further action is needed to control spending," the Governor said in the statement.

No details were released on whether spending cuts or tax increases will be part of the plan, though Budget Director Robert Megna predicts they'll "stay away from tricks and gimmicks", and won't touch the state's $1.2 billion dollar rainy day fund.

The reasons for the gap, say the governor's budget officials, include the continued weak economy and downturn on Wall Street, which has caused personal income tax collections to decline 35% from the first quarter of fiscal year 2008. Sales tax collections are also down by 6%, and wages declined by 4.8%, the biggest drop since figures have been recorded starting in 1975. That decline is largely due to lowered bonus payments on Wall Street and the loss of 236,000 jobs in the state since August of 2008.

Budget Director Megna says the deficit may shrink, depending on how many state employees take advantage of voluntary work reductions and an early retirement buy out program, agreed to by the governor and state worker unions.

"We're going to be aggressively pursuing that," Megna said.

At the same time, budget officials expect pension contribution costs to be higher, and that social services spending will grow to take care of the increasing poor and needy.

The budget report also finds that the state could experience a severe cash flow problem in November and December, and may have to temporarily borrow money from a special state fund set up for emergency purposes.

The $2.1 billion dollar gap represents a significant drop in just three months, since the state spending plan was approved in early April and pronounced to be in balance. Megna blames the timing of the state's fiscal year, which is the earliest start in the nation, for the miscalculations. He says the most important tax information comes later, in April and in May, after tax day.

"Unlike other states that start on July 1, we have our most volatile tax receipt period right in the first quarter of the fiscal year," he said.

There was also word Thursday that the State Senate will be returning on August 6th, to deal with New York City mayoral control and other issues. But Senators likely won't be addressing the state's budget deficit until Paterson presents his plan later in the month.