Paterson said the damage was worse than expected.
“In the beginning of May, our budget director projected our New York State deficit over the next three years at $21.5 billion—that was a record,” Paterson said in his speech. “But That number has now erupted to $26.2 billion—a staggering 22 percent increase in less than 90 days.”
The recent mortgage crisis, banking crisis and corresponding Wall Street downturn, has triggered a shortfall of tax revenue, leaving the state with a larger than expected deficit.
“The damage on Wall Street is affecting all of our communities and its effects on our New York State’s finances are devastating,” Paterson said.
Wall Street firms lost $22.8 billion in the first quarter of 2008 and 4,300 jobs during the month of June alone.
Additionally, the amount of tax revenue from banks has fallen drastically since June of last year. “The 16 banks that pay the most on taxes to their profits remitted $173 million to our New York State Treasury,” Paterson said. “This June, just a month ago, they sent us $5 million—a 97 percent decrease.”
Paterson suggested paring down the State government to cut costs. “It is time for New York and other governments to cut up our credit cards,” he said, adding that his administration will “address the size of the state work force” and consider further cuts to agency spending and public and private partnerships for State assets.
On Monday, July 28, New York City Mayor Michael Bloomberg spoke about the city’s financial plan at the State Annual Financial Control Board meeting.
To address the city’s tightening budget, Bloomberg said the city’s agencies have reduced spending.
“That’s why we’ve put the lid on City-funded spending; it’s been kept virtually flat for this year compared to last year,” Bloomberg said. “In fact, the budget’s spending increase of 1.6 percent in City funds is well below the projected 2.7 percent annual rate of inflation. “We’ve directed City agencies to be very judicious in identifying where and how to save, in order to maintain our essential services and our economic competitiveness,” he added.
To find a solution for the deficit, Paterson called the legislature for an emergency economic session on Tuesday, August 19.
“When I meet with the legislature, we will work together to help New Yorkers cope with this crisis,” Paterson said.
“We will continue working on a property tax cap to lighten the load for homeowners and we will find a way to curtail the rising costs of home heating next winter. I will do everything I can to make sure that New York’s families do not freeze when it gets cold.”
Paterson emphasized the importance of early planning. “My message to the legislature is that next year’s budget process starts now,” he said.
