Turns out New York’s “Accidental Governor” is no more capable of understanding the responsibilities that come with the job than his predecessor. But while Eliot Spitzer’s fatal flaw is hubris mixed with a wee bit of sex addiction is seems, David Paterson’s problem is simply ineptitude.

Paterson and his supporters have been making the claim for months now that he has been unfairly targeted by the media, and certainly the ugly coupling of sloppy bloggers and immoral tabloids produced a pathetically irresponsible miasma of “a rumor from a single unconfirmed unreliable source” “reporting”. But as it turns out, there was even more fire than smoke.

That the sitting Governor would call the victim of an alleged assault by one of his closest aides (his people say she called him but DP declined to make that case on the radio this morning) after she had been pursuing legal redress is unfathomable to those of us who haven’t been CEOs. It’s just strange how power seems to erase a person’s (presumably) natural ability to use his brain. It’s not like he was turning up aces before this happened. You’d think with all of his troubles he might have thought picking up the phone and calling this woman was maybe not the best idea. Or not.

Paterson was never suited to be the boss. To his credit he said all the right things about the state budget and the economy and did his best to shame the hucksters in the Legislature to take the crisis seriously. But they never took him seriously and for good reason. What happens behind the scenes in politics is way more important than what goes on in public and everyone in Albany knew Paterson was the captain of a rudderless ship.

Let’s be fair: “Steamroller Spitzer” didn’t do any better with the Legislature either but there was no question he, and everyone else, at least knew what he wanted to do. Paterson has shown no such inclination.

The political establishment has been waiting for him to declare he wasn’t running for (re)election and Democrats have been fretting about his unwillingness to take a fall for the sake of the party. Seems like that’s all about to take care of itself.

And so now it’s in the hands of Andrew Cuomo. Haven’t we seen this movie before? Cuomo — the guy who wants to be Governor so bad we can taste it — was given the opportunity to screw Spitzer with Troopergate (Spitzer ended up screwing himself instead…well someone ended up screwing Spitzer but she’s not important right now) and now Cuomo has the power to finish off Paterson. There’s definitely something Shakespearean going on around here.

St. Sen. Hiram Monserrate (photo: Ellis Kaplan)

If you want some advice about marriage — same-sex or otherwise — I can’t think of anyone better to ask than convicted girlfriend-batterer, ex-cop, and current New York State Senator Hiram Monserrate. Monserrate was one of eight Democrats in the state’s “upper” chamber who voted against allowing people of the same gender to marry yesterday.

(Irony alert! Four of the eight ‘no’ votes came from members who represent Queens — but apparently not queens.)

Although I’m sure he had very good reasons for his decision (the word in Albany and his Elmhurst district is he’s hoping to beat back a primary opponent by appealing to religious voters!) Monserrate is pretty much the poster boy for everything that is wrong in Albany and he proved it yet again with his vote.

You may recall a grand jury charged Monserrate with three felonies and three misdemeanors in the caught-on-tape beating/slashing of his girlfriend Karla Giraldo. Giraldo was seen on surveillance tape clinging to the doorway of Monserrate’s home screaming while the Senator shoved her outside. At first Giraldo made statements that lead prosecutors to believe Monserrate had slashed her in the face with a broken drinking glass. Later she changed her tune.

Nonetheless the Senator was convicted of misdemeanor assault and will someday, maybe, be the subject of a “disciplinary” hearing in the Senate. And Friday he will be sentenced for his crime.

So now this “family values” Democrat wants to gin up support among the Pentecostal crowd out on Roosevelt Avenue by voting against same-sex marriage? Perfect.

The arguments for and against marriage equality are well known and honest people can disagree about whether it’s fair to deny two people civil, legal but non-religious marital status solely because of their gender. It would be interesting to hear Queens Senator Shirley Huntley’s take. The 71-year-old African-American Senator certainly remembers anti-miscegenation laws that denied civil, legal marriage to two people based solely on the color of their skin. She was another of the 8 Dems who voted ‘no.’ Unfortunately she chose not to explain.

