NY state faces five-year $60.8 bln deficit

NEW YORK (Reuters) - New York state's five-year deficit is $60.8 billion, partly because of the soaring costs of repaying debt and paying for health and pension benefits for public employees, Governor David Paterson said on Monday.

Each year, debt service costs will rise 17 percent while the tab for benefits and pensions will go up 11 percent.

But the "revenue generation," which broadly speaking is how much the state can spend, will only be about 37 percent of the increase in the state's bills during that period, said the Democrat at a New York Observer newspaper breakfast.

The deficit for the new budget that starts April 1 has probably grown to about $9 billion from last month's $8.2 billion estimate because several expected payments will be late or not materialize, he said.

His list included a $300 million payment from a slots machine vendor for Aqueduct Racetrack and $200 million from the Battery Park City Authority. Further, collections from a tax amnesty program are falling short.

State and federal prosecutors are examining various aspects of the Aqueduct contract, which delays finalizing the contract.

These problems are worsening the state's cash crunch and making it more likely some of the $14 billion of payments due in March -- from income tax refunds to aid for schools and universities -- will be delayed, Paterson said.

Asked if the state would issue IOUs like California or lay off or furlough workers, Paterson said: "These are all on the table depending on how our revenues come in the next few months." But he described delaying payments as a simpler solution; he delayed $750 million of payments in December.

March 1 is the deadline for Paterson and the legislature to agree on the amount of revenue for the new budget, Paterson said. The Assembly's deficit forecast is $1.2 billion more than his; the Senate's estimate is about $750 million higher.

Though both houses are led by Democrats, analysts have questioned whether Paterson can be an effective budget negotiator after he dropped out of the New York state gubernatorial race on Friday.

Paterson's move follows reports he and state police spoke with a woman who last fall accused a top governor's aide of assault. After speaking with the governor, the woman failed to appear in court and her case was dismissed, said the New York Times, which first reported the story.

On Monday, Paterson denied he would resign and dismissed concerns about his ability to lead, saying his withdrawal from the race means he can stay above the fray.

"I won't have to hear a robotic response from the legislature that 'He's doing this for politics, he's doing this to get his poll numbers up, he's doing this run against the legislature,'" Paterson said.

(Editing by Andrew Hay)