Today’s New York Times had a somewhat worrisome report on NY State’s fiscal situation:

From New Jersey to California, many states are contemplating a raft of painful budget cuts as they wrestle with evaporating tax revenue and ballooning deficits.

But in New York, which faces the same economic uncertainties, no such severe cutbacks are on the table. In fact, Gov. Eliot Spitzer has proposed adding about $6 billion to this year’s $118 billion budget and hiring some 2,000 new state workers.

Where will the money come from?

Yet over the weekend, Mr. Spitzer and legislative leaders reduced by another $250 million their estimate of how much money the state will have to finance its operations. That came three weeks after a downward revision by Mr. Spitzer of $384 million.

That is a reduction of $634 million. What is going to happen to programs, specifically those in upstate, such as the recently announced RIT Pollution Prevention Institute? Many think Spitzer may have to raise taxes. How can New Yorkers shoulder any more tax burden?

What if things get worse, say the “R” word is true (bold mine)?

Job growth in the state is slowing. Initial unemployment claims have reached their highest level in five years. And some economists have asserted that the country is already in a recession.

Though Mr. Spitzer has revised his revenue estimates twice because of rapidly shifting economic forces, he has still proposed increasing spending by about 5 percent, more than one and a half times the rate of inflation.

But it’s not all bad:

Compared with states like New Jersey and California, New York’s projected deficit is a smaller portion of its budget. And the state also has at its disposal a sizable rainy-day fund, which now contains more than $1 billion.

New York has also held up relatively well as home prices have fallen across the country.

Why? Because we never had a big housing bubble to burst (for better or for worse).

But then there’s that “R word” again:

But if there is a recession, some economists believe it will hit New York harder than many other states because New York’s fortunes are so intertwined with Wall Street’s.

Upstate revival is dependent upon aid and, since Wall Street makes up 20% of the state’s revenue, this could be bad news for other projects. The supposed F.A.I.R. plan money gap Maggie Brooks assured us Governor Spitzer was sending our way in light of her tax grab has already been discounted. How will this budget deficit affect Spitzer’s recent announcement of up to $50 million to demolish Midtown to ready it for PAETEC?

What should New York do if a recession hits?  Maybe nothing except hunker down?  The tenuous position New Yorkers are in demonstrates just how vulnerable we all are to economic downturns.  If we’re losing jobs and unemployment is rising, this points to a need for health care plans independent of employers for millions of Americans.  This is why Democratic principles, such as health care for all, are so important.  That $1 billion rainy-day fund just won’t cover the “R word” for very long.
More to come on this important topic tomorrow.