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Commentary By Nicole Gelinas

Be Brave, Dave, and Just Cut It Out

THE old governor is ousted in a sex scandal, and the new governor cuts through the old partisan politics to say what the voters need to hear: Change is imperative.

"The days of spending like there's no tomorrow end today," the governor, who hails from the legislature, tells his colleagues. "The good news is we're not bankrupt. The bad news is we're close."

Gov. Paterson, 2008?

No. New Jersey Acting Gov. Richard Codey, 2005.

But Paterson made an eerily similar speech last week, saying, "What I want you to understand is that this is not a new governor responding to an economic crisis. This is a new governor trying to create fiscal reality."

Both speeches impressed fiscal conservatives, with Codey promising to hold spending flat while Paterson said he wanted to cut 5 to 10 percent "off the top" of state spending next year.

Both spoke to states in trouble. In New York, high taxes are partly why 183,000 domestic residents left each year between 2000 and 2004, and immigration can't make up for these losses forever.

But Codey was only a caretaker governor. Though he kept his word for his short time in office, his speech didn't change anything.

And now the question is whether Paterson can live up to his rhetoric—and keep New York's budget under control for his term, and maybe years after.

If his first budget is any gauge, the answer is, at best, wait 'til next year.

While Paterson pared nearly $2 billion from Spitzer's fanciful proposals, state spending in the $122 billion budget will still increase by nearly 5 percent—lower than during the Spitzer and Pataki years, but still too much for the economic stagnation New York possibly faces. By far, New York already spends more per capita than any other state, so there's plenty of room to cut.

And to precariously balance the budget—there's no guarantee revenues won't fall short later in the year—Paterson and the legislature have done what past governors and legislatures have done: They got creative. In addition to one-shot gimmicks and creative tax moves, like a move to start charging New Yorkers for purchases made over the Internet, the budget includes sharply higher sin taxes for cigarettes. It also includes a higher levy that will hit most health-insurance plans, as well as surcharges on traffic tickets.

One omen is particularly egregious for next year, as the fiscal situation likely continues to deteriorate. The new budget continues a Spitzer-era proposal to increase the tax base for certain corporations, so that their first $10 million in capital is taxed, rather than just their first $1 million. Although it's coupled with a permanent corporate tax-rate cut targeted toward smaller businesses, this tax-base increase will hit larger businesses just as they're suffering through the credit crunch.

It may not seem like much, but it shows how willing New York is to go after its cash cow—the finance-heavy corporate sector—just when that cow is sick.

Another bad omen for future progress: On the spending side, Paterson and the Legislature carefully avoided any fights with Albany's major industries—education, Medicaid and state-subsidized housing.

Despite looming multimillion-dollar deficits, the state will shovel nearly $2 billion in new money to schools, even though sharply higher spending hasn't translated into better results in recent years. The budget earmarks $200 million for "affordable housing," even though middle-class New Yorkers struggling with their mortgages might like to keep that money to help make their own housing more affordable.

As for the health-care industry: The state will pick up the tab to fund Medicaid for children whose families earn four times the poverty level, even though the federal government won't pay its customary share of the bill for new middle-class families, as the Bush administration opposes such an expansion.

For legislators and their lobbyists, the sweet details of the state budget likely helped Paterson's strong speech go down easy. Struggling voters and taxpayers have, for now, only Paterson's promise for next year—as well as New Jersey's precedent, which isn't much of a comfort.

This piece originally appeared in New York Post

This piece originally appeared in New York Post