The following is a news release from Governor Paterson:

 

"Governor David A. Paterson on November 12th  announced a comprehensive, two-year $5.2 billion deficit reduction plan that will entirely eliminate the State's $1.5 billion current-year shortfall, protect against further declines in revenue in a volatile economic climate, and make a substantial down payment on next year's deficit.

Governor Paterson's proposed reductions are spread across virtually every area of State spending, including education, health care, human services, the State workforce, and others. These actions would produce $2 billion of savings in 2008-09 and $3.2 billion in 2009-10.

"The deficit reduction plan I have put forward today represents a series of difficult choices across virtually every area of State spending," said Governor Paterson. "The only way we are going to overcome this unprecedented crisis is through shared sacrifice. I look forward to engaging in a productive dialogue with the Legislature about the actions we must take at next week's special session to address our State's record budget deficits."

Governor Paterson's plan would close the State's $1.5 billion current-year shortfall, while also providing a $548 million cushion against additional declines in revenue during 2008-09. These proposed actions would also reduce the State's 2009-10 deficit from $12.5 billion to $8.8 billion and four-year budget deficit by from $47.0 billion to $35.9 billion.

After implementing Governor Paterson's deficit reduction plan, 2008-09 All Funds spending would still total $119.2 billion, an increase of $3.1 billion or 2.7 percent over the previous year. State Operating Funds spending would total $77.0 billion, an increase of $1.9 billion or 2.5 percent. Inflation is currently projected to be 4.2 percent for 2008-09."

 

Click here to read Governor Paterson's entire release.  

On November 18th, Governor David A. Paterson will convene a special emergency session of the New York State Legislature to address a mid-year budgetary shortfall of $1.5 billion.  This session will be the second in the current budget year held to address the state revenue losses that could mushroom as high as $47 billion over the next four years, according to Paterson. Next year's shortfall is expected to exceed $10 billion. 
 
To combat this deficit, on November 10th Governor Paterson raised the possibility of billions of dollars of cuts in Medicaid and school aid. Moreover, he threatened to urge state labor unions to reopen the current contracts for public employees.
 
This loss is directly tied to the Wall Street meltdown that has led to the biggest bankruptcy filing in American history (Lehman Brothers), the collapse of Fannie Mae and Freddie Mac, federal government intervention in private banking institutions and in insurance giant AIG, a concomitant credit squeeze, and a precipitous decline in the valuation of the stock market.  Wall Street payments account for 20% of the state's income tax collections, and that revenue could be down by as much as 40%.  Governor Paterson has also testified before Congress, requesting federal aid to help alleviate this situation, which has national origins but which affects the State of New York disproportionally hard.  
 
"There will be hard and painful cuts. There is no segment of this budget that will not be cut," Governor Paterson warned in a speech on October 28th. Governor Paterson predicted that the state consequences of this crisis would include the loss of 160,000 jobs (45,000 in financial services alone), an unemployment rate that could well top 6.5 percent, and a decline in personal income and wages which would reverse the trend to higher income and wages that had obtained in 2007.  This is confirmed by New York City Comptroller William C. Thompson Jr., who issued a report on October 15 predicting a loss in New York City of 165,000 jobs over the next two years. Of course, when income and wages decline, so too does consumer spending, so the effects of the financial thin ice spread into most other sectors of the economy.
 
According to State Comptroller Thomas DiNapoli, the volatility on Wall Street has had an effect on the New York State pension fund, which stood at $154 billion back in March, but has suffered a twenty percent reduction ($30 billion) since that time. This may lead to additional pressure on municipalities to increase their contributions to this fund in the future.
 
Since BALCONY is comprised of small businesses, trade associations, non-profits, and labor unions, we are vitally concerned that both our response and the State's to the fiscal crisis be responsible, creative, and well thought out.  Most of the public pronouncements by the Governor have tended to signal that he believes we can "cut our way out of this deficit."  While State budget cuts will be part of the solution, it will take a surgeon's scalpel and not an axe to make cuts that do not affect the businesses of, or services to, those who are most in need of help.
  
BALCONY does not possess a "magic bullet" solution to this impending crisis.  Indeed, there is widespread and vigorous debate among BALCONY members as to the proper strategy to follow, and this debate is precisely the reason BALCONY was formed to address.  It is the duty of BALCONY and other public policy organizations to provide the forums and a dash of "common ground" civility to push this ongoing conversation forward.
 
One BALCONY member, the New York City Building Congress, has issued a report predicting much uncertainty among new construction projects.  This report stated, "Overall construction spending in 2008 is forecast to reach a record $33.8 billion, a 16 % increase from 2007 when spending reached $29.1 billion. Spending is currently forecast to reach $33.4 billion in 2009 before easing to $26.2 billion in 2010."
  
Another BALCONY member, New Yorkers for Fiscal Fairness, has suggested a strategy to deal with the mid-year shortfall of $1.2 billion.  They propose that instead of slashing services immediately, New York State should borrow $1 billion from the Tax Stabilization Reserve Fund at the end of the 2008-2009 State fiscal year in March, and apply that to whatever gap then exists between disbursements and incoming revenue.  New Yorkers for Fiscal Fairness has created the Better Choice Budget Campaign, a coalition of over one hundred non-profits and labor- and faith-based organizations, to promote this step and a host of others that could serve as guidelines for Governor Paterson and the New York State Legislature.  Further details of this proposal are available at  www.abetterchoiceforny.org.
 
BALCONY does not back any one proposal exclusively, and asks all its members and interested New Yorkers to carefully consider all proposals - to ask themselves what the implications of any proposal will be on certain issues including:  Medicaid, various state property tax relief plans including the "circuit breaker," and any other services that New York State provides for its citizens.  If this crisis degenerates into political character assassination and partisan bickering, the ultimate losers will be the citizens of New York.  Everybody agrees that sacrifices will be required of all, and the only way New Yorkers will accept belt-tightening voluntarily is if they perceive that these sacrifices are distributed in an equitable and caring fashion.
 
We look for the input of BALCONY members on which measures you think are most viable. Each action has a consequence: massive layoffs by the State will harm surely local economies, while early retirement incentives may provide savings and minimize economic downturn. State cuts to our public schools will almost assuredly lead to higher local property taxes, simply shifting the burden to localities. Stimulus packages from Washington to the states and localities could be structured in a way to relieve the state of burgeoning Medicaid expenses and perhaps even include a public works component to rebuild our infrastructure using - and developing - green technologies here in New York as part of the rebuilding.
 
We look forward to hearing your thoughts and ideas on this issue. A series of forums or a meeting of our membership this winter is under consideration. Please know that we respect and urge feedback of all BALCONY members to help provide our Governor and Legislature with solutions. Business and Labor will work together and find solutions to common concerns is our mission. Let's take a fresh look at how we can work together to achieve this goal.