Paterson Delays Some School Aid While Legislators Inch Toward Budget Deal

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Gov. David Paterson has once again put off some payments that the state owes to schools, citing lack of money.

Paterson, who originally included the school aid money in emergency spending bills approved by the legislature, now says he's going to withhold $2.1 billion in school aid payments after all, due to "severe cash flow difficulties.”

The governor says while the scheduled payment date is March 31, he legally has until June 1 to hand over the money.

This is the second time the governor has had to delay payments due to schools or local governments. The first was in December when he and the legislature failed to agree on a complete plan to close a deficit in the current year's budget. The money was eventually paid in January, when more revenues came in.

Now, Paterson is holding back the payments because the legislature has left the capitol for a holiday recess without agreeing on a new state budget in time for the April 1 deadline. The governor warns that when they return, they may have to cut even more out of the state spending plan than he had first proposed.

Meanwhile, state lawmakers may be inching toward agreement on a budget, now that Senate Democrats are more open to a borrowing option first proposed by Lt. Gov. Richard Ravitch and favored by the State Assembly.

Senate Democratic Leader John Sampson says he plans to meet with Ravitch to discuss the plan to borrow up to $2 billion a year, in exchange for some constraints on spending in the future. The proposal is favored by Assembly Democrats as a partial means of closing the over $9 billion deficit.

"I've always had some hesitancy with respect to the borrowing," Sampson says. "But once again, everything has to be on the table, and we have to look at that more in depth."

Gov. Paterson, who has never appeared to be fully on board with Ravitch’s plan, says even if the Senate and Assembly adopt the borrowing proposal, and float bonds for $2 billion in state operating expenses, they would still fall far short of addressing the deficit.

"That leaves you over $4.1 billion worth of deficit that is not addressed," Paterson says.

While Senate Democrats have accepted many of the governor's cuts to education and health care, the Assembly plan rejects $600 million in school aid cuts. Both houses do not want to implement some of the taxes and fees that Paterson has suggested to bring in additional revenue. They do not like a proposed tax on sugared soft drinks, and are against permitting wine to be sold in grocery stores, which would generate revenue from licensing fees sold to supermarkets. Paterson says the legislature should consider some cuts and new revenue options, before they resort to borrowing.

"You know that expression, we're putting the cart before the horse," Paterson says. "We're putting borrowing before cutting, which is what our predecessors did, and that's how they got us into the hole we're in."

There are no legislative sessions scheduled until April 7, but Democratic legislative leaders says they have not quit working on the budget, they are continuing to talk while home in their districts, and could bring members back at a moment's notice.