In fact just one of the 38 Senators who voted against same-sex marriage explained his vote. St. Sen. (and minister) Ruben Diaz has had a bee in his bonnet about gay everything since as far back as I can remember. I’ll never forget the news conference in the South Bronx a bunch of reporters attended one winter day a decade back in which the speakers were there to talk about some environmental racism they thought was going on in the neighborhood. One by one they decried how the area was bearing far more than its share of pollution. Then Diaz came to the mic and went on a bender about gays. Huh?

In 1994 when he was on the Civilian Complaint Review Board he said bringing the Gay Games to New York would only increase the number of people with AIDS. A few years later he was the driving force in trying to close the Harvey Milk High School (designed to give gay kids a safe space to go to school) by claiming it was “heterosexual discrimination.” At least he’s consistent. But one has to wonder why he has for so many years been fixated on gay things. Freud would have a field day.

And here’s where the story comes full circle. Diaz told the Post recently that he will be officiating the marriage of Hiram Monserrate and Karla Giraldo. After the restraining order that is keeping the Senator away from his punching-bag fiance-to-be is lifted.

Oh, so that’s the traditional marriage the Senate is protecting! God bless them.

New York State Capitol

So the Albany soap opera has come to a close. Crystal and Alexis will live to catfight another day. Serena and Blair will return in the fall. And Malcolm and Pedro will assuredly be ready for more battles next session. In the meantime let’s figure out the winners and losers from the month of madness.

Losers

We’ll start with the losers because it’s easier.

Republicans

Already in a deep state of disarray and on the wrong end of the demographic pendulum, New York Republicans came thisclose to pulling off a miracle. The problem is they had to consort with a criminal (OK not a convicted criminal but still) to get there and surprise surprise he stabbed them in the back. The GOP gets no credit for trying to fix Albany and ends up with no more power than when this all started. Ouch.

Senate Democrats

It was clear when they won control last November that these guys (and gals) were waaaay out of their league. Having spent their entire careers in the minority where they had been paid to do virtually nothing (since they had no power and no real function), they ascended to the leadership without any idea how to run the place. Nothing that has happened in the last 30 days will convince anyone otherwise. Indeed now everyone knows what reporters and Albany insiders knew nine months ago.

Mike Bloomberg

This may not seem so obvious because Bloomberg kvetched about the problem plenty, echoing the sentiments of most New Yorkers. Nonetheless in having to fight for school control and the ability to raise taxes, Bloomberg was forced to draw attention to two things that may not help him much in his reelection effort. Then again he’s gonna spend $100 million bucks against a guy no one knows is even running.

Tom Golisano

Having first helped produce the Democratic win in November and then having prodded the deserting Dems into action, billionaire Floridian (nee Rochesterite) Tom Golisano has proven he can play the puppetmaster — he’s just not very good at it. Golisano wants reform but nothing he has precipitated is likely to produce lasting change. I would LOVE to stand corrected on this one.

New Yorkers

We made California look good. New Yorkers got the government they deserve. By reelecting their State Senators and Assembly members year after year New Yorkers have, like many Americans, cast aside their responsibility to elect officials who will work in the best interest of his or her constituents. Now no one can argue they don’t know what the result of this has been. New Yorkers got screwed to be sure, but honestly, don’t we deserve it?

Winners

David Paterson

The only winner here is, oddly, Governor David Paterson. Sure there will be arguments that Attorney General Andrew Cuomo will benefit in his quiet attempt to be the right Democrat for Governor in 2010 but where’s the evidence? His limited contribution was to declare that Paterson couldn’t appoint a Lieutenant Governor. Most New Yorkers will think that makes Cuomo part of the problem.

Assembly Speaker Shelly Silver might also be deemed a winner but he was already the most powerful guy in Albany before the chaos and he remains so today. And don’t talk to us about Pedro Espada. Yes he is now Majority Leader. No, it won’t keep him from being indicted.

