ALBANY - Gov. David Paterson spent last week sounding the alarm that New York's economy in sinking and sending the government into crisis.

“The fact is, we confront harsh times,” Paterson, four months on the job, told New Yorkers Tuesday in a rare televised address. “Let me be honest, this situation will get worse before it gets better. The time to act is now.”

Really?

It wasn't news to New Yorkers who have watched gas and grocery prices rise at historic rates while their 401(k) earnings dropped with the stock market and they canceled vacations.

So where were your elected officials, whose job is to watch such stuff, while the economy tanked?

Back on Jan. 17, state Comptroller Thomas DiNapoli issued a dismal cash report that showed Wall Street bonuses - a critical part of the state's revenue stream - were down almost 5 percent.

Business tax revenue was down $292 million at the end of 2007, too, part of a slowdown he first noted publicly on July 20, 2007.

As this year's state budget process was just beginning in January, DiNapoli warned: “There are dark economic clouds rolling in.”

Months before, Senate Democratic leader Malcolm Smith, alone, called for a hiring freeze and spending cuts.

Take the wayback machine even further, to September 2007: New York City warned the traditional cash cows of Wall Street and real estate revenues appeared to be dropping. The same week, then-Gov. Eliot Spitzer warned of a $4 billion deficit in the 2008-09 fiscal year. “It's a very serious budget gap that will require tough decisions,” he told the state Business Council.

But through it all, Albany was otherwise occupied.

In July 2007, Attorney General Andrew Cuomo and the Inspector General's Office investigated a claim of political espionage by Spitzer aides in a plot to smear Senate Republican leader Joseph Bruno.

Then Albany County District Attorney P. David Soares investigated the travel scandal.

Then the Senate Investigations Committee investigated with several public hearings.

Then the state Public Integrity Commission investigated.

Then the State Investigations Commission investigated the investigations.

Then Soares investigated again.

No crimes were proven.

A week ago, the state Public Integrity Commission charged four Spitzer appointees with state ethics violations, which they noted aren't crimes. Two accepted the charges, which carried no penalty. Two more are accused of misconduct that could, after more investigation, result in $10,000 fines.

The political discord that reigned for a year gridlocked New York state government and derailed or gutted deals and tentative agreements including a law that could save millions of dollars in public projects, one that would curb violent video games and another to fight crime. Paterson's landmark proposal to cap local school tax growth wasn't even introduced in the Legislature, where it faced immediate opposition by the teachers union and the lawmakers they support.

When Paterson succeeded Spitzer, who was snared in a prostitution investigation in March, the top goal in Albany wasn't policy or spending, but harmony. Paterson's call in March to cut the budget by $800 million and limit the spending increase to 3.7 percent was mostly ignored - then overruled - by the Legislature.

The $122 billion budget increased spending by $5 billion, or 4.5 percent, over the previous fiscal year and added $11.5 billion in new debt that will be issued over several years. That followed the 2007-08 budget, in which an embattled Spitzer eventually caved to the Legislature and increased spending 8 percent.

Now all that lost time is slapping back hard.

Paterson last week cut $630 million to balance - for now - the current budget. He said the Legislature needs to cut another $600 million. And don't look for the light just yet: Paterson said high spending and plummeting revenues portend a $26.2 billion in budget deficits over the next three years.

“Everything is on the table,” he told The Associated Press Thursday. “I want to set an example that everyone should come to the table with clean hands, you know, no personal projects, no pet issues, no desire to block other people or not letting something happen because someone one else wants it ... it's all part of the deficit that we have to clean up.”

Don't worry. The Legislature agrees something needs to be done, and they'll probably get around to doing it pretty soon.

It might happen Aug. 19, when Paterson called for an emergency economic session of the Legislature. However, deep cuts in spending - unheard of in a decade of budgets that grew two or three times the inflation rate - have even less of a chance this year, coming just weeks before the fall legislative elections. Most lawmakers have plans to campaign, not bite the lobbying hands that have fed them.

Any action may be put off until September or later. That's when another round of economic data will be available for further review, argues Assembly Speaker Sheldon Silver.

And the Senate and Assembly majorities have already taken biggest ticket items - protected by Albany's most powerful lobbyists - off the table. That includes school aid, which got a historic bump in April, and cuts to the state work force.

But at least everyone is getting along.

Albany wasn't always like this.

In the fall of 2006, the state Ethics Commission - forerunner to the Public Integrity Commission - took just four weeks to investigate Comptroller Alan Hevesi's use of state workers as drivers for his ailing wife. Hevesi eventually resigned and pleaded guilty to a felony.

The ex-prosecutor who handled that investigation, Karl Sleight, said there's a lesson in all of this.

“The current atmosphere is hypersensitive on the topic of ethics and integrity. It seems that some investigative bodies are out to uncover the `next big scandal, whether it exists or not,” said Sleight. “That mind-set will affect decision-making and policy implementation.”

It already has.

--

Michael Gormley is the Albany, N.Y., Capitol editor for The Associated Press. He can be reached by e-mail at mgormley(at)ap.org.

AP-ES-08-01-08 1153EDT