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As pundits mull New York's fiscal state, the Senate renews call for tax cuts and says the Executive Budget, usually a spending floor, may be a ceiling

February 1998

Traditionally the New York State Legislature adds huge new spending to whatever is proposed in the Governor's budget. But the state Senate, at least, is looking for more tax cuts rather than more spending.

Senate Majority Leader Joseph L. Bruno says his house will pass a budget that spends less than the Governor's proposal, while adding new tax cuts "to encourage more job growth."

The state's leading Democrat, Comptroller Carl McCall, sounded a cautionary note about the spending and debt increases contemplated in the new budget. However, another close observer of the state's fiscal practices, Chase Manhattan Bank, concluded that Governor Pataki's budget does not jeopardize his record for fiscal restraint.

The Governor's overall budget "provides sufficient spending to address the needs of the people," Senator Bruno said. "The $71.9 billion total (in the Executive Budget) will be the ceiling for state spending, not the floor."

An additional priority will be enactment of new business tax cuts, he said. The Senate has proposed a sweeping tax-reduction package that is strongly supported by The Business Council.

The Senate will also address concerns about "the proposed distribution of aid to education."

Senator Bruno promised Senate action on the budget by mid-March. Fred Jacobs, counsel to Speaker Sheldon Silver, told The Business Council's Government Affairs Steering Committee that an on-time budget is likelier this year, partly because the parties are closer than usual in revenue projections.

Comptroller McCall criticized the state's growing reliance on debt.

Under the Executive Budget, debt service would increase more than 40 percent over the next five years, he said. He noted that 80 percent of capital spending would be financed by "backdoor" borrowing.

But Chase Manhattan's Financial Digest, which scrutinizes New York's economy and fiscal practices, criticized "pundits" who, it said, dismiss the new budget as "a retreat from the fiscal policy prudence that has been the defining difference between the Pataki administration and its predecessors."

The bank said the administration is still "shrinking Albany's slice of the state economic pie," because the economy is growing faster than the budget.

The Fiscal Policy Institute predicted future budget gaps caused in part by new spending in the proposed budget. The group, funded primarily by public employee unions, has made similar predictions about every one of Governor Pataki's budgets - only to see major surpluses result every year.

February 5, 1998