The only person who gets any bump out of this is Paterson who made the right noises and, with his Lt. Governor move, will be perceived by the public to have created the spark that made this problem go away. That being said, winning in this case is a relative thing. Paterson had no where to go but up.

Daily News uber-blogger-reporter Liz Benjamin was in the courtroom today for yet another hearing with Supreme Court Justice Thomas McNamara on the “Who’s in Charge of the Senate” case. You’ll recall the Dems and Republicans have been in McNamara’s court seemingly every couple of hours for the past few days with the same result: McNamara tells them to go act like adults, figure out a compromise, and let the court deal with court stuff.

So when he adjourned today’s hearing with the same sentiment someone laughed. Out loud. And reporters took note. Now Liz has fessed up:

I have to confess that it was me who laughed audibly from the back of the courtroom when the judge said he was adjourning this matter yet again. That sparked the following response from the bench.

“The laughs that I hear are understandable. And I’ll be honest with you, coming out here today and going through this ritual is not something that I’m really getting enjoyment out of.”

“However, given the importance of what we’re dealing with and the resolution of which, in my opinion – I’ve expressed this throughout this entire proceeding – is best left to people of another branch of government despite the understandable reaction I think I have an obligation personally…and in the function of my job to allow the process to continue in a manner if I feel that progress is being made and if the system that I represent is not being abused.”

McNamara warned – again – that he is, “at some point,” going to reach a moment when he will “do my job,” adding: “But with the hope of a resolution that could be reached by the parties, I am willing to allow it to continue to go forward.”

Ha hahahahahahaha. Kudos to Liz for both admitting she was the “guilty” party and for doing the right thing: Laughing at the pathetic circus that 62 men and women elected and paid to legislate have instead created. The judge should take a hint from Liz and laugh in the faces of the lawyers and their clients. “Screw you! Fix it yourselves!” That’s the quote we’d like to see.

UPDATE

Apparently the judge agrees with us. McNamara finally ruled and now the real fun begins. Bipartisan compromise. I kinda miss Joe Bruno right about now…

Circus Promoter Tom Golisano

There’s big news about Tom Golisano.

The formerly upstate billionaire (he’s still got the money but he moved to Florida) is dating former tennis star Monica Seles. So reports Page Six. Oh, and the three-time candidate for New York Governor  just loves the circus. How else to explain his recent quarterbacking of the quasi-Republican coup in Albany?

Golisano has always been an odd bird in New York politics. In his three runs for Governor as an independent (94, 98, 02) he always seemed to have it out for Republican George Pataki (who won each time) even though they, at times, seemed to disagree about very little. Golisano’s reform mantle has really been a cover for lowering taxes in the state in which he built his successful payroll company. Nothing wrong with that.

So last fall Golisano put some of his money into Democratic State Senate candidates hoping to hitch a ride on the demographic train that spelled the inevitable end of decades-long Republican rule in Albany’s upper chamber, if not in 2008 than certainly in 2010. When the Dems did in fact win control of the Senate Golisano expected a hearing. Or at least a little courtesy.

Instead we’ve learned he got a fairly rude brush off from the newly-ensconced Majority Leader Malcolm Smith. Golisano says he was pissed after Smith spent an entire meeting with the billionaire fooling around with his Blackberry. Quel suprise!

Smith was incompetent on day one and, as numerous others have written in the last few days, he horribly misunderstood how to govern with a one-seat majority. So Golisano helped convince two Democratic Senators to back Republican Dean Skelos as the new Majority Leader and the coup was on. But if the G man seriously believes this will change anything he is more deluded than his mentor, Ross Perot.

First, the two Dems he lured to the team are both in serious legal trouble and may both end up sent packing before their terms end. Both Pedro Espada (under investigation by Attorney General Andrew Cuomo for using state funds for himself — a charge he went to trial on a few years back and won) and Hiram Monserrate (soon to go on trial for felony assault of his girlfriend) are hardly posterboys for reform. Indeed Espada has shown he will do almost anything to save his political skin. That’s what makes this next part pretty scary: As part of this deal, Espada becomes President Pro Tem of the Senate, meaning he will become Acting Governor the second David Paterson becomes incapacitated or even leaves the state. So now Paterson is a prisoner of New York. Could be worse. Let’s hope he doesn’t get an appendicitis though.

