Desperate times could bring about desperate measures in NY

ALBANY -- It turns out that after months of self-congratulatory backslapping over finally steering New York away from fiscal crisis, the sky is falling again.

And for many lobbyists and politicians in Albany, that's just perfect.

Supporters of some potentially transformative plans like a Catskills casino, gas drilling in the Southern Tier and a tax on millionaires are getting added ammunition as the fiscal outlook darkens. And for all the talk of Albany's new politics after years of dysfunction, the bedrock remains steeped in horse-trading and creating a crisis before a lawmaker can push through a solution.

And the budget chatter from Albany is delivering that crisis.

After the legislative session ended this summer, it appeared the worst was over because Gov. Andrew Cuomo and the Legislature dispatched a $10 billion deficit and made a rare cut in spending.

More good news came in July: State Comptroller Thomas DiNapoli announced tax collections were $799 million ahead of projections.

But the last two weeks changed much of that. So what happened?

Overall, the economy remains fragile and unpredictable, same as it has since the hemorrhaging of jobs and tax revenues slowed last year.

But estimates this month from Cuomo show a surprising deficit of $350 million this year with another $3.5 million deficit next year.

And Cuomo said this week that the inability of Washington's supercommittee to cut the federal debt last week, the shock it sent to Wall Street, and economic crisis in Europe "have dramatically changed the fiscal course of the state."

"In some ways, it couldn't be worse," Cuomo said Wednesday. "The economic news is getting worse, not better, and we have a way to go before we are going to come out the other side of this economic tumult."

Cuomo's not wrong if he's low-balling the state's fiscal situation. All governors do before they face a Legislature that traditionally tries to increase spending.

But in New York politics, such pessimism can be gold if you are backing big, bold and controversial plans like hydrofracking for gas in the Southern Tier.

The faltering economy provides fuel for residents there who envision an energy boom after decades of decline. It may also be the catalyst needed for an already powerful political mix involving the Democratic governor and Republican Sen. Thomas Libous of Broome County. Cuomo and Libous, the Senate's deputy majority leader, have formed perhaps Albany's closest alliance.

It's the kind of partnership that could yield a deal in which Libous' Southern Tier district gets state approval for hydraulic fracturing of natural gas wells, called hydrofracking, where many residents want it. In return, Cuomo can limit the process of shooting water and chemicals into underground shale, which environmental groups strongly oppose.

"It makes sense to me that if we are going to permit environmentally safe drilling, that you go to those regions that are willing at accept it," Libous said. "I know this region is willing to accept it."

In true Albany fashion, everything could end up in one big pile:

-- Economic woes would also stir the mix for a private sector casino and for a millionaire tax. Cuomo is looking at whether bringing in a casino -- and its tax revenues -- is a good idea, but has rejected a higher tax on New Yorkers making over $1 million a year out of fear it would drive employers out of state.

-- Powerful Assembly Speaker Sheldon Silver, however, seems oddly optimistic of his chances of getting his proposed millionaire tax passed, which could help avoid further cuts to schools, hospitals and social services. And Silver remains the key to any expansion of gambling.

-- There is even a regional payoff: A millionaire tax and a casino to better fund New York City schools is a top priority of the Assembly's Democratic majority, while reviving the long moribund upstate economy is the top goal of the Senate's Republican majority this election year.

"It seems clear the governor is laying the foundation for major initiatives of some kind," said E.J. McMahon of the fiscally conservative Manhattan Institute. He said many of the economic factors today were present months ago but the rhetoric has changed.

"The phrase 'things have changed' keeps creeping in," McMahon said.

Officially, drilling for gas is only in the review stage to see whether it is environmentally safe. Officially, private-sector casino gambling is just an idea. And officially, the millionaire tax is dead.

But Cuomo faces two basic ways to address further fiscal crisis after three years of budget cutting. He can cut more spending and consider raising taxes. Or, he can try to quickly grow the economy and let more jobs and commerce raise revenue, a riskier route he favors but that has mostly failed in the past.

"That is a more ambitious way to go at it," he said. "That's how I'm doing it. I'm not willing to accept failure, especially without trying."