Is that state in recession or teetering on the precipice of another Great Depression? Will this generation become America”™s second “Greatest Generation?”
No one is sure where New York”™s economy will end up, but Gov. David Paterson is hoping a new advisory panel of economic experts can contribute some enterprising ideas to stop the rest of New York from joining Wall Street at the bottom of the financial barrel.
The new Council of Economic Advisors met for the first time in Albany on Monday, August 18, one day before the Legislature was called back into special session. The unpaid group, consisting of members ranging from Nobel Prize-winning economist Joseph Stiglitz of Columbia University to Robert Rubin, director and chairman of Citibank”™s executive committee, make up the 18-member group who hope to bring some palatable answers to the state”™s soured economy.
Paterson”™s radio plea on Tuesday morning, when he compared the current fiscal crisis to a harbinger of the Great Depression, hopes to garner support for his proposed cuts to the current budget and to brace for a dismal 2009-2010 year with legislators en route to the capital for a special session that day. Where will spending be trimmed, where will additional funds come from, and where can additional revenues be found, now that Wall Street is nearing rock bottom as a significant source of income?
Robert Ward, deputy director of Rockefeller Institute in Albany, heads that entity”™s state and local government finance research team. Before he joined Rockefeller, Ward was research director for the public Policy Institute of New York State, affiliated with the Business Council of New York State.
Ward said the 90-minute meeting with the governor sparked “An interesting discussion, taken up largely by a presentation by the state budget division explaining the size of the problem, particularly in the 2009-2010 budget. Gov. Paterson is very focused on bringing state spending under control.”
Paterson hopes his years spent working alongside Assembly and Senate members will help get the two sides of the aisle working together rather than nitpicking over pulling pork off the spending menu.
First and foremost, said Ward, “The governor is looking at the immediate problem of closing the deficit and addressing cuts in state agencies.”
When it comes to fixing the Wicks”™ public works bidding law, the rising cost of state pension plans and closing tax loopholes for multinational companies, those hot topics did not come up at the advisory panel”™s first meeting. “My understanding is our group is to come up with new ideas, whether it relates to public/private partnerships, providing services more cost effectively or analyzing new action in Washington in the form of an economic stimulus package ”“ and decide whether it will help or hurt in the long term,” said Ward.Â
Panel member Dan O”™Flaherty, professor of economics at ColumbiaUniversity in Morningside Heights, said Paterson reached out to the economics community to brainstorm. “We don”™t expect this to be a long-term commitment. Essentially, Paterson will pick our collective brains to see what innovative ideas he can use to help New York in this crisis. Whether the Legislature will embrace those ideas is another story.”
Rae Rosen, assistant vice president and senior economist for the Federal Reserve Bank of New York, sits on the new panel. She said the governor presented the financial problems; the panel”™s next meeting will talk about ways to tackle them. A date has not been set.
The Legislature can listen to Paterson”™s proposals, but ultimately, unless Paterson uses his executive order clout, it”™s the legislators”™ call on cuts. The budget cuts Paterson has already proposed ”“ $2.6 billion over the next two years, with $630 million to be slashed immediately to close the current budget gap ”“ have been described by the governor himself as “painful.”
On Wednesday, Aug. 20, Paterson called a press conference to announce the Legislature agreed to $427 million of the cuts proposed. While elected officials didn”™t quite hit the number Paterson hoped for, he said getting them on board with 70 percent of his proposals would have to do for now.
With Senate Majority Leader Dean Skelos, a Long Island Republican, and Assembly majority leader Sheldon Silver, a New York City Democrat, by his side, Paterson praised both sides of the aisle for their bipartisan effort and for coming out and making cuts at a time when all are up for election in November. But Patersont noted Silver and Skelos have “a very divergent sense of what direction to go.”
Paterson is preparing for less income from both capital gains taxes and Wall Street, building that additional loss of that revenue into the budget to be on the safe side.Â
“In the past 10 years, the state”™s budget had increased by 71 percent,” said Paterson. “Spending money government didn”™t have and passing costs on to taxpayers has come to an end, but it will be a bumpy ride.”
The Legislature will be back after Labor Day to tackle the property tax cap on school taxes, and with election time just around the corner, the pressure is on.