Of course everything is still in flux and it’s Albany so the only thing worth predicting is that this will all end in an unpredictable and highly entertaining way if you’re into dysfunction. And that’s what Golisano has bought for himself and the state he no longer calls home: Even more political dysfunction.

Smith was no leader but he was the Leader of the Senate and with only about a week left for the Senate, Assembly, and Governor to get a whole mess of really important stuff done, this chaos certainly does not serve the people of the Great State of New York. The Republicans agreed to Golisano’s demands for substantial reform in the way the Senate works which, if Skelos and Company really meant it, might actually be worth the turmoil. But Skelos? C’mon Tommy, don’t you listen to The Who? Try track the last track on Who’s Next. You might learn something.

The Senate Republicans proved over their 66 years of (almost) uninterrupted power (Dems were in “control” for nine months in 1965 due to redistricting-mandated multiple elections) to be as venal and corrupt as their Democratic opponents. It’s not for nothing that their former long-time Majority Leader Joe Bruno has been charged with 8 Federal corruption counts.

Golisano is clearly a savvier negotiator in business than in politics since any idiot realizes Republicans would have promised anything to get back in power. Keeping those promises is another story. And Golisano’s reform bona fides have always been a little suspect.

Last fall he promised to take on his fellow billionaire politician Mike Bloomberg over the Mayor’s extension of term limits (allowing MB to run for a third term) but then punted, spending chump change for a tepid last-minute “effort” that failed.

This time around Golisano has done little more than bankroll a new show for the Albany Circus Maximus. I’m sure he’ll enjoy his ringside seats before jetting back to his waterfront abode in Naples, Florida. As for the rest of us? Let ‘em eat popcorn.

It's Coming!

The headline in Friday’s Boston Globe would not have been out of place in the Post or Daily News: MBTA plans for drastic cuts in bus, rail service. Hmmm. And it gets even more familiar once you start reading the front-page article.

The MBTA would halt all evening and weekend commuter rail service, eliminate six Green Line stops, discontinue lightly used bus routes, and lay off 805 employees if the agency does not get legislative help with its $160 million deficit, according to a state document.

The agency has delayed making the contingency plan public as it awaits action from the Legislature on a potential gas tax increase designed to rescue the state’s transportation system. The increase could prevent or minimize service cuts and fare increases.

Wait. Is Massachusetts now governed from Albany? No. In fact Boston and Gotham aren’t alone. As Eliot Brown points out over at Politicker, Chicago went through all this almost two years ago (when times — and tax receipts — were good) and managed to avert their doomsday plan well past what everyone thought was the “last minute.”

The problem is that transit funding in the US is wildly inadequate and often poorly set up. Look at the systems with the most problems of late: New York, Boston, and Chicago. These three systems alone account for roughly two out of every five mass transit trips taken in the entire United States. And riders already pay far more of the cost of operating those systems than newer systems like Miami, Houston, and L.A. They are, in effect, penalized for being successful.

The Federal government stopped supporting mass transit operating budgets in the early 80s, instead focusing on capital funding to build or rebuild systems. The result has been a long, slow descent into increasing fares and local bonding initiatives funded with incremental tax increases. That impact of that long-ago policy shift is finally catching up with America.

Almost every transit system is facing operating deficits and service cuts and fare hikes are being contemplated across the country. It’s easy to blame Albany for inaction (and it’s certainly true that the Senate in particular seems desperately in need of adult supervision) but the bigger picture is two-fold and damning: The Feds forced transit funding down to the local level while freely doling out cash to highways in all 50 states. And in New York the decisions of Governor George Pataki, Mayor Rudy Giuliani, and Mayor Michael Bloomberg have compounded a bad situation.

