March 2, 2011 / 11:16 PM / 9 years ago

NY governor cuts spending despite revenue recovery

NEW YORK (Reuters) - New York Governor Andrew Cuomo on Wednesday ordered a 10 percent cut in personal service contracts to shrink a yawning deficit, even as he and the legislature agreed on a higher revenue estimate.

New York uses personal service contracts for numerous areas and Cuomo’s cuts will affect technology, engineering, health care, accounting, research, and environmental studies.

Like governors from New Jersey to Wisconsin, Cuomo is relying on state workers to accept budget cuts, lower pay and benefit packages. This policy has prompted numerous union protests.

A Cuomo spokesman was not immediately available to say how much the personal service cuts might save.

The Democrat governor, the Republican-controlled Senate and Democratic-led Assembly agreed that gradually rising employment will help the state collect an extra $155 million of revenue by the time the new fiscal year ends.

Still, Cuomo says more cost savings are needed if New York is to shrink a deficit for the new budget starting April 1 that tops $10 billion, a legacy of the recession. Cuomo included billions of dollars of cuts in a $132.9 billion budget plan.

New York’s economy has lagged the nation’s but the state’s higher revenue outlook is more positive than other forecasts. The Rockefeller Institute of Government last month said the long-term outlook for most states “is still ominous.”

New York’s economy is uniquely dependent on the often volatile fortunes of Wall Street.

Director of State Operations Howard Glaser said the state will start laying off workers on April 1 if unions reject savings measures, from wage freezes to higher health care premiums and an overhaul of the overtime pay system.

Cuomo’s budget plan calls for laying off nearly 10,000 workers. Glaser said those jobs could still be saved if the state could agree with unions on ways to reach a targeted $450 million in savings without resorting to layoffs.

“We are working hard to wield a scalpel, not an ax, on labor costs,” Glaser said.

In a sign of the gulf between them, Glaser and a leader of one of the largest state unions, CSEA Legislative Director Fran Turner clashed over the salaries of state workers.

Another battle between the governor and unions brewed on Wednesday, when a report commissioned by Cuomo recommended creating a sixth and less costly tier of pension benefits for new hires.

New York has been far ahead of other states in compressing the cost of pension benefits by creating multiple tiers of pension benefits. However, the CSEA and the NYSUT, the teachers union, blasted the proposal for yet another tier.

“Tier V reform was just implemented with union help in 2010 (and) designed to save taxpayers $35 billion,” the two unions said in a statement. They added: “There are no immediate savings to be gained by a Tier VI reform.”

There was one bright spot, however, on the spending front. New York Chief Judge Jonathan Lippman, who was criticized for seeking more funds for the judicial branch, proposed $100 million of savings that would be achieved by streamlining the courts and using more digital filing.

Reporting by Joan Gralla in New York and Dan Wiessner in Albany; Editing by Andrew Hay

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