After months of warnings, NY State is now broke. The NY Times reports, "New York had a negative balance of $174 million in its general fund on Wednesday, with nearly $1 billion in bills owed by day’s end." And State Comptroller Thomas DiNapoli said, "New York State is officially living paycheck to paycheck. The state is starting the new year by scrambling to make payments and juggle money."

Governor Paterson had said the state would run out of money last month, but the State Legislature passed far less in cuts than what he would have liked. DiNapoli wanted even more cuts and told the Post, "We've never seen a cash-flow situation this dire in New York state and for the first time in history, the state could actually end a month in the red.... It all could have been avoided with a more realistic budget passed last April."

As for what this means for the state's day-to-day finances, the Times explains, "To fill the gap, New York will be forced to rely on its own version of overdraft protection by raiding its short-term investment pool — a kind of statewide checking account. But that account itself is dangerously low, with only about $800 million on hand, compared with a balance in more flush years of as much as $16 billion. And the lower the short-term balance falls, the harder it is for the state to cover its day-to-day bills and the closer New York moves toward a previously unimaginable eventuality: A government check that bounces."