The three of them over the last 15 years forced the MTA to borrow money repeatedly for projects — there was NO pay as you go in the Empire State — and now the mortgage payments are eating away at the operating budget. All those new cars on Metro North and the LIRR, all those subway station improvements, all those new subway cars — that was all done on borrowed money and the bill is coming due more each year. That’s why the MTA is in such a hole despite riders paying the highest share of operating expenses of any transit system in America.

At the same time multiple studies have shown cars and highways getting massive hidden subsidies that wildly distort the way Americans get around. Hong Kong’s transit system actually makes a profit. How? Everybody uses it because gas prices are very high making transit a cost-effective and attractive option. Hong Kong’s transit doesn’t need a subsidy because the government doesn’t tilt the playing field toward auto use with hidden pro-car subsidies.

Our leaders in Washington and Albany (and Boston and Springfield) have repeatedly failed transit users as if money spent on transit is somehow less worthy than money spent on highways. America loves it’s cars but isn’t it time to at least stop subsidizing them?

NYS Comptroller Tom DiNapoli

Add State Comptroller to the very very long list of people who think the budget agreed to by Albany’s “3 men in a room” sucks. In fact, other than the three men in the room (Governor David Paterson, Senate Majority ‘Leader’ Malcolm Smith, and Assembly Speaker Shelly Silver) and their respective lackeys, the list includes pretty much everybody.

Here’s what Comptroller DiNapoli — himself a former Assembly member who then-Governor Spitzer feared would go too easy on the Albany power trio — has to say:

New York faced an extraordinary challenge to adopt a 2009-10 State Budget in the context of a daunting recession. My preliminary review of the budget indicates it does not adequately respond to today’s economic realities.

The budget is not a long-term solution to New York’s propensity to spend more than the state can afford. While the budget proposes to close an unprecedented gap, it does so by an over reliance on non-recurring federal stimulus funds and new tax revenues projected to materialize at a time of declining tax receipts.

This is essentially a buy-time budget, based on a hope that the economy recovers quickly. It’s a very fragile basket to place all the taxpayers’ eggs in. Instead of using the Federal stimulus to restructure the financial plan and match projected revenues to long term growth in spending, the budget uses stimulus funds as a short-term fix.

The danger is that New York could end up right back where we started, with huge budget gaps and an unsustainable level of spending. I will provide a more detailed review of the enacted budget shortly.

But of course all that matters to the statehouse wrecking crew is, whom if anyone will voters take their anger out on? Since voters almost universally reelect their local legislators who then pick the Senate Leader and the Speaker, Governor Paterson ought to be very worried. He’s the only guy voters can take it out on directly.

New York Gov. William Sulzer in 1913

The latest Get Real video is a history lesson that Albany’s Democrats seem never to have learned. Turns out their self-destructive behavior now is eerily similar to what happened in 1913 — the last year (other than one year during the Depression) that the party controlled all three levers of power in state government. Could they be sowing the seeds of their own destruction again?

Get Real: Dem History Forgotten from Jay DeDapper on Vimeo.

Will the Rich Take Their Rolls?

Do we need a “millionaire’s tax” to solve New York’s budget crisis? Advocates of the tax say we do because New York doesn’t make the rich pay their fair share.

Opponents say that is not true and counter that hiking taxes on the very wealthy will only cause them to move out of state, depriving Albany of hundreds of millions, if not billions in tax revenue.

So who’s right? Get Real cuts through the crap and tells the truth:

New York State taxes are too regressive meaning the rich don’t pay their fair share.

That’s the claim and in one sense it is accurate — the wealthiest pay a smaller share of their income in total state and local taxes than do people with lower incomes. But in another sense the statement is actually pretty silly. Read on.

Advocates cite statistics from the Institute on Taxation and Economic Policy showing that the “effective tax burden” on the poorest fifth of New Yorkers is 12.6% (the highest for any group) and just 6.5% for the wealthiest 1%.

