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State ends 2009 in black with general fund cash infusion

ALBANY - New York didn't end the year in the red because Gov. David A. Paterson on Thursday transferred money to cover a historic shortfall in the state fund used to pay many bills.

He said the cash infusion to the general fund, estimated at about $600 million, would be recouped this month once tax collections on bonuses paid to Wall Street financiers begin coming in. He also promised this month to send $750 million to schools, cities and counties that had been withheld to ease pressure on the depleted treasury.

Paterson's action came after it was clear the general fund would end December in deficit, a first in modern budget history. The cash crunch wasn't a surprise, however, as tax receipts have missed projections for eight months due to the recession.

"We are not running out of money," he said, referring to a year-end balance of $883.7 million because of the cash transfers. "I will not let the state run out of money as long as I can stand on two feet."

Fiscal experts praised Paterson, though they were troubled that the fund had been exhausted for the first time since 1982.

E.J. McMahon of the conservative Empire Center for New York State Policy likened Paterson's action to a family borrowing from the children's college fund to pay monthly expenses after the checking account is overdrawn. "You aren't broke but this is the first time in 30 years that you've had to dip into your kid's college account to pay the bills," McMahon said. "And you are saying, 'It's OK, I'll be able to pay it back . . . in January because I'm pretty sure my boss is giving me a bonus' - but you aren't positive."

State Comptroller Thomas DiNapoli reported that New York began the last day of 2009 with $506.4 million against bills of nearly $806 million. It took in $1.2 billion in taxes, federal grants and other receipts but transfers were needed to remedy the general fund deficit and provide sufficient flexibility to the $131.8-billion budget.

Paterson forecast gains in the fund this month and next but said another crunch could arise in March, when $14 billion is due. The fiscal year ends March 31. He said, "I would assume in January when the revenues come back that I will complete the payments" to school districts and others. But he added, "if we don't have the resources [in March] I will . . . hold the payments."

Four education groups, including the teachers' union and school boards association, filed a lawsuit, saying Paterson lacks the constitutional authority to postpone payments authorized by the legislature. The groups requested a delay in court arguments until Jan. 20 to see if school aid and STAR funds are released, said Timothy G. Kremer of the state School Boards Association.

The Association for a Better Long Island, which represents developers and other businesses, on Thursday announced plans to file court papers in support of Paterson. "No matter how you read the . . . books, this is a genuine, Defcon 1 emergency," said the association's Desmond Ryan.

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