By Henry Goldman
October 6, 2009 (Update2)
SourceOct. 6 (Bloomberg) -- New York Governor David Paterson ordered a spending cut in all state agencies totaling $500 million, a day after disclosing income-tax revenue has declined 36 percent during the past year.
The governor of the third-most-populous U.S. state, where a majority of voters have disapproved of his job performance in polls, has predicted the current-year deficit may grow to $3 billion, $900 million more than budget officials estimated in July.
Although the cuts don’t require firings or furloughs, agency heads would be encouraged to reduce staff through attrition and severance agreements, Budget Director Robert Megna said. The governor directed the State University of New York to save $90 million; prisons, $69.3 million, and City University of New York to cut $53 million, Megna said.
“We want to reduce contractual services, reduce the amount of paper clips we are buying,” Megna said in telephone conference call with reporters. “We want to help the university purchase energy, food, maybe work joint computer purchases to achieve savings. There is an enormous amount we spend on these non-personnel, non-service items.”
Other agency savings involve travel, printing, vehicles, leases, energy, postage, consultant contracts and equipment, and amount to about 11 percent of the agencies’ “non-service” or “non-personnel” spending, the governor’s office said in a news release.
State Budget
The $133.5 billion budget for this year anticipated $86 billion of state funds, with the remainder coming from the federal government.
“Cuts are necessary given the state’s persistent fiscal difficulties,” Paterson said in a statement. The reductions “represent a first step” in cuts he intends to make “working cooperatively with the Legislature.”
In discussions over the summer, Republican and Democratic legislative leaders accepted the administration’s estimate of a gap of at least $2.1 billion, Megna said. Talks continue on how to balance the budget, he said.
The reductions don’t affect aid to local governments, including school districts, and Medicaid, Megna said
“If the Legislature does not get to the point where they can provide solutions, the governor will then take his position as leader of the state seriously and provide a plan to eliminate the gap,” Megna said. “Right now we are working collaboratively to try to come up with a joint plan.”
Income-Tax Revenue
Paterson, in an interview on CNBC, disclosed yesterday that a 36 percent decrease in income tax revenue this year has opened a deficit that may reach as much as $3 billion for the year ending March 31.
State Comptroller Thomas DiNapoli has predicted gaps of $4.62 billion in 2011, $13.3 billion in 2012 and $18.2 billion in 2013.
The state has $1.38 billion in reserve funds, Megna said.
Wall Street, which in 2007 accounted for about 20 percent of state revenue, lost $42.6 billion and year-end bonuses fell 44 percent to $18.4 billion in 2008.
Last year, Paterson ordered two separate cuts, of 3 percent and 7 percent, for recurring savings of $1 billion, said Matt Anderson, a Budget Division spokesman. Today’s order would bring the annual recurring savings to $1.5 billion, the governor’s office said.
Tax Increases
The budget for the fiscal year that began April 1 contained $45.2 billion in tax increases and $5.1 billion in spending cuts. The plan also included $6.2 billion in federal stimulus money and $1.1 billion in one-time revenue, according to Assembly figures.
State budget officials say New York will have $54.3 billion of outstanding debt by the end of the fiscal year, with debt service costing the state 4.4 percent of all funds, or $5.87 billion.
To contact the reporter on this story: Henry Goldman in New York at
hgoldman@bloomberg.net.
Last Updated: October 6, 2009 17:41 EDT