New York Senate Delays Vote on Revenue Plan as Talks Continue on Medicaid

The New York Senate adjourned without voting on a $1 billion package of tax and revenue measures needed to pay for spending bills they passed four days earlier.

The delay is necessary to develop a contingency plan should as much as $1 billion in extra federal Medicaid money fail to arrive, said Senate Democratic leader John Sampson of Brooklyn.

“A responsible budget means having a responsible back-up plan,” Sampson told reporters at the state Capitol. A plan developed with Assembly Speaker Sheldon Silver was submitted to Budget Director Robert Megna late June 30, Sampson said. He declined to describe it.

If there isn’t a negotiated agreement on a Medicaid contingency plan and on Governor David Paterson’s $419 million veto of aid to local school districts, “we are definitely considering” calling for an override, Sampson said. Overriding Paterson’s veto requires a two-thirds majority in each chamber.

“I can’t divulge my methods,” Sampson said regarding how he may get Republicans to provide some of the 42 Senate votes needed for an override. Democrats hold a 32 to 30 majority in the upper chamber, and a 107 to 42 advantage in the Assembly.

Paterson said the willingness of lawmakers to prepare a Medicaid contingency plan won’t stop him from vetoing spending measures they passed, including about 6,800 “member items” that legislators can insert to benefit local organizations.

“I’m not going to sit here and kill myself trying to sign 6,900 vetoes as some sort of a ploy for negotiations,” Paterson said at an Albany event for reporters to witness the signing.

In Deficit

“Because they didn’t pass the revenue bill, we are a billion dollars in deficit, not even counting the Medicaid money,” Paterson said. If the revenue bill had passed, the governor had estimated a $400 million to $1.5 billion imbalance, which he has reduced by about $500 million with vetoes.

The governor has promised a total of about 6,900 vetoes, including about 3,000 already signed, according to Morgan Hook, a Paterson spokesman. In addition to striking out the additional aid to local schools, Paterson will veto $91 million added to higher education and the member items that total $193 million for not-for-profit groups and others in lawmakers’ districts, said Erik Kriss, a spokesman for the Division of Budget.

The package on hold in the Senate includes applying the sales tax on clothing purchases of less than $110 and a new levy on hedge-fund managers to help close a $9.2 billion deficit.

Paterson was critical of a tax increase on some hedge-fund managers. The measure might lead some of the investment companies to flee the state, he said yesterday.

While the gap remains, Sampson said the “budget is passed and government will continue to operate.” The spending plan for the year that began April 1 is the most delayed since 2004, when the budget wasn’t passed until August.

Negotiation Agenda

Negotiations with Paterson and Silver will include proposals to cap annual increases in local school and government property taxes, Sampson said. A plan to give the state and city university systems more flexibility to increase tuition and operate independently from the Legislature is also on the agenda, he said. Silver, the Assembly leader from Manhattan, opposed both measures.

Silver couldn’t be reached immediately for comment.

The Assembly passed the revenue bill last night, and it is pending in the Senate. The measure must be passed by both chambers before it can be presented to Paterson, who can accept it or veto it in whole.

Medicaid Impasse

A measure to provide extra subsidies for the health-care program for the poor failed to move forward in the U.S. Senate last week as Republicans balked at the cost. The additional subsidies, which would have been extended by six months, were raised as part of last year’s economic-stimulus package and are set to expire in December.

Under the state Legislature’s plan, spending will increase from last year by about 2 percent. The proposal needs the revenue and tax-raising measure to be complete, said Austin Shafran, a spokesman for Senate Democrats. “This would be only the fourth time in the last 30 years that spending rose less than inflation,” he said.

New York law requires the governor to propose a balanced budget, though there isn’t any requirement that the budget passed by the Legislature be balanced, said Robert Ward, deputy director of the Albany, New York-based Rockefeller Institute of Government.

Relying on Hope

If the Legislature’s budget isn’t balanced, “you just cross your fingers and hope there’s no problem,” Ward said.

Other analysts aren’t sure spending will match revenue.

“More work may need to be done to balance this year’s budget,” Elizabeth Lynam, deputy research director at the Citizens Budget Commission, said on its website. A $2.4 billion deficit is possible, if Congress doesn’t approve the added Medicaid funds and other spending and revenue assumptions prove inaccurate, she said. The independent group monitors the state budget.

Paterson has said he may call lawmakers back to Albany later this year if the budget they presented falls out of balance. Sampson said he didn’t want that to happen.

To contact the reporter on this story: Michael Quint in Albany, New York, at mquint@bloomberg.net.

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