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Cuomo Braces New Yorkers for First Budget Reduction Since 1995

New York Governor Andrew Cuomo. Photographer: Nathaniel Brooks/Pool/Getty Images
New York Governor Andrew Cuomo. Photographer: Nathaniel Brooks/Pool/Getty Images

Jan. 26 (Bloomberg) -- New York Governor Andrew Cuomo, facing a budget deficit of $10 billion or more, may cut spending for the first time in at least 17 years, lawmakers say.

Cuomo, a 53-year-old Democrat and son of former Governor Mario Cuomo, has been hosting meals with legislators of both parties in Albany, the capital of nation’s third most-populous state, to enlist their support. He’s scheduled to present his first budget Feb. 1.

“We were warned to prepare for the worst storm we have seen,” said Senator James Alesi, a Republican from Rochester, after he and other lawmakers met Cuomo for hamburgers this month in the Executive Mansion. “He said, ‘We’re not talking about cutting the growth of spending. We’re talking about cutting spending.’”

Such a reduction would be the first scaling back of the overall budget, which includes federal aid, since at least fiscal 1995, state documents show. In the general fund, the measure that Cuomo must balance by law, declines have occurred only twice in that period: last year and in 1995, when Republican George Pataki, who defeated Cuomo’s father, submitted his first spending plan.

New York’s predicament is similar to those of other states, where budget shortfalls are estimated at $125 billion, according to a Jan. 21 report by the Washington-based Center on Budget Policy and Priorities, which researches the impact of government policies on low- and moderate-income Americans. The states face a projected loss of $53 billion in federal aid as President Obama’s stimulus program ends, the report said.

‘Will Be Smaller’

“Our overall budget will be smaller than we had because we are not going to get as much federal money,” said Herman D. Farrell, the Democratic chairman of the Assembly Ways & Means Committee.

Farrell was referring to the $135.3 billion all-funds budget for the current fiscal year, which included $47.6 billion from the U.S. government. About $5.4 billion of that money was stimulus aid used for education and health care that helped the state close a $9.2 billion gap. Those funds won’t be available to Cuomo.

In the 10 years ended in 2010, the state increased spending of its own funds by an average of 5.4 percent annually, more than twice the 2.5 percent inflation rate, according to budget documents. If federal aid is included, spending grew at a 6 percent rate.

“We spend too much money in this state,” Cuomo said at a Jan. 24 press conference in Albany. “We’re going to have to change fundamentally our behavior.”

‘Tough Times’

At a news conference this week, Cuomo declined to comment on specifics of his budget, including a report by the New York Times that he might trim the state workforce by as many as 15,000 positions. A spokesman, Josh Vlasto, said in an e-mail message that any speculation on the budget is premature.

“These are tough times,” Cuomo said Jan. 24. Changes to the state workforce are part of balancing the budget and will “depend on the level of cooperation you have with the workforce and with the unions.”

In his campaign and since, Cuomo said he wants to freeze the pay of state workers, whose base compensation rose 13.6 percent in a four-year contract that expires March 31.

He also proposed a revamped pension system with less-generous benefits for new workers. He hasn’t said whether the plan would continue to guarantee benefits regardless of pension-fund investment performance, or shift that risk to employees who would participate in 401(k)-type accounts.

Christie’s Plans

New York isn’t the only state considering a smaller budget. New Jersey Governor Chris Christie, speaking in an interview yesterday at Bloomberg’s New York headquarters, said it was “possible” that spending would be cut in his 2012 plan.

The 48-year-old Republican said the current year’s $29.4 billion budget would serve as the “new baseline” for calculating next year’s outlays.

To cut spending in New York, Cuomo and the Legislature must agree on changes to state laws that call for outlays for operations to accelerate next year by $13.1 billion, or 17 percent, to $92.3 billion, according to budget documents.

The largest projected increase -- of $5.7 billion to $17.6 billion -- is in the state’s Medicaid program for the poor, where enrollment has grown to 4.9 million, or 25 percent of the population. The state is projecting a loss of $3.6 billion in federal Medicaid funds.

Aid to the 700 school districts is projected to grow by $2.9 billion to $22.7 billion even as federal funds drop $822 million.

Cuts for City

Officials in New York City, which received $11.5 billion in state aid this year, mostly for education, are bracing for a reduction.

“Any cut is doing to be difficult for us to deal with, and the severity depends on the magnitude,” Mayor Michael Bloomberg said Jan. 24. The mayor, who is the founder and majority owner of Bloomberg News parent company Bloomberg LP, said he would have a “private conversation” this week with Cuomo.

The Democratic governor may find stronger allies among Republicans than some of his own party, said Leonard Cutler, a public law professor at Siena College in Loudonville, New York, and a former Pataki aide.

By lowering spending in the general fund, the state’s main account, which is scheduled to rise by about $12.5 billion next year, Cuomo would exceed the $7 billion in cuts proposed by Carl Paladino, his Republican challenger in November’s election.

“Cuomo’s sounding a lot like a Republican,” Cutler said. “I think he’ll find allies among Republicans for his tax and spending policies. The days of Republicans siding with unions to oppose spending cuts are over.”

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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