New York Gov. seeks $2 bln spending cuts, led by aid to schools and health care for the poor

NEW YORK, Nov 12 (Reuters) – New York Gov. David Paterson on Wednesday proposed $2 billion of spending cuts, led by aid to schools and health care for the poor, to clip a widening budget deficit as fallout from the financial crisis crimps revenues.

Paterson said the legislature agreed not to increase personal income taxes at a special session set for next week to reduce the state’s $121 billion budget.

Paterson, a Democrat who says the state must reform its long history of over-spending, said he hoped to avoid an income tax hike next year — though he did not rule one out.

“If we’re not getting cooperation, and can’t get any other way to do it, then it would become a possibility,” he told a news conference, warning against relying on more aid from Washington to fix a two-year $14 billion deficit.

Assembly Democrats had pushed to increase the personal income tax on millionaires, a move that the Senate, led by lame duck Republicans, blocked.

Under Paterson’s proposal, school aid would be cut by $800 million and funding for Medicaid, the joint state-federal health-care program for the poor, would be cut by $572 million. Those cuts will come even as more people are expected to seek health benefits as the economy falters.

New York has one of country’s most generous Medicaid plans and spends more per pupil — $14,884 — than any other state.

In addition, Paterson proposed higher fees, including a $600 increase in annual tuition at state universities and a new 5-cent deposit for bottles of water and noncarbonated drinks.

Paterson’s proposals drew a mixed response from legislators.

Republic Senate Majority Leader Dean Skelos said lawmakers cannot act until they see next year’s budget. “We must avoid any job-killing taxes and fee increases, which the governor is proposing,” he said.

Republicans will control the Senate only until the new Democratic majority is inaugurated in January.

Meanwhile, Democratic Speaker Sheldon Silver said he disagreed with Senate Republicans who say the fiscal crisis has been exaggerated.

“The Assembly will not shrink from tough choices and plans to confront New York’s fiscal crisis head-on, based on the principle of shared sacrifice.” Silver said.

The outlook for next week’s special legislative session has become more obscure since the Democrats, who won a two-seat majority on Nov. 4, failed to win the support of four senators who want more sway for Hispanics.

Other measures proposed by Paterson include cutting aid to New York City by $44 million. The city, whose securities industry generates one-fifth of the state’s tax dollars, would still get $205 million in state aid.

Though Paterson denied he was singling out the city, which already has pruned spending, Mayor Michael Bloomberg said: “I want to make sure we’re not penalized for doing the right thing.”

No other local governments would see their state aid cut next year under the proposal, though there would be no increases in aid for local governments, Paterson said.

Under the proposed reductions to school spending, poorer schools with more special-needs pupils would lose about 3 percent of their state funds. Schools in wealthier areas with fewer demands for extra programs would be cut 10 percent.

Paterson said the measures would only reduce the growth in spending, but education advocates disagreed, saying New York City schools would suffer a $255 million cut.

“This is not a cut in the increase as the governor presented, but a retreat from meeting a constitutional obligation that took 15 years to litigate and legislate,” said the Campaign for Fiscal Equity, a coalition aimed at reforming the state’s school finance system.

Paterson said local property taxes, the principal way that cities and towns pay for schools, would not rise because 80 percent of the schools can tap reserves.

Paterson said layoffs of state employees this year would be minimal, though existing attrition rates might have to be accelerated. He also proposed that unionized workers forgo a scheduled 3 percent annual pay hike next year and defer receiving up to five days of pay.

Several big unions for state workers earlier this week showed they have no appetite for concessions. (Editing by Leslie Adler)

NEW YORK, Nov 12 (Reuters) – New York Gov. David Paterson on Wednesday proposed $2 billion of spending cuts, led by aid to schools and health care for the poor, to clip a widening budget deficit as fallout from the financial crisis crimps revenues.

Paterson said the legislature agreed not to increase personal income taxes at a special session set for next week to reduce the state’s $121 billion budget.

Paterson, a Democrat who says the state must reform its long history of over-spending, said he hoped to avoid an income tax hike next year — though he did not rule one out.

“If we’re not getting cooperation, and can’t get any other way to do it, then it would become a possibility,” he told a news conference, warning against relying on more aid from Washington to fix a two-year $14 billion deficit.

Assembly Democrats had pushed to increase the personal income tax on millionaires, a move that the Senate, led by lame duck Republicans, blocked.

Under Paterson’s proposal, school aid would be cut by $800 million and funding for Medicaid, the joint state-federal health-care program for the poor, would be cut by $572 million. Those cuts will come even as more people are expected to seek health benefits as the economy falters.

New York has one of country’s most generous Medicaid plans and spends more per pupil — $14,884 — than any other state.

In addition, Paterson proposed higher fees, including a $600 increase in annual tuition at state universities and a new 5-cent deposit for bottles of water and noncarbonated drinks.

Paterson’s proposals drew a mixed response from legislators.

Republic Senate Majority Leader Dean Skelos said lawmakers cannot act until they see next year’s budget. “We must avoid any job-killing taxes and fee increases, which the governor is proposing,” he said.

Republicans will control the Senate only until the new Democratic majority is inaugurated in January.

Meanwhile, Democratic Speaker Sheldon Silver said he disagreed with Senate Republicans who say the fiscal crisis has been exaggerated.

“The Assembly will not shrink from tough choices and plans to confront New York’s fiscal crisis head-on, based on the principle of shared sacrifice.” Silver said.

The outlook for next week’s special legislative session has become more obscure since the Democrats, who won a two-seat majority on Nov. 4, failed to win the support of four senators who want more sway for Hispanics.

Other measures proposed by Paterson include cutting aid to New York City by $44 million. The city, whose securities industry generates one-fifth of the state’s tax dollars, would still get $205 million in state aid.

Though Paterson denied he was singling out the city, which already has pruned spending, Mayor Michael Bloomberg said: “I want to make sure we’re not penalized for doing the right thing.”

No other local governments would see their state aid cut next year under the proposal, though there would be no increases in aid for local governments, Paterson said.

Under the proposed reductions to school spending, poorer schools with more special-needs pupils would lose about 3 percent of their state funds. Schools in wealthier areas with fewer demands for extra programs would be cut 10 percent.

Paterson said the measures would only reduce the growth in spending, but education advocates disagreed, saying New York City schools would suffer a $255 million cut.

“This is not a cut in the increase as the governor presented, but a retreat from meeting a constitutional obligation that took 15 years to litigate and legislate,” said the Campaign for Fiscal Equity, a coalition aimed at reforming the state’s school finance system.

Paterson said local property taxes, the principal way that cities and towns pay for schools, would not rise because 80 percent of the schools can tap reserves.

Paterson said layoffs of state employees this year would be minimal, though existing attrition rates might have to be accelerated. He also proposed that unionized workers forgo a scheduled 3 percent annual pay hike next year and defer receiving up to five days of pay.

Several big unions for state workers earlier this week showed they have no appetite for concessions. (Editing by Leslie Adler)

By Joan Gralla
Wed Nov 12, 2008 6:03pm EST

Source: Reuters

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