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Massive new debt to follow tax cuts State's borrowing to rise by $11.7 billion

Huge new cuts in state taxes that lawmakers are quick to take credit for will be accompanied by a massive, multibillion-dollar borrowing package.

When the legislators today approve a new state budget, they also will add $11.7 billion to the state's debt level -- already the nation's second-highest.

"We are approaching a level of debt that exceeds the affordability for state taxpayers," said Assemblyman William L. Parment, D-Jamestown. "It's ruinous for the state's fiscal picture."

The debt has grown from $14.4 billion in 1990 to an estimated $50 billion this year before the latest borrowing is added, according to the state comptroller's office. Taxpayers already are paying more than $4 billion annually to pay off previously issued debt.

"It seems to me to be adding insult to injury to taxpayers," Assemblyman James P. Hayes, R-Amherst, told colleagues of the borrowing during a floor debate Thursday.

Though lawmakers will wrap up their budget bills today, the process is far from over. The governor Thursday warned he would use his budget veto power unless the Legislature agrees to make "significant" changes.

He did not specify those changes, but Pataki's budget office said the new legislative plan will spend up to $115 billion in the coming year -- far above their claim of $112.4 billion.

"We're going to have to make changes, significant changes, to have a budget that's acceptable to me," Pataki said after an appearance across the Hudson River from the Capitol. "Most of it takes effect unless vetoed by the governor. I certainly don't see vetoing the budget en masse. There will be, if we don't reach agreement, certain elements that are vetoed."

The sides are expected to negotiate changes over the next week and a half before Pataki will have to act on the bills. If deals are not struck, Pataki will likely focus his vetoes on items most close to the hearts of legislators, setting the stage for an override battle against the lame-duck governor.

The new borrowing will pay for everything from new school facilities in Buffalo to housing and environmental programs. Lawmakers say the borrowing is for sound capital programs such as $40 million to Buffalo State College for a new technology building and $3 million for a new science facility at Canisius College.

Critics acknowledge that such long-term building projects are good debt, but they also say the budget is sprinkled with inappropriate borrowing for items such as car purchases, repairing potholes and hundreds of millions of dollars worth of pork-barrel projects -- items that should be funded on a pay-as-you-go basis.

The governor proposed about $8 billion in new debt when he offered his budget plan in January.

The Legislature, in its new budget package that is being voted on here this week, added about $3.7 billion more in borrowing, said Senate Majority Leader Joseph L. Bruno, R-Brunswick.

The legislative borrowing includes an extra $2.6 billion for public school construction projects, including $400 million for "high needs" districts such as Buffalo. The state already provides billions of dollars each year in reimbursements to schools for construction projects, said John F. Cape, the governor's budget director. What's new in the Legislature's plan, he said, is that the state will directly do the borrowing for districts for $2.6 billion.

"It's a disturbing precedent," Cape said. "What's next? State-supported debt for a new city hall? How about that monument in the park?"

Elizabeth Lynam of the Citizens Budget Commission, a business-funded fiscal watchdog group, said the school construction borrowing "is the poster child for the need for constitutional debt reform in the state."

She noted that voters in 1997 rejected a big school bond.

"Now they are attempting to do a backdoor school bonding engineered in a way that doesn't have to go before voters," she said.

Legislators, though, say a court order requiring more state money for New York City schools drove the new borrowing plan. Besides the public school borrowing, $760 million is being borrowed for State University of New York and City University of New York construction projects, including $25 million for a new University at Buffalo engineering building.

Besides the borrowing concerns, Cape said, the legislative budget violates the constitution because the Legislature rewrote language in Pataki's budget in ways that go against a court order upholding the governor's control over the budget process. The governor criticized the Legislature for not adopting changes he said would control the costs of school spending and Medicaid.

In the budget talks, Pataki said, he will push for those changes, cuts in spending and more tax cuts to help the upstate economy. The governor singled out concerns over the Legislature's child tax credit -- giving families a $330 credit for every child between ages 4 and 17. Pataki had proposed a $500 tax credit that could be used for educational expenses -- for both public and private schools -- in about 80 of the state's poorest-performing districts, including Buffalo.

e-mail: tprecious@buffnews.com

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