New York Governor Seeks Power for Emergency Cuts

[stormcris]

NEW YORK -- Saying the state faces an unprecedented fiscal crisis, New York Gov. David Paterson on Tuesday sought emergency legislation that would give him authority to implement a one-time, across-the-board reduction in state payments to close a $3.2 billion budget gap for the current year.

The proposed bill includes a legislative finding that the state's deficit "presents a genuine danger that the state will lack the funds necessary to make payments as they come due," Mr. Paterson said in a Web address.

The state's "extremely precarious and worsening fiscal situation" necessitates the payment denials that the legislation would allow, he said. Mr. Paterson said Friday that the cuts could involve furloughs and layoffs of state employees, as well as delayed payments to schools, local governments, workers, health care and service providers. Payment reductions would exclude debt service and collective-bargaining obligations, as well as those expenses required under state and federal law.

"I want to make clear that this is not a cash flow problem that can be fixed with one-shorts or creative accounting," Mr. Paterson said. "This is a lack-of-cash crisis that threatens the financial stability of our state. Unless we take action, the state will run out of money."

Mr. Paterson and the legislature have been at loggerheads over how to solve the deficit since the governor submitted a deficit-reduction plan a month ago. He gave the legislature a choice of either passing his original plan or submitting to the one-time cuts. His original plan called for $1.8 billion in spending cuts and $1.2 billion of one-time actions to raise funds.

Ratings agency Moody's Investors Service warned Thursday that legislative actions would be crucial to the state's maintaining a "Aa3" credit rating and stable outlook. That rating is the fourth highest of 10 investment-grade rankings handed out by the firm.

"If there is no action taken by the state to close the gap, or if action is taken but is largely one-time in nature," the rating would be endangered, Moody's said. It added that January revenues will be critical because they begin to include taxes on Wall Street bonuses.

"Put simply, the state is running out of cash," State Comptroller Thomas DiNapoli said in a report a day later.

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Thoughts?

[stormcris]

It seems New York may be using the IOU system as well.