New York speaker's absence slows state budget process

By Edward Krudy NEW YORK (Reuters) - The loss of New York Assembly leader Sheldon Silver from state budget negotiations following his arrest on corruption charges last week could delay the process and threaten recent strides toward better fiscal management. Silver has presided over the state's budget negotiations for two decades as speaker and is widely seen as having clout, influence and experience that will be hard to replace. His arrest on charges of pocketing $4 million from bribery and kickback schemes comes a little over two months before the April 1 deadline for the state's budget. It also comes as Governor Andrew Cuomo's most ambitious legislative program yet, a $142 billion spending plan that includes contentious reforms to public education, is set to tax the legislature even without the added distraction of Silver's arrest. "Whoever replaces him is likely to have very similar politics, but Silver brought the weight of 20 years' worth of debts paid and clout, and whoever is next won't bring the same thing to the table," said Ed McMahon, a senior fellow at the Manhattan Institute, a right-leaning think tank. It is far from clear how the new budget will be negotiated. Joseph Morelle, the majority leader of the Assembly, will take over as interim speaker before an election on February 10, according to press reports. An earlier plan for five senior Democrats to negotiate on behalf of the Assembly met a lukewarm response from the governor and other Democrats. New York state's budget process is highly condensed with the state's fiscal year starting on April 1, compared with July 1 for most other state. That means any delay runs the risk of overshooting the deadline. "This is truly unchartered territory," said McMahon. "The executive state budget is a big unwieldy document, so in such a compressed budget period every day counts." The Ways and Means Committee, the body responsible for negotiating the budget on behalf of the Assembly, is still missing a permanent secretary, and the fate of Silver's counsel, Jim Yates, a key budget negotiator, is also uncertain. Herman Farrell, leader of the Ways and Means Committee, did not comment. Morelle's office was not immediately available to comment. It is unclear what impact Silver's absence would have on the outcome of the budget. It could even make certain aspects, such as education reform, easier to pass given Silver's support for teachers unions and his position on the left wing of the Democratic party. It could also make it easier for Cuomo to make permanent a 2 percent cap on property tax increases, a move Silver has opposed. "It's much more likely the governor's agenda will go through if Shelly is weakened and certainly if Shelly is not there," said Doug Muzzio, a political analyst Baruch College in New York, using Silver's nickname. Cuomo has made budget timeliness a barometer of government efficiency. Last year he produced his fourth straight on-time budget, the first time that has happened in 40 years. Credit ratings agencies upgraded the state last year, citing improved fiscal management as one factor behind the move. Standard & Poor's now rates the state AA+, its highest rating since 1962. The premium over top-rated debt the state pays to borrow money is at the lowest level in over a decade. While the charges against Silver are unlikely to have a credit impact, a delayed budget or highly politicized wrangling during the process could tarnish the state's reputation for fiscal management, making the last four years look like the exception rather than the rule. Still, S&P said it is not treating events in Albany as a credit risk at this stage. The agency said its upgrade of the state's rating was based on recent restraint in spending, which has significantly reduced out-year budget gap projections, as well as the series of on time budgets. "At this point, we do not expect that to change," said S&P analyst David Hitchcock. (Reporting by Edward Krudy; Editing by Lisa Shumaker and Dan Grebler)