That’s interesting but these numbers represent the tax burden including ALL state and local taxes – including real estate and sales taxes. Not just income tax. Advocates also point to this:

That’s also interesting and accurate but only half the story – think about it: On one hand we learn people making 40K a year are paying the same tax rate as a millionaire while on the other we are told millionaire’s pay just half the tax rate of someone making a working class wage. Both are technically correct but neither prove that New York State’s taxes are particularly regressive.

For instance EJ McMahon of the conservative Empire Center for New York State Policy points out that:

“Exemptions, deductions and credits—which are phased out or capped for high-income taxpayers—play as large a role as the marginal tax rate in determining taxes for most families.  Middle-class New Yorkers pay lower graduated rates on the first $20,000 to $40,000 of their income, while those earning more than $150,000 pay a flat rate of 6.85% on all income. Thus, for example, a family of four earning $60,000 pays an effective rate of 2.5% (about $2,100), while a family with income of $1 million pays an effective rate of more than 6% (over $60,000).”

In other words the rich pay a higher effective income tax rate than the middle and working classes.

McMahon uses different stats to try and refute the advocates’ contentions about NY’s allegedly regressive taxes: “The highest-earning 1% paid 41% of income tax in 2007, up from 26% in 1994.  The top 1% will still be paying 35% this year, despite income and market losses.”

McMahon’s numbers demonstrate that as the rich have gotten much richer they have paid more in total taxes, which is also interesting, but it too does not directly address the issue:
Are New York State’s taxes regressive?

The answer seems to lie in another chart that advocates have included in their presentations – the same chart as the first one we showed you but with a breakdown of which taxes make up the “effective tax burden.”

Note that the lowest-earning fifth of New Yorkers do not pay income taxes at all and in fact get money from the state thanks to the nation’s most generous Earned Income Tax Credit. Note also that the income tax burden increases as the groups get wealthier. What’s interesting here is that the poorest fifth of the population pay the highest effective state and local tax rate and that’s because of sales and excise taxes. This group spends the largest share of its income on taxable goods (which makes sense since the working poor often live paycheck-to-paycheck while millionaires are able to live well and save large amounts of their earnings).

Advocates say that is precisely the point – the poor pay the biggest share of their income on taxes overall and that is regressive. But that’s because New York’s sales and property taxes are among the highest in the nation. Sales taxes are indeed considered regressive (poor pay higher percentage of their income than rich) but property taxes are less so.

So what’s the answer?

New York’s reliance on sales and real estate taxes coupled with a relatively high income tax puts more of the tax burden as a share of income on those in the lower-earning three-fifths of workers. That does make the state’s tax policies regressive but compared to taxpayers in other states not remarkably so.

More directly to the point – and why the claims made for a millionaire’s tax are more smoke than fire: If we want to make the income tax more progressive, ought we not also lower the sales tax to make it less regressive? After all, New Yorkers who are in the bottom fifth of the income ladder don’t even pay income taxes. Making the rich pay more won’t change that. On to the other major claim….

Wealthy New Yorkers will flee the state if their income taxes are hiked.

Governor Paterson has most famously used this argument to explain why he was opposed to a millionaire’s tax. But there’s strong evidence to suggest that’s unlikely to happen.

Both sides like to use New Jersey as an example and for good reason. In 2004 the Garden State hiked it’s top income tax rate from 6.35% to 9% on those making more than a half-million bucks a year. What happened? Depends on who you ask.

The Fair Share Tax Reform group cites a study done late last year by Princeton University’s Policy Research Institute for the Region. The report (with the eyes-glazing-over-as-we-read title “Trends in New Jersey Migration: Housing, Employment, and Taxation”) showed that the number of people earning more than $500,000 a year grew by 70% after the tax hike, resulting in an additional billion dollars a year in revenue for Trenton.

McMahon, on the other hand, notes:

“The Garden State has become one of the nation’s worst economic and fiscal basket cases. For tax years 2004-2006, the first three years after New Jersey raised its top rate, its population of high-income filers (those earning over $200,000 in adjusted gross income) increased by 44 percent, compared to a national rate of 59 percent. New Jersey’s growth rate in high-income taxpayers ranked 47th out of 50 states during that period; only Ohio, Connecticut (which also raised its top rate) and Michigan were lower.

