Even if New York averts government shutdown, its budget woes escalate

New York State lawmakers are likely to approve another short-term fix to prevent a threatened government shutdown. Delay in closing an $8.5 billion budget gap is only making things worse, some analysts say.

Mike Groll/AP
Sen. Hugh Farley (R-Schenectady) votes during session in the Senate Chamber at the Capitol in Albany, N.Y., on Monday. Albany legislators are expected to pass yet another short-term fix that should avert a shutdown of New York state government.

In the absence of an actual budget, the New York legislature since April 1 has been passing weekly emergency spending bills to pay the salaries of state troopers, park employees, and drug addiction counselors, among others.

On Monday, Albany legislators are expected to pass yet another short-term fix that will keep the state running for another week. Without it, Gov. David Paterson had said he would shut down many state activities.

Within the weekly spending measures, however, are glimpses of what the Empire State may look like if state officials ever do bridge a $8.5 billion spending gap, second only to California for the highest in the nation. The snapshot is of a state that will be spending less money on hospitals, education, and the environment. Commuters may end up either paying higher fares to ride the rails or waiting longer for mass transit rides. And some of those local Little Leagues that used to get checks from their local legislators may have to pass the hat to fund ballfield renovations.

“It most likely means a lower quality of life for New Yorkers," says Frank Mauro, executive director of the Fiscal Policy Institute in Albany, N.Y. “The way they are balancing the budget now is similar to the 1990s, when there were deep service cuts.”

Other states are also expected to face red ink when their budgets are due on July 1. Total budget shortfalls for the states will amount to $140 billion, estimates The Center on Budget and Policy Priorities (CBPP). Some of that will be ameliorated if Congress approves $23 billion in additional funding for Medicaid programs and perhaps another $25 billion for education.

New York State, however, is unique in that its fiscal year began April 1. By not passing a budget for the first three months of its fiscal year, the state is digging itself into a deeper hole, says Nicholas Johnson, fiscal director of the CBPP. “The longer you wait, the harder it is to find the money,” he says, noting that the state may lose potential revenue from any new taxes for at least 25 percent of its fiscal year.

Democrats control the state Assembly and have a tenuous majority in the Senate. This being an election year, some Democrats have said during negotiations with Governor Paterson (a fellow Democrat) that they can no longer vote to cut the budget. Republican lawmakers don’t want to pass tax increases. Lawmakers from both sides want some form of property-tax relief.

Reports from the negotiations indicate that lawmakers still need about $1.4 billion to close the budget gap, says Mr. Mauro. Some of this is expected to come from new revenues, some from program cuts.

For example, on Monday, besides funding the state for another week, legislators are expected to cut funding for mental health services and welfare by $300 million. This would adversely affect organizations that provide programs to counter substance abuse.

If legislators reach agreement on budgets for those programs, they will still have to pass budgets for education, public safety, and transportation. Last week they made cuts to health care, which Mauro suggests they may reconsider.

When lawmakers work on the transportation numbers, the Metropolitan Transit Agency, which runs the buses and subways, will be asking for additional funding because it, too, has a large budget gap.

On the revenue side, the governor has proposed a tax on sugary sodas, couching it has a health-care issue that would tackle obesity. However, the soft drink companies are lobbying against the increase. There is also a proposal to raise the tax on cigarettes by $1 a pack. Mauro’s organization is arguing for a tax on the wealthy.

The state is also expected to use some unusual methods to balance its books. One of those, says Mauro, would allow the state and municipalities to borrow from the $97 billion state pension plan in order to fund their contributions to the plan. Legislators may have some leeway to do this, Mauro says, because the pension plans are currently fully funded.

Some groups that have already seen their budgets sliced hope to reverse the cuts before an overall budget becomes final. For example, the state has already reduced funding for environmental affairs, says Alison Jenkins, fiscal programs for Environmental Advocates of New York, an umbrella lobbying group. She says the biggest losers will be funding to buy open space, particularly in sensitive watershed areas, and financial aid to family farms.

“We’re hopeful something will happen to prevent the cuts, but we know it’s a tough uphill battle at this point,” she says.

Time may be running out. Mauro expects a final budget agreement in a week or two.

“I think there is enough desire to end this brinkmanship,” he says.


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