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Paterson faces likely suit if he delays payments

Governor David Paterson, addresses crowd gathered at GE

Governor David Paterson, addresses crowd gathered at GE Aviation Systems North America Inc., as Dennis Mullen, CEO/designate of Empire Development, stands by his side. (October 22, 2009) Credit: Newsday/Photo by James Carbone

ALBANY - Gov. David A. Paterson faces a likely lawsuit this week if he begins delaying state payments to school districts, counties, cities and hospitals to stop New York from running out of money on Dec. 31.

The teachers' union, school boards and others contend Paterson's planned move, to be announced as early as Sunday, is unconstitutional - setting the stage for a third legal fight over Paterson's authority.

Citing a 29-year-old ruling by the state's highest court, the groups said the governor isn't required to keep the budget balanced and cannot unilaterally negate spending adopted by the legislature, regardless of the state's finances.

Paterson is expected to delay paying about $500 million of this month's $11.7 billion in local assistance grants. That equals the spending cuts he and lawmakers failed to agree on to close this year's $3.2-billion deficit.

Relatively small reductions

Reductions will be small compared with yearly payment totals. For example, New York will spend $24.8 billion in the 2009-10 fiscal year on school aid, but Paterson's delay affects just a portion of December's $2.06- billion allotment, due Tuesday.

Still, any postponement, along with the prospect that the money may never materialize, alarms the 600,000-member New York State United Teachers union. "What the governor wants to do is absolutely illegal," asserted Alan Lubin, the union's executive vice president. "We, together with others, intend to sue to stop him."

Paterson, acknowledging constitutional restrictions, said he plans only to delay payments to localities, not cancel them. He added he would recommend to lawmakers that they rescind the unpaid funds as part of the next budget. "You can't spend money that you don't have."

The treasury will be empty, or nearly so, if December's bills are fully paid. Paterson projects a surplus of $36 million while Comptroller Thomas DiNapoli forecasts $3 million of red ink.

To conserve cash until tax collections pick up in January, Paterson has ordered budget director Robert Megna to withhold the certification necessary for DiNapoli to issue checks. Since 1995, the director has had to first certify the state has sufficient funds before payments can be made.

The certification provision was established by Gov. George Pataki to boost his control over spending.

It could be the loophole Paterson needs to get around the constitutional prohibition against governors unilaterally nixing expenditures, experts speculated.

Can't throw out budget

"This is a budget that both the governor and legislature approved - you can't get rid of that appropriation without both sides agreeing to it," said Bennett Liebman of Albany Law School.

However, he added, the certification requirement "is helpful to the governor's case. . . . A court is going to have to settle this."

Judges will turn to a 1980 Court of Appeals decision involving another Democratic governor faced with a cash crunch. Seeking to "tighten state spending" in 1976, Gov. Hugh Carey's budget czar blocked $7 million in sewage treatment aid to local governments. Oneida County filed suit, saying Carey was illegally thwarting legislative will.

The court agreed, saying, "the desire to maintain a balanced budget does not furnish an occasion for the exercise of an extraordinary power which does not otherwise constitutionally exist."

Richard Briffault of Columbia University Law School, said, "It's not a good enough argument for the governor to say, 'I'm postponing payments to keep the budget balanced.' "

He also said Paterson may be constrained by payment deadlines. School aid and grants to municipalities are due Tuesday, and welfare and STAR property-tax reimbursements, in the last week of the month.

Paterson has won in the past. He prevailed over a Senate lawsuit against his appointment of Lt. Gov. Richard Ravitch and one requiring all senators to attend special sessions after June's coup.

"The governor is clearly frustrated he cannot get his way with the legislature, particularly the fractious Senate," Briffault said. "So, he's trying to push his powers to the limit."

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