Gov. David Paterson said last week that New York state has run out of cash and he’s directing budget officials to reduce state aid payments to schools, local governments, and nonprofit service providers until the financial picture improves.
Speaking at the Museum of American Finance in Manhattan, Mr. Paterson said he’ll probably get sued, but he won’t let the state run out of money on his watch.
“I am directing the Division of the Budget to limit payments so that we will have the cash to pay our debts at the end of December,” Mr. Paterson said. “I will continue to withhold payments until this economy is leveled off.”
“Now, New York has run out of cash,” he said. “You can’t spend money that you don’t have.”
Budget Director Robert Megna said the state faces a shortfall of more than $1 billion in the general fund at the end of this month, which would be a first for New York.
Other state funds can be tapped to help close that gap, Mr. Megna said, but even using all $1.2 billion of rainy-day reserves and delaying a pension fund payment will leave the margin “razor thin.”
Rather than risking some setback that would force hasty cuts, Mr. Megna said the administration is cutting spending in an orderly fashion. The budget division plans to detail temporary cuts this week, he said.
In his executive budget proposal next year, Mr. Paterson could propose making them permanent.
“We’ve had a revenue collapse over the last 24- to 36-month period,” Mr. Megna said. “The state’s cash position is at its weakest point in recent history.”
Last week, after lawmakers agreed to cuts of about $2.8 billion, the governor said they wouldn’t be enough. He warned then of reduced and delayed payments, targeting school aid and funding to hospitals.
Timothy Kremer, the executive director of the New York State School Boards Association, said it has asked its roughly 700 members to assess the impact of approximately $300 million in school aid is delayed or permanently cut, which Mr. Paterson had proposed last month. Lawmakers rejected the cut, which would have been roughly 1.5 percent reduction across the board.
A version of this article appeared in the December 16, 2009 edition of Education Week as Governor of New York Says State Out of Cash