New York governor weighs raising more money from sales tax

ALBANY (Reuters) - Cash-hungry New York state might raise more money from its sales tax, Governor David Paterson said on Wednesday, though he declined to offer details on what he said were the Assembly's revenue-raising proposals.

"Frankly, they don't sound bad," the Democratic governor told Albany reporters.

New York missed its April 1 deadline for the Democratic governor's $135 billion budget and Paterson has been feuding with the legislators over cuts in education and healthcare he says are needed to close a $9.2 billion deficit.

So far, state workers, from firefighters to lifeguards, have stayed on the job because the legislature each week has enacted emergency bills. While Paterson has included some annual savings in these weekly measures, the budget gap could grow by $200 million or more if Congress does not approve more Medicaid spending for the U.S. states, Paterson estimated.

Democratic Assembly Speaker Sheldon Silver also did not reveal any specifics about a possible sales tax hike, saying only: "We are talking about a variety of things that will get us to close the gap in this budget."

New York's sales tax rate is 4 percent; this levy raised $1.1 billion in the year-to-date period ended on May 31, Comptroller Thomas DiNapoli said in a report on June 17.

A spokesman for Senate Majority Conference Leader John Sampson said by email: "We are making substantial progress toward a fair and final discussion and will continue to discuss options to achieve that goal."

Silver criticized the governor's compromise plan on property tax relief, which would cap annual increases by counties, cities, towns at 3 percent. Paterson's plan excludes school districts, however, which account for about 65 percent of the state's property taxes.

"I am not a fan of caps generally and not a fan of caps especially where we are cutting back on local aid and revenue sharing -- to not allow people to make up for it would be very difficult," Silver told Albany reporters.

One of Paterson's proposals that remains unresolved -- freeing state and New York City universities to set their own tuition rates instead of fixing them in the state budget -- was praised by Moody's Investors Service.

"Historically, the State University of New York has maintained flat tuition for years at a time, only to suddenly impose sharp tuition increases to compensate for accumulated cuts in state funding," Moody's said in a June 21 report.

Letting New York's universities raise tuition each year "within set parameters," the way other big public universities do, could improve investments in academics, research, student aid and buildings, Moody's said.

(Reporting by Elizabeth Flood Morrow in Albany; Writing by Joan Gralla; Editing by Kenneth Barry)