Cuomo Reaches Deal With Top New York Legislators to Close $10 Billion Gap

New York Governor Andrew Cuomo and top lawmakers agreed on a budget that eliminates next year’s $10 billion deficit by sticking close to the governor’s proposals for spending cuts without new taxes, they said.

The agreement for the fiscal year that begins April 1 would add $250 million of spending to Cuomo’s proposed $132.5 billion plan. Even with the increase, total outlays would decline 2 percent, the first such drop since at least 1995. Lawmakers, who Cuomo said faced a choice between accepting his plan or shutting down government, may be on a path to achieve New York’s first early budget since 1983.

Cuomo, a 53-year-old Democrat, made the announcement yesterday in Albany, the state capital, after meeting with Assembly Speaker Sheldon Silver , a Democrat from Manhattan, and Senate President Dean Skelos, a Republican from Long Island.

“Well done, my friends,” he said as he reached for handshakes at the end of the press conference.

The agreement “transforms the way we do business,” Cuomo said. Lawmakers agreed with Cuomo’s proposals to limit future spending growth on Medicaid to U.S. medical-cost inflation, starting in April 2012. School aid would grow no faster than personal income among the state’s residents.

Cuts to City

Silver said he expects Democrats in the Assembly will support the budget, even though they lost their bid to extend an 8.97 percent tax on millionaires due to expire Dec. 31. Cuomo and Skelos opposed any new taxes.

About 71 percent of New York voters favored the millionaire’s tax, and 67 percent said they would rather lawmakers accept Cuomo’s budget than allow state government to shut down, according to a Siena Research Institute poll released today. The poll of 802 voters was conducted March 20 to March 23 and has a margin of error of plus or minus 3.5 percentage points, the Loudonville, New York-based institute said.

Cuomo, who was elected in November with 61 percent of the vote, says he has followed the same policies he outlined during his election campaign.

New York City Mayor Michael Bloomberg said the plan cuts state aid “more than ever before” and that the amounts added in the agreement “are merely a fraction of the $600 million necessary to avoid additional layoffs and cuts in the city’s budget.” The state granted no revenue-sharing money to the city for the second consecutive year, while aid to other cities was reduced 3 percent.

The mayor is the founder and majority owner of Bloomberg LP, owner of Bloomberg News.

Medicaid, Schools

Medicaid and aid to local schools, the two biggest parts of the state budget, are expected to increase about 4 percent under the new formulas, Cuomo has said. Next year, before the controls apply, Cuomo’s budget called for Medicaid and school aid spending to fall $2.85 billion each from levels called for by existing law. Education aid in the coming school year would have been $1.5 billion below last year’s level.

The agreement calls for the elimination of 3,700 prison beds, while adding about $272 million to Cuomo’s proposed aid to local school districts and other education programs, and smaller amounts for senior citizen centers, higher education and other programs.

Budget Director Robert Megna said no new total amounts for state spending or the size of the budget were available, and it wasn’t yet known exactly how the state would pay for the increased outlays. Cuomo’s budget, including federal aid, was 2.6 percent lower than last year, a decline that was trimmed to 2 percent, according to the announcement of the budget plan.

Revenue ‘Looking Good’

“Revenue right now is looking good enough that we probably finance the increase from that,” Megna said.

While a budget agreement is in place, state officials are still negotiating with labor unions for about 130,000 workers whose contracts expire March 31. If unions don’t agree to savings of $450 million, Cuomo has said he may fire 9,800 employees.

Other issues still to be resolved by lawmakers and Cuomo include passage of a state-imposed cap on local property taxes and extension of rent-control laws for New York City and nearby counties. Cuomo favors both measures. Republicans in the Senate have already approved a cap on property-tax growth at the lower of 2 percent or inflation, while Democrats want rent controls to remain and be enhanced.

Paterson’s Ploy

Whether the Legislature approves the budget early, before the March 31 end of the fiscal year, depends on how soon bills are drafted and printed. Last year’s spending plan wasn’t approved until Aug. 4, after former Governor David Paterson pushed through bills that lawmakers had to approve or face a government shutdown.

A “message of necessity” by the governor may be required to get approval before March 31, Cuomo said. That action would remove the requirement that bills be on lawmakers’ desks at least three days, or parts of days, before voting.

Removing the property-tax cap and rent controls from the budget negotiations “has been a huge help getting not only an on-time budget, but an early budget,” said Senator George Maziarz, a Republican whose district stretches from Niagara Falls to Rochester.

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

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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