California’s state budget gap was about $40 billion this year. New York’s some $50 billion. Every state in the Union is struggling with drastically lower revenues and higher costs for services of every kind, washing state capitals with red ink.
At the polls next year, governors who are facing elections—including Governor David Paterson of New York—may find themselves politically drowned by such gargantuan deficits.
So faced with closing schools, hospitals, fire stations, and kicking struggling families off of welfare roles, governors are turning instead, like the famous bank robber Willy Sutton, to wherever the money may be. In New York’s case, at least some of it is hidden in a carbon piggy bank.
Late last year, ten northeastern states started a cap-and-trade system covering carbon emissions from powerplants. Each facility must buy its initial “allowances” for their emissions, generating hundreds of millions of dollars in revenues. Each state decides how to spend this money, but generally they have committed it to energy efficiency programs.
That’s where Paterson took a bold gamble. He proposed using $90 million of the New York's $202 million in carbon allowance revenues this year to subsidize the state’s budget deficit.
Many criticized the move, fearing that environmental and energy efficiency goals won’t be met and that other states might copy the move, making matters worse. That may also cost the Governor some green friends, hurting his relection chances.