With New Yorkers facing the state's worst financial crisis since the Great Depression, many hoped Gov. George Pataki and the state Legislature would adopt needed reforms to spur the economy and provide relief for unemployed and tax-weary residents.

Instead, it was business as usual behind the massive granite walls of the 104-year-old Capitol. The result, critics say, is that New York, once the economic hub of the country, has continued a slow but steady decline compared to other states.

While Westchester, Rockland and Putnam and other Hudson Valley counties have escaped the worst of the downturn, residents and businesses still pay higher taxes and fees, and experts doubt the region will remain unscathed unless New York City's economy dramatically rebounds.

This year, lawmakers and Pataki raised taxes and spending, and borrowed more than $4B to pay for everyday expenses such as running prisons and psychiatric hospitals — the practice that almost drove New York City into bankruptcy in the 1970s. And they enacted virtually none of the reforms, such as protection from lawsuits and cuts in spending, that business leaders said were needed to create and preserve jobs.

The reasons: entrenched politicians, bitter partisanship and big money, critics say.

In short, a dysfunctional government — one that critics say works largely in secret for the benefit of politicians and insiders who know how to play the system, rather than for New York's 19M residents. For New Yorkers, that means higher taxes, service cuts and an economy that lags behind the nation.

"If ever there was an opportunity for the governor and the Legislature to slice into the fat in state government, the budget deficit was it," said James Roche of the Mohawk Valley Chamber of Commerce. "In my view, they blew it.''

And it appears conditions won't change soon. The state faces a deficit of up to $6B next year, which could mean more tax hikes and service cuts unless the economy dramatically rebounds.

Even the confluence of momentous events couldn't crack Albany's political foundation.

"It's amazing how resistant to change Albany is,'' said Mark Alesse, head of the New York chapter of the National Federation of Independent Businesses, a business lobby. "Nine-eleven didn't change the way we do business, the recession didn't change the way we do business and the enormous deficit didn't either.''

Now, plagued by a steep drop in manufacturing jobs — the lifeblood of upstate New York for more than a century — and a Wall Street slump that has ravaged the city's job count, New York is again losing jobs faster than the rest of the country, as it has for much of the past quarter-century.

© 2004, Gannett News Service