Recap time: Two months ago, New York State had a $7.4 billion budget deficit to close. Now it stands at a staggering $9 billion deficit and sure to exceed $10 billion before an actual budget is even passed. Not to mention, with the March 31st dead line looming over New Yorkers heads, they’re reminded that over the past three decades, New York has passed a budget on time on only seven occasions. In order to circumvent potential dysfunctional governance, the Senate passed several measures, including emergency budget appropriations, to keep the state government functioning past the budget dead line.
Where does the budget go from here though? Here’s what we know; back in January, Governor Paterson proposed a $134 billion budget that includes:
•$1.1 billion cut in school aid (5% of total aid)
•$1 billion cut to health care (including Medicaid)
•$923.2 million tax on health insurers
•$142.7 million cut to CUNY/SUNY colleges
•$4.8 billion cut in state spending
•"Sin tax" on soft drinks and cigarettes that is expected to bring in $465 million
•Closure of 91 state parks to sure up $15 million
This proposal is purely a hack job of state spending and tax increases. Paterson believes New Yorkers need to make great sacrifices in order to close the state deficit. Some of these sacrifices might include substantial school layoffs, health care premium hikes, tax levy hikes and state tuition hikes. This could very well leave some New Yorkers wondering whether closing the deficit gap is even worth it. Conversely, some economists have expressed concern that with all these cuts and taxes, the deficit might still not be fully closed. In the end though, Paterson hits every New Yorker will a fist full of reality.
On the other hand, the NYS Senate, borrowing some ideas from Lt Governor Ravitch, just passed their own budget proposal. So far, the $136 billion proposal includes:
•Borrowing $2 billion a year for the next three years in federal bonds
•$1.4 billion cut in school aid
•$109.9 million cut to SUNY colleges
•$4.3 billion cut in state spending
•Rejects $1 billion in proposed taxes (including sin taxes) and fees in Paterson’s proposal
•Rejects closure of state parks in Paterson’s proposal by providing $11.25 million in funding and $2.1 million in restored fee revenues
The senate’s proposal is not willing to go far enough in taxing in order to completely abolish the deficit, so they proposed borrowing $2 billion in federal bonds, which state comptroller Thomas DiNapoli says is a "bad idea". The cuts are there, but the tax increases are not and the only foreseeable way to close the remaining budget gap is through bonds. Listen, tax increases are unpopular in every state, but New York has the highest taxes in the country. One can see why the senate’s proposal tries to keep taxes at bay. Yet, borrowing might be just as bad and could potentially create more damage in the long run if New York goes bankrupt.
No matter how you look at it, New York is not going to be in good fiscal shape for the next few years. Over spending, immense public authority funding and bad money management has caused New York to sink this low. Borrowing money is not the answer and that’s why Paterson, for all his faults, has the most feasible and pragmatic budget proposal for New York. Unfortunately it doesn’t look like it his proposal will pass.