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Monday 8 December 2008

Economic crisis makes for strange political bedfellows.

As a severe fiscal winter sets in, the major political parties may be borrowing more and more -- from each other's sales pitches.

Elected Democrats -- presumed to be pro-tax, pro-spending, and pro-labor -- are forced to slash government budgets and will try their best to look fiscally prudent and business-friendly. Republicans -- supposedly all about free enterprise and small government -- led the way for a federal bailout of private companies. And, in New York, the GOP will look to preserve its alliances with public-sector unions.

They may as well take pages from each other's playbooks in this way. State legislators and budget-watchers seem to generally agree that the Wall Street blowout is so severe, every option for stemming red ink will come into play. The Ravitch commission's proposals this week for funding regional transit service might serve as a preview. They include tolls on the East River bridges and a new payroll tax on businesses in the metropolitan area. But don't expect this to prevent higher fares. You'll get those, too. Call this a holistic approach to economic pain. A rough outline of what to look for, statewide:

Given how bad the deficits are, at least some public employee layoffs look likely because they offer executives a fast way to save a lot of funds. The long-standing presumption is that union leaders would rather lose members than make deep concessions -- since those dismissed are less likely to be around to vote to oust them. Expect increasing calls for a new tier of thinner pensions for incoming public employees.

Expect continued pressure from the Democratic-controlled state Assembly for higher income taxes on the wealthiest, though that plan alone as it stands won't fill the full budget gap. Those bent on consolidating special taxing districts in the name of efficiency may find a new urgency to their cause. Gimmicks are forever. Putting off an employee's first paycheck for a week or two, putting employees on corporations with separate revenue streams, selling assets and leasing them back, are variations of this. School budgets, and their pressure against property taxes, will loom large. So will the mounting costs of health-care subsidies. Cuts, at least in the rate of increases in these areas, seem a sure bet. Gov. David A. Paterson's highest-profile assignment, in his short tenure as lieutenant governor, was heading up the The Empire State Stem Cell Trust -- a special revenue fund created specifically to collect and distribute hundreds of millions of dollars in grants in support of stem cell research. The fate of the expected funding levels is in doubt. Paterson already has begun scaling back big commitments to biotech initiatives. Opposing fiscal camps for years have had their more left and right New York champions in Frank Mauro, of the Fiscal Policy Institute, and E.J. McMahon of the Empire Center for New York State Policy. From the left, Mauro recently argued in a public forum that the state should "not rely solely on drastic cuts in state spending" but tap the state's reserve fund "for this very purpose," surgically cut wasteful spending and impose a "high-end" income-tax surcharge. From the right, McMahon recently called for a permanent reduction of the size of the public sector, "sweeping reform" of public-employee labor laws that set "overly favorable" bargaining terms for unions, and reforms of public pensions and restructuring government-retiree health benefits. If the fiscal crisis deepens as expected, the pols in charge will negotiate these suggestions.

The question becomes what mix will prevail. Or, to view it another way, which interest groups will get to bleed the least.

COPYRIGHT 2008 Newsday

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