New York this year has also had to face the reality of declining tax revenues. Without giving a second thought to the idea of reinstituting the higher income tax rates paid by wealthy New Yorkers just a few years back, Governor Paterson this week spear-headed an effort to slash the budget into balance. Legislators and the Governor agreed to cut over $400 million from the budget, primarily from Medicaid and aid to local governments. This is in addition to about $1 billion in administrative cuts the Governor instituted himself over the last several weeks.
As in Florida, the more relevant question now is what to do about next year's projected deficit. This session also featured the slashing of about $1 billion in spending from next year's budget, though that still leaves a $5.3 billion projected deficit. Will lawmakers decide just to cut deeper next year? With the Governor still supporting tax cuts (in the form of a local property tax cap) despite the condition of the state budget, that prospect unfortunately appears quite likely.