State’s $1.1 Billion Surplus Could Put Pressure on Spitzer

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The New York Sun

With two months remaining in office and his eyes turned toward his presidential campaign, Governor Pataki is trying to burnish his image as a strong fiscal steward with an announcement today that the state will end the fiscal year with a big surplus.

Mr. Pataki’s office said a report by the budget division shows a $1.1 billion surplus, driven largely by higher-than-expected tax revenues and a $400 million drop in spending.

The governor, who was criticized by opponents earlier this year for signing onto a budget that increased spending by about 13%, will stow away about $580 million of the surplus into state reserve funds and plug $500 million into the next two years’ fiscal holes.

“This report is further evidence that our sound economic policies are working,” Mr. Pataki said in a statement. “New York is on firmer fiscal footing than it was 12 years ago,” he added.

The front-runner to replace Mr. Pataki, Eliot Spitzer, has not proposed income or business tax cuts, but has suggested that he would push for property tax reductions. The surplus could put more pressure on him to either cut taxes or increase spending.

A spokeswoman for Mr. Spitzer, Christine Anderson, said via e-mail yesterday that the surplus was “faith based budgeting of the worst sort.” Even with this fiscal year’s increased revenues, the state faces budget gaps of $2.4 billion and $4.5 billion for the next two years, she said. That is down from estimates of $3.2 billion and $5.4 billion.

“Considering these looming gaps, Eliot has been clear that the state must be prepared to make some tough decisions to get its fiscal house in order,” Ms. Anderson said.

A spokesman for Mr. Pataki, Scott Reif, said setting aside more than $1 billion shows the administration has “taken concrete steps to ensure the state is prepared for any potential risks to its finances in the future.”

Mr. Spitzer’s GOP challenger, John Faso, called the $1.1 billion surplus projection “welcomed news,” but said it is “by no means a license to increase state spending next year.” Mr. Faso has vowed to reduce taxes and has criticized Mr. Spitzer for not doing enough to take on Medicaid fraud during his tenure as state attorney general.

Last year, when the budget surplus was $2 billion, Mr. Pataki pledged to cut state taxes and empaneled a commission headed by a CNBC television show host, Lawrence Kudlow, to come up with changes to the state’s tax code. Those cuts were turned into smaller-scale tax rebates and tax credits once the governor and state Legislature hammered out the final budget.


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