New York Lawmakers Delay Vote on Revenue Plan as Talks Continue

New York lawmakers expect to adjourn without considering a $1 billion package of tax and revenue measures needed to pay for spending bills they passed two days earlier, Senate Democratic leader John Sampson said.

The delay is needed to develop a contingency plan should as much as $1 billion in extra federal Medicaid money fail to arrive, Sampson told reporters yesterday at the state Capitol.

“In order to have a fair and responsible budget, we have to deal” with the possibility that the additional federal money doesn’t show up, Sampson said. The Senate will return “one day next week” to allow time for negotiations with Governor David Paterson, he said.

The package on hold included a sales tax on some clothing purchases and a new levy on hedge-fund managers to help close a $9.2 billion deficit. The state’s estimated $136.5 billion budget will be completed before August, Sampson said. The spending plan for the year that began April 1 is the most delayed since 2004, when the budget wasn’t passed until August.

The announcement came two days after Democrats in the Assembly and Senate approved spending bills that assumed the federal money would be paid in full. Paterson, a Democrat, said the Legislature’s plan was out of balance by $400 million to $1.5 billion. He vetoed $419 million of education spending lawmakers added to his earlier $135 billion budget proposal.

Paterson said he will veto more elements in the Legislature’s plan, including $193 million in about 6,800 so-called member items that lawmakers can give to not-for-profit groups and others in their districts. He also intends to veto $91 million of spending for higher education and other items, said Erik Kriss, a spokesman for the Division of Budget.

Agenda for Negotiations

Negotiations with Paterson and Assembly Speaker Sheldon 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 opposed both measures.

Silver couldn’t be reached immediately for comment.

“The Legislature’s revenue bill provides enough to balance the budget,” assuming lawmakers don’t override the governor’s vetoes and the additional Medicaid money is received in full, Kriss said before Sampson’s announcement.

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.

Spending to Rise

Under the state Legislature’s plan, spending will increase from last year by about 2 percent. The proposal needs the measure to raise revenue and taxes 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.

There is no danger of a state shutdown, as budget talks continue, because most appropriations for the government have been passed in weekly emergency spending bills, Sampson 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.

Before Sampson’s announcement, Paterson 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.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE