Gov. David Paterson and legislative leaders on Monday defended their $131.8 billion budget agreement and its 8.7 percent spending increase as a model of fiscal prudence.
“We made the tough choices,” Paterson said at Monday’s press conference following the most secretive budget process ever. He said the long-awaited fiscal reform of Albany has begun in the budget deal to be voted on this week.
“State spending was actually flat,” Paterson said. He noted that more than $6 billion of the spending increase is with federal economic stimulus funds, not state dollars. “If the Legislature can maintain this type of fiscal discipline over the next few years, we can see the light at the end of the tunnel.”
The praise of the budget by Paterson, Assembly Speaker Sheldon Silver and Senate Majority Leader Malcolm Smith conflicts with the view of private sector analysts. They have said the billions of dollars in additional taxing and billions of dollars of restored funding to special interests has put New York on a dangerous path, threatening a recovery even when the recession ends.
The state Business Council said the “reckless” budget threw “fiscal responsibility out the window.”
“It’s ‘The Twilight Zone,’ ” said Doug Muzzio, a professor of politics at Baruch College, saying there appears to be a distorted reality in the state Capitol. He said the budget is using one-shot aid from the federal economic stimulus package to create unsustainable spending. He also said the secretive budget process was a new low.
“They are treating this stimulus package as methadone, to get them past the shakes and sweats of this budget cycle,” Muzzio said. “But methadone is addictive, and you’re not going to get another stimulus package. It’s extraordinarily shortsighted.”
On Monday, the senior director of Fitch Ratings, a major bond rating company, gave some comfort to Albany leaders. She said getting a budget agreement before the April 1 deadline is a positive, after late budgets in Albany for most of the past 20 years.
“We have been saying they acted in a timely way to a downturn, and this is kind of consistent with that,” said Laura Porter, senior director of Fitch.
She said she will withhold judgment on the budget until she determines how federal stimulus money is used and if the spending is sustainable. She also notes the budget deal doesn’t include the structural changes to drive down spending that was included in Paterson’s budget proposal in December.
“If choosing between the two, you’d want a sustainable budget over an on-time budget, but I don’t think it’s an ‘either-or’ situation,” she said.
The budget includes restoration of some health and education cuts Paterson once argued were essential, and it overhauls the state income tax system so wealthier earners are taxed at a higher rate. That change, and other taxes and fees, are expected to add up to $7 billion.
The budget also filled a $17.7 billion deficit that Paterson said Monday could deepen by as much as $4 billion, requiring him and legislators to recraft the budget midyear.
Paterson emphasized that the $10.5 billion increase in spending is comprised mostly of more than $6 billion of federal stimulus funds. While the total budget deal, including federal funds, includes one of the biggest increases in spending ever and is double the size of the 1997-98 budget, Paterson’s budget division said state spending will increase just $642 million. That would be 0.8 of 1 percent more than current state-only spending of almost $77 billion.
“The more they talk, the less it adds up,” said E.J. McMahon, director of the fiscally conservative Empire Center for New York State Policy. “And you need to think of the stimulus money there. It is temporary, extraordinary aid that is replacing state funds. . . . They are growing the spending base at a level that’s not sustainable.”
He said the painful cuts the leaders refer to are mostly decisions to reduce growth. In a complete contradiction to Paterson’s view, McMahon says every major area of the budget is getting more spending.
“Governor Paterson and the majority leaders have found a way to make doing business even more expensive,” said Matt Crosson, president of the Long Island Association, a business group. “It is a budget without logic, without common sense and without a clear understanding of what is required to bring New York back from this recession.”
How this will play to New Yorkers is unclear.
“He gets the budget on time, that’s good, great,” said Quinnipiac polling Director Maurice Carroll. “But he gets a budget the size of the Empire State Building? That’s bad.”
Part of confusion is the result of the unprecedented secrecy the Democrats used to craft the budget. They dispensed with conference committees in which rank-and-file legislators debate policy positions and spending priorities in public. The leaders found the committees unnecessary because they were all Democrats and had few differences.
“That’s the problem when you do it in secret,” said Blair Horner of the New York Public Interest Research Group. “There’s no way for the public to know how the numbers add up.”