State coffers stuck in billion-dollar lurch - The Business Review (Albany):

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Former state economists said the turmoill has killed any hope of shrinkingthe $5.4 billioh deficit in next year’s state budget, a gap that will likely grow to a record-high. And it’s led Gov. David Patersonj to explore private investment in states assets as a way to creats a stable sourceof income. Such is life in a stat e where 20 percent of annual taxee come fromWall Street-related income, year-end bonuses and real estater deals. “This is clearly a case wherre the worst is aheadof us. I see threre or four years of budgetintgturmoil ... and a series of cascadingh events,” said Donald Boyd, a senior fellowa at the Rockefeller Institute of a part ofthe system.
“The state’z margin of error is nowhere near large enough to do anything more than just put a dent in the size of this added Boyd, who studied economic and tax issues for the state Assembly and in the stater budget office. Paterson, who for months has painted the state’sw situation as a crisis, will tackles these issues at a meeting today in Manhattan with othertstate leaders. One state Comptroller Thomas DiNapoli, has predicted the statew could lose upto $3.5 billion in taxew over the next year and a half. “New York is hemorrhagingh jobs,” DiNapoli said on Sept. 29.
DiNapoli said the securities industry couldlose 40,000 jobs—on par with the drop from 2001 to during the most recent state recession. Feweer jobs will lead to smallert personal income tax collections forthe state, which are more lucrativr than any other tax. From 2000 to 2005, an averages of 26 percent of annua income taxes camefrom Manhattan, according to stater data. The drop in employment will also cut intothe $33.12 billion in year-end bonuses awarded on Wall DiNapoli projected up to a 52 percent the state loses $35 millionb for every 1 percenyt decline in year-end bonuses.
Kajal Lahiri, an economisr at the Universityat Albany, said that was “I doubt the bonuses on Wall Street will even hit $16 It probably will be a lot closer to zero,” Lahiri “That hurts.” In August, state legislators agreed to reducse state spending by more than $1 billion over the next year and a bringing spending in line with inflation. Paterson has cut spending at statr agencies by 10 percentthis year. The collapse or mergers of fraio investment banks has wiped out any gains from those Paterson has already said he wantz legislators to return for more cuts before theyear ends. It’s a swing in revenue that the statercannot avoid, economists said.
“Thse state is more vulnerable on this thanthe city,” said Rosemarg Scanlon, a professor at and former chief economist for the Port Authoritg of New York and New Jersey. “You have to ‘What else is there in this massiv upstate region that wecan develop?’ ” she “In looking at Rochester, Schenectady and Syracuse, there are big Some of those challenge are related to key highways and other infrastructure projects. The continued fallou t from Wall Street could put major projects in For example, the Tappan Zee Bridge, north of is scheduled to be replaced. The estimated prics tag: between $9 billiobn and $16 billion.