The point is well-taken and begs the question: What does the experience of the boom years 2004-2008 have to do with what might happen as we slide into a very deep recession? The fact is neither side knows because there is no relevant research to look at.

But you have to ask: If New Jersey’s total tax burden (including property and sales) is the highest in the nation at 11.8% and Connecticut’s is third-highest at 11.1%, are wealthy New Yorkers who currently live in the second most-taxed state at 11.7% really going to move across the river or the border to save what would amount to them as little more than a few pennies?

It seems very unlikely. In fact the US Census Bureau asked about moving in the 2000 Census and found that 78% of those who moved said they did so for either family or housing reasons. In fact housing was the primary reason for moving among the wealthiest and best educated.

Certainly even this research misses the incredible changes in technology that allow people to work from remote locations – Jackson, Wyoming has millionaires galore who work from their ski lodges via blackberry and computer.

But based on what we know now, if Albany were to institute a higher tax on the state’s wealthy, there is no reason to believe any substantial number of them would leave.

Finally it’s worth noting that the “millionaire’s tax” has recently be redefined as a “quarter-millionaire’s tax” with the Fair Share Tax plan being promoted. The arguments being made are still the same, even if the number of people effected is much, much larger.

Now you know.

Wish You Were Here? Maybe Not.

New York’s budget hole is huge and growing as Governor Patterson reminded us all on Wednesday but if you want to see how bad things can get, go west.

As the LA Times lays out in painful detail, California’s budget woes are much worse than ours. New York faces a $14 billion gap this coming budget year while California’s deficit is $42 billion over the next 15 months.

Paterson has repeatedly warned that if Albany’s legislative leaders don’t agree to structural spending changes New York “might end up like California.” Here’s what he means:

Gov. Arnold Schwarzenegger and the legislative leaders in California’s capital, Sacramento, have agreed to cut spending on schools, colleges, and public transportation while increasing some key taxes and borrowing against future lottery earnings. That seems pretty sound, no? (Especially that borrowing bit….)

Here’s what the LA Times learned: “The deficit would be wiped out with $15 billion in cuts; $14.4 billion in new and increased taxes on sales, vehicles, gasoline and personal income; $12 billion in borrowing against future profits from the lottery; short-term loans; and various accounting maneuvers.” And you thought Albany was bad.

The deal comes less than a week after Schwarzenegger forced more than 200,000 state employees to take an unpaid day off last Friday meaning almost all state offices and services shut down. That’s expected to happen twice a month for the foreseeable future.

And while New York is debating whether to raise income taxes on those making more than $250,000 per year and to tax sugary drinks, all Californians will face a 2.5% income tax hike, sales taxes that reach nearly 10% in Los Angeles, and huge spikes in car registration and gas taxes.

Most striking to New Yorkers is the proposed $8 billion cut to education. Schools in California, like New York, are one of the biggest areas of state spending and are therefore impossible to ignore. California spent more than $35 billion on education last year while New York spent roughly $20 billion. But while California appears ready to deeply slash education spending, Paterson’s proposal to increase school aid by “only” $1.5 billion has been met with howls of protest. And remember: New York already spends about 60% more per pupil than our friends out west do.

All of this has been cobbled together without including any Federal stimulus funds. When that pile of cash comes to California (and come it will — the House Speaker is from California and the state is a huge Democratic winner for Presidents) the plans will certainly change, especially as regards any borrowing. But at the end of the day California may get $10 billion from Washington and that’s just a down payment on their problem.

Fortunately it looks like Albany will be crafting it’s budget deals after DC doles out the stimulus dollars which will help to make the choices clearer. But nothing should chasten New York’s lawmakers more than what’s happening in California.

Sacramento has spent years failing to match government spending to tax revenues (largely because California voters love to approve propositions that mandate spending and those that mandate cutting taxes, but that’s a story for another day). Albany has done the same. The bill is due.