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The Associated Press November 4, 2010, 4:51PM ET

Hard times worsen NY's deficit, more seek Medicaid

New York's hard times just got harder.

The administration of Gov. David Paterson on Thursday said closing the latest deficit may require cuts of perhaps 1 percent in every area including a midyear cut in school aid. The Legislature would have to agree to most cuts and any across-the-board cuts.

Budget Director Robert Megna said the $315 million shortfall in the current budget must be addressed by Dec. 31, when Paterson's term ends and fellow Democrat Andrew Cuomo, the current attorney general, takes office.

"We've flattened out a little bit on the revenue side, where revenue seemed to be improving," Megna told reporters. "That's about half the problem."

The rest of the problem is the increased number of New York's 19.5 million residents receiving the government's Medicaid health care coverage. Megna said the poor economy has driven 4.9 million New Yorkers onto Medicaid, compared to 4.2 million just three years ago.

"It's probably the highest it's been even through the last two or three recessions we've lived through," he said. "So it really is a lot of people coming onto the Medicaid rolls who would have been working and might have been insured by their employer or might have been in another plan."

State Comptroller Thomas DiNapoli said the deficit is partly the result of overly optimistic revenue projections in the state budget. Megna said income tax revenue and other tax revenue that started to rise in the summer had leveled off, based on fewer people getting back to work than the government anticipated.

The 2010-11 budget, about $135 billion, was the result of difficult negotiations and was passed four months late.

The state fiscal year ends March 31. The 2011-12 fiscal year is now projected to have a $9 billion deficit.

The current $315 million gap is smaller than past midyear gaps. A year ago, the state faced a $3.2 billion gap in December, and in December 2008 the gap was $1.5 billion.

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