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New York’s Paterson Vetoes Attempt at ‘Back Door’ Spending

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July 8 (Bloomberg) -- New York Governor David Paterson vetoed legislation that he said was an attempt by lawmakers to get around his rejection of some school-aid spending.

Much of the bill, which amended education and family service law, had merit, Paterson said. He objected to one section on the 22nd of 45 pages where a change in the school-aid formula would have cost the state $600 million during two years, according to division of budget estimates.

“The Legislature seeks to achieve through the back door of this bill what it did not gain through its appropriation,” Paterson said in the veto message.

Last week’s veto of $419 million of school-aid spending was needed because “the Legislature failed to put forward a balanced budgetary plan that would account for such added spending,” he said.

The school-aid money was the largest item among 6,709 vetoes -- a stack of paper 31 inches high (78.7 centimeters) -- Paterson delivered yesterday to absent lawmakers, trimming $805.3 million of spending to help narrow the state’s $9.2 billion budget deficit.

With its Senate adjourned, the nation’s third-biggest state by population has a spending plan without enough funds to pay for it. The Senate didn’t act on a $1 billion revenue bill passed by the Assembly, and neither chamber planned for the chance that about $1 billion of federal Medicaid assistance wouldn’t arrive. The U.S. Senate blocked the money.

Revenue Bill

Without a revenue bill, a projected cash squeeze in September becomes worse and “the state will run out of money in about a month-and-a-half,” Paterson said today in an interview on New York City radio station WOR.

A school-aid payment due Sept. 1, before tax receipts arrive mid-month, “will put pressure on cash and may require payment to be made on a more staggered basis,” as was done in March and June of this year, as well as December 2009, said Erik Kriss, a spokesman for the Division of Budget.

Cash projections show a balance of $3.35 billion at the end of August and $3.26 billion at the end of September, according to budget documents.

Even if the revenue bill passes the Senate, the budget contains dubious spending and revenue assumptions that open the door to a mid-year deficit, according to analysts at the Empire Center and Citizens Budget Commission, two independent watchdog groups.

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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