As he had earlier promised, Gov. David Paterson today said he will withhold $750 million in local aid scheduled to go out this week. That includes more than $500 million in scheduled school aid payments and $112 million to cities and counties. Additionally, the governor will hold back $47 million set to go to health insurance firms that cover state employees, although that is not expected to affect coverage of workers.
Paterson stressed that his actions are payment delays rather than cuts, although he hasn't precluded making cuts in the 2010-09 budget to be released next month.
The move is likely to provoke a lawsuit from the state Senate, which has been battling the governor over budgetary issues, and it will probably make some towns, cities, counties and school districts borrow money in the short term in order to cover costs such as salaries, benefits and a large payment for retiree pensions coming due in the next several months.
Some localities may even point to this borrowing and consequently raise local property taxes.
The governor said the state is going to run out of money this month, even after it taps its rainy day fund and borrows money from other pots of cash throughout state government.