New York State Capitol

While we all wait to see exactly what the US Senate comes up with for it’s version of the stimulus package it seems certain that the total amount will easily blow way past the $819 billion House plan which passed Wednesday. So what will it mean for New York? Especially the state government which is facing a $15.4 billion budget gap?And what about New York City where Mayor Bloomberg is unveiling his doomsday budget today?

Monetarily Sen. Chuck Schumer calculates the state and cities will get roughly $15 billion over the next two-plus years.The biggest chunk of help will come in Medicaid funding which happens to be the largest part of the state budget. But whatever portion of that $15 billion the state gets it assuredly will not be enough to close the deficit. That means all of Governor David Paterson’s doomsday talk and his resulting doomsday budget is still relevant.

Paterson’s budget, filled with fees and cuts, has met with pretty much total silence from Legislative leaders in Albany who have said it made no sense to even talk about what might need to be cut or what taxes and fees might need to be raised until the size of the Federal “donation” was understood. Well we’re pretty close to understanding now.

Paterson’s budget proposed roughly $9.5 billion in cuts — the lion’s share out of the two biggest areas of the budget, education and health care. Since the state can expect about $10 billion in Medicaid help over the next two years and roughly $5 billion in education assistance during the same period (not all of which goes to Albany — $11B is what one analyst said is likely to be Albany’s take), a quick back-of-the-envelope calculation shows that if lawmakers only wanted to use the Federal cash to offset budget cuts (as opposed to making the cuts and using the cash to reduce the tax and fee hikes) the number to cut comes down to a more manageable $4 billion.

While budget watchdogs and even the Governor may scream that the current crisis should be used to reform health care and education funding in NYS (which are generally far above what almost any other state spends with no benefit to show for it) we’ve all seen this scene before.

Under Republicans and Democrats New York’s government has almost always taken the easy way out, using one-shot asset sales, windfalls, and various accounting tricks to avoid facing the hard truth: New York State spends too much and New York citizens get too little for it.

You’d think the prospect of a second Great Depression coupled with a 15 billion dollar Federal gift might persuade the Legislature to fix the chronic budget mess under the cover of crisis. But you’d probably think wrong.

As for the city, Schumer says Gotham should get around $3.4 billion in health and education funding or about $1.7 billion this year and the same next year. The Independent Budget Office just estimated the city’s budget gap for 2009 has grown to $4.3 billion. The Mayor’s budget will count on that Federal cash but he will propose a sales tax increase, service cuts, and worker benefit changes to close the $2.6 billion gap that will remain.

Of course the politics at City Hall will be somewhat different because while the Mayor and most of the council members are running for reelection this November they don’t have the luxury Albany has of “creative budgeting”. That’s because back in the 70′s Albany made New York City adhere to very strict balanced budget rules. Too bad Albany won’t live by the very effective rules it sets for others….