CITIZEN POWER ALLIANCE

April 9, 2008 --

In the most forceful speech of his short tenure, Gov. Paterson declared yesterday that he intends to reduce next year's state budget by 5 to 10 percent - up to $12 billion - because the spending plan he inherited this year is "too big and too bloated."

"The first thing we have to do is tighten our belts," the governor told an audience of several hundred business and civic leaders at an Association for a Better New York breakfast.

He warned that the new $121.7 billion state budget - which was agreed to by the governor and legislative leaders hours later - would have to be revised because state revenues are collapsing, with the top 20 taxpayers providing $72 million from Jan. 1 to March 21, compared with $533 million in the same period last year.

While many states have slashed spending to deal with the unofficial recession, Paterson contended that New York - "which is more adversely affected by the economy" - has yet to come to grips with financial reality.

One source close to the governor praised the speech, saying he sounded like a "true fiscal conservative who can right the ship."

Paterson zeroed in on four spending programs for major overhauls:

* The STAR property-tax rebates. "Sending back rebates to individuals who are hoodwinked and controlled into thinking that 5 percent of the money they send to the state got sent back to them and somehow they're supposed to be happy about it, it's patently ridiculous," he said.

* The 640 public authorities. "Only 11 are regulated, "so maybe we should find out what the other 629 do because they consume billions of your and my dollars every year," he said.

* Enterprise zones "that haven't solve the problems" of unemployment for which they were designed.

* Industrial-development agencies that aren't increasing business.

Paterson said his aim was to cut spending by 5 to 10 percent "off the top and not balance the budget on those who need services, on the middle class, or people who are lucky enough to make a million dollars."

Hours later, he and legislative leaders finalized details on the budget for the current fiscal year, which began April 1.

Officials said it will increase spending by 4.9 percent and raise $429 million in business-tax "loophole closures" and another $130 million in new taxes and fees.

The new budget, which does not include a Democratic Assembly proposal to increase taxes on millionaires, adds $1.8 billion in new school funding, including 38 percent, or $684 million, for the city.

In a victory for the city, the Legislature rejected then-Gov. Eliot Spitzer's original plan to delay funding for school construction for 18 months, and also agreed to restore half of the $164 million proposed cut in revenue-sharing aid to the city.

The budget hikes the state tax on cigarettes by $1.25 per pack, require that out-of-state online companies such as Amazon.com charge New York sales taxes, and close corporate and bank tax loopholes, some temporarily.