Gov. David Paterson Sunday made good his threat to share the pain of an unbalanced state budget.
He announced he will withhold $750 million in payments to school districts, local governments and social services agencies. Paterson said these were not cuts; the state is going to hold the money longer, to make sure it has cash on hand to pay its bills.
“I can’t say this enough: The state has run out of money,” Paterson said. “We are $1 billion short.”
The Governor blamed his actions on the state Legislature’s failure to make enough cuts to fill a $3.2 billion midyear budget deficit.Ã‚Â The Legislature enacted $2.8 billion in cuts, but did not cut into aid for school districts as Paterson had proposed.
“The reason that we donÃ¢â‚¬â„¢t have a permanent fix is because the Legislature walked away and ran back to their districts and told their constituents, ‘Look, I saved the school district from the big bad governor.’ But the reality is that they only temporarily delayed the day of reckoning,” he said.
Paterson’s decision, which is likely to be challenged in court, will cause a measure of chaos at hundreds of local government and school business offices.Ã‚Â Their state aid checks were to have been written and sent to them starting tomorrow.Ã‚Â For many of those agencies, the December state aid check is the largest one they receive. Schools will have 10% of their aid withheld. Other agencies will have as much as 19% withheld.
“Looming problems are in front of us,” Fulton Superintendent of Schools Bill Lynch warned last week.
The delay in aid payments may cause school districts and local government to draw down their reserve funds.Ã‚Â They’ve been trying to preserve those funds because the next two years of budgets contain large shocks — two big increases in the local cost of retirements for workers in the state system.
Local governments are obligated to pay a share of the retirements of their workers in the state system.Ã‚Â For several years, when investments were very strong, local governments paid little or nothing.Ã‚Â But the Wall Street crash is now forcing local governments to make up a large gap.
Fulton Mayor Ron Woodward has said the city will have to spend as much as $400,000 more in the 2010 budget and another $400,000 on top of that in 2011 to fill the retirement fund gap.Ã‚Â The city budget that goes to a public hearing Tuesday contains no tax increase because the huge jump in retirement fund contributions has been offset by other cutbacks.Ã‚Â The 2011 budget, however, is another matter.
“I don’t know how we’re gonna do it without a tax increase,” Woodward said.