Growing Deficit Adds Chill to Usual Springtime Battle on N.Y. Budget : A $6-billion shortfall is expected. Lawmakers oppose Cuomo’s call for spending cuts, gasoline tax increase.

NEW YORK — It is springtime in Albany and, at New York’s historic state Capitol, an increasingly familiar seasonal scenario is unfolding. The April 1 deadline for approving the state’s annual budget has come and gone, and for the eighth year in a row state lawmakers are at loggerheads with Gov. Mario M. Cuomo on how to implement his proposed spending plan.

But this year the impasse is no trifle. The projected $6-billion deficit in the governor’s $51.9-billion financial proposal is more red ink than the state has seen in any one fiscal year in its history.

About the only thing the lawmakers agree on is that Cuomo’s proposal--which includes deep spending cuts, massive employee layoffs and a stiff hike in the state gasoline tax--is unacceptable. Meanwhile, the state government continues to finance its operations through another familiar springtime ritual: borrowing against future revenues.

“There are talks going on, but there’s certainly no progress being made,” said Cynthia Green, a senior research associate with the Citizens Budget Commission, a business-financed watchdog group. “Despite the huge size of the problem, everybody wants to figure out some way to maintain the status quo. And you know what? You can’t.”

Such wishful thinking on the part of state legislators is becoming a common affliction across the country as states are caught up in what for many is the worst fiscal crisis since the Great Depression. In Connecticut, the Legislature’s joint finance committee has adjourned without voting on Gov. Lowell P. Weicker Jr.’s proposed income tax to help plug a $2.8-billion budget shortfall. In California, the Legislature has ignored repeated appeals by Gov. Pete Wilson to begin now to whittle down its projected $12.6-billion deficit, the largest in the nation.

“In states like New York, Connecticut and California, the problem is so large that the solution must be large, too. And it’s just not easy to get people to agree on anything of that magnitude,” said Marcia Howard, deputy director of the National Assn. of State Budget Directors.

Traditionally in New York, which has suffered chronic deficit problems for almost a decade, the state relies heavily on one-time revenue gainers to plug shortfalls in its budget. These “one-shots,” as they are commonly called, include such practices as selling off state assets and dipping into state reserve funds.

The state recently sold Attica state prison, site of a bloody 1971 uprising, to the state Urban Development Corp. for $200 million in cash. The state keeps the prison but pays back the purchase price plus interest to the development authority over 30 years. According to an estimate by the state comptroller’s office, the interest alone will amount to about $290 million.

Last year’s budget was precariously balanced with nearly $2 billion in one-shot revenues, which contributed to the state’s credit rating being dropped to the third lowest in the nation.

But this year, Cuomo’s proposed budget calls for $4.5 million in spending reductions that include severe cuts in public school funding, local government aid and welfare and Medicaid payments. In addition, the governor would eliminate 18,000 state jobs through layoffs and attrition, impose a wage freeze and cut state university funding, which would be offset by a $500 annual tuition increase.

On the revenue side, he has proposed a total of $1.5 billion in new measures, including a 10-cent-a-gallon gasoline tax expected to raise $500 million and a postponement of a scheduled $410-million cut in corporate and personal income taxes.

At the same time, he has adamantly refused to consider raising any of the major broad-based state taxes, including the corporate tax, the personal income tax or the state sales tax, contending that to do so would make New York uncompetitive with its neighbors and aggravate the already severe exodus of business and jobs.

The governor’s budget proposal has provoked a series of marches, demonstrations and protests throughout the state by state employees, public officials, state university students, AIDS patients and health care workers. A demonstration by thousands of irate protesters in Albany in March turned violent as the demonstrators smashed the glass doors outside the governor’s office.

“We’ll beat him so no politician will try to get students to pay for a recession ever again,” cried one university student.

In New York City, more than 20,000 labor union officials and union supporters marched up Broadway from Battery Park to the World Trade Center, site of the governor’s New York City office, in a giant protest march recently.

“Don’t bother running for President,” yelled Gerald McEntee, international president of the American Federation of State, County and Municipal Employees. “Who wants to hear a road show about slashing libraries and closing parks? Stay home; get it in order. Maybe you can visit Washington.”

Sol Wachtler, chief judge of the state court system, has threatened a lawsuit challenging the constitutionality of Cuomo’s decision to cut $90 million from the state judiciary’s budget, a 10% reduction. Cuomo dismissed Wachtler as another representative of a special interest group seeking protection from the budget ax.

“He’s like every other advocate in this system,” Cuomo said. “He’s doing what the Council on the Arts is doing, he’s doing what the school boards are doing, he’s doing what the Black and Puerto Rican Caucus is doing, he’s doing what the union leaders are doing.”

Meanwhile, Cuomo’s popularity has suffered heavily. A survey by nonpartisan Marist Institute for Public Opinion taken in late February and early March--about a month after Cuomo unveiled his new budget--revealed that slightly less than half the electorate approves of the job he is doing as governor, a sharp drop from the nearly two-thirds who approved of his performance in a similar poll a year before.

The survey also showed that contrary to the governor’s priorities, 51.5% favored a tax increase, while 20.5% preferred cuts in social programs and 20.1% would opt for state employee layoffs.

Some critics have charged that the budget Cuomo has submitted is an attempt to avoid being labeled as a tax-and-spend liberal Democrat, particularly if he decides to run for the Democratic presidential nomination next year--a move he denies having in mind.

As an alternative budget, House Speaker Mel Miller (D-Brooklyn) has proposed a three-year increase in the top rate of the personal income tax that would raise about $1 billion in new revenues. Miller said his proposal would boost the top rate to 8.663% from the current 7.875% and avoid some of Cuomo’s most dire spending reductions.

Senate Republicans--the dominant party in that chamber--reject many of Cuomo’s revenue measures and have proposed deeper spending cuts in many areas, including welfare and Medicaid.

In recent days, Cuomo has traveled to New York City to meet with Mayor David N. Dinkins, who is facing a fiscal crisis of his own. The city is struggling to close a $465-million budget gap before the fiscal year ends June 30 and a $3.5-billion shortfall in the city’s $29-billion budget next year.

The fortunes of the city and the state are intimately linked, and neither Dinkins nor Cuomo would like to see the city end up in the hands of the State Financial Emergency Control Board, which could happen if the city’s deficit this year does not fall below $100 million.

Last Saturday, after a daylong series of meetings with Cuomo, legislative leaders, local officials and union bosses, Dinkins outlined a plan to halt the city’s fiscal free-fall through drastic cuts in services and the municipal work force that slice far deeper than any the mayor had said might be needed.

After the meeting, Cuomo pronounced the mayor’s plan as “candid and courageous” and said that he would make an effort to give the city $250 million in state aid that Dinkins included in the plan. The mayor’s request was $150 million above what he had sought from the state at the beginning of the year.

Meanwhile in Albany, “no one is blinking, there is no movement at all,” said one veteran Statehouse observer. “It could break tomorrow--or it could very well linger into July.”

New York Profile Capital: Albany Governor: Mario M. Cuomo, age 58, Democrat 1990 Population: 17,990,455 Key Industries: manufacturing, finance, communications, tourism, transportation, services Per Capita Income, 1989: $20,540 U.S. Average: $16,490 Sales Tax: 4% to 8.25% State Income Tax: 4% to 7.875% (New York City also imposes its own income tax of 2.4% to 3.4% for residents and 0.25% for non-residents) Fiscal 1992 Budget: $51.9 billion Shortfall: $6 billion