Politics on the Hudson

The state Division of Budget just put out its financial plan and economic outlook for the state, and as expected, it’s not pretty. And it’s even worse that it was yesterday, when Gov. David Paterson said the state faces a $20 billion deficit over the next three years.

Actually, the budget division says the deficit in total will be $21.5 million over the next three fiscal years: $5.0 billion for 2009-10, $7.7 billion for 2010-11, and $8.8 billion for 2011-12.

The budget office says that, first, the country is in a recession based on unemployment numbers, the weakening housing market and the subprime mortgage crisis.

Next, the state expects to take in about $530 million in less revenue—the fourth time since January that revenue projections were lowered to reflect the sagging economy. So that’ll mean more belt tightening.

Thirdly, state debt will total $52.8 billion at the close of the 2008-09 fiscal year, an increase of $3.2 billion.

The report, though, does have a glimmer of positive news: personal income tax revenues were $1.6 billion higher than estimated in February, suggesting the economy is improving. Yet the higher-than-expected receipts won’t mean an overall improvement in revenue, the budget division said.

The state has already taken steps to lower spending, but more will be needed, Gov. David Paterson warned.

“While this year’s budget is balanced, we face some very significant challenges ahead to get our fiscal house in order,” he said. “With a $5 billion deficit looming next year, we must immediately begin taking steps to rein in government spending.”

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