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THAT '70S WOE IN RERUN

GOV WARNING OF WORST ECONOMY IN DECADES

By FREDRIC U. DICKER, State Editor

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Last updated: 8:41 am
July 28, 2008
Posted: 4:18 am
July 28, 2008

ALBANY - Gov. Paterson, convinced the state faces its worst fiscal crisis since the mid-1970s, will deliver the grim news in an unprecedented special address to New Yorkers as soon as tomorrow night, The Post has learned.

The governor's address - which his aides hope will be televised by public and cable news stations - will say that plunging state revenues will force painful cuts in state services, necessitate a reduction in the state work force, possibly through layoffs, and require other difficult economic measures, source said.

Paterson is also expected to announce that he's ordered state agencies to slash spending beyond the relatively modest 3.3 percent cuts he ordered in late spring.

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He may also call a special session of the Legislature to propose reducing some of the record-high levels of spending that were approved as part of the state's new budget in April.

"The situation is worse than anyone realizes," said a source close to Paterson.

"The governor has said he's tired of the state going from deficit to deficit, spending like it has a credit card that never has to be paid, and that he's prepared to take action," the source said.

Paterson in recent days has huddled with budget planning officials from the administrations of former Govs. Mario Cuomo and Hugh Carey "to get their ideas on how to manage a fiscal crisis," the source said.

To make his concern even clearer, Paterson will hold a private meeting today with Columbia University's Nobel prize-winning economist Joseph Stiglitz, the former head of the World Bank, who has called the current worldwide financial crisis the worst since the Great Depression.

"The governor has been impressed with Stiglitz's work, and there have been staff discussions leading to the meeting Monday," said an administration source.

Paterson warned last week that Wall Street bonuses - a major source of state tax revenue - will likely drop by 20 percent or more this year.

A day later the state Financial Control Board said New York City's projected two-year deficit had grown by a whopping $4 billion because of Wall Street losses and the economy's overall decline.

The governor's own budget experts are slated to present an updated financial plan with sharply lower projected revenues on Wednesday.

Spendthrift New York City almost went bankrupt in 1975-76 and the state defaulted on some of its bonds at the same time in the worst fiscal crisis to face New York since the Great Depression.

While state and city leaders pledged to assure the prudence of future fiscal practices, that pledge was largely abandoned during the past 20 years as officials ran up state spending at two or three times the inflation rate because of sharp increases in education and health-care spending.

fredric.dicker@nypost.com

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