Why has David Paterson sounded so much more alarmed over the grim news about Lehman and AIG than Michael Bloomberg?
Paterson has said he may call another special session of the legislature to make further cuts to the budget, and earlier today he compared this crisis to the 1930s. By contrast, at a press conference yesterday, Bloomberg said, “The world is not coming to an end here.”
There are two reasons the governor sounds more pessimistic, according to Doug Turetsky of the Independent Budget Office.
Turetsky said the state is more reliant on taxes that are sensitive to the business cycle (like business income taxes, personal income taxes, property transfer tax, and sales tax). The city, by contrast, is more reliant on property tax, which Turetsky described as “consistent” by comparison.
There’s also the issue of preparation.
“The city built in expectations of revenues falling this year. I’m not sure the state did in the same way,” said Turetsky.
Earlier this year, the state was planning to increase expenses, he said. “I remember being very surprised when Spitzer first proposed the budget for this year, with revenues going up. Spitzer was projecting a four percent increase, which made no sense to us.”
Spitzer did eventually propose cuts to state spending.
UPDATE: A spokesman for the mayor called me to caution against directly comparing the city and state responses to Wall Street. Bloomberg’s comment yesterday about not being able to "cut" our way to a balanced budget is consistent with Paterson’s call for state lawmakers to further reduce the state budget, according to the spokesman, because city lawmakers already cut budgets and scaled back capital investments. The state has only recently begun reducing it’s budget.