To keep the state from becoming "insolvent," Governor Paterson announced that he will withhold 10 percent of nearly $1.9 billion in funding for schools and municipalities — including New York City — that was supposed to be issued on Tuesday.

As part of what he has described as a last ditch effort to avoid crossing "the financial Rubicon into fiscal disaster," Paterson will indefinitely delay the payout of $60 million in school aid and $23.9 million in municipal assistance that would have come to New York City. He insisted that he is not cutting the funds or impounding them, but putting them off until the state can afford the expenditures.

The Governor blamed the state Legislature for recently enacting a $2.7 billion budget deficit reduction package when he asked for a $3.2 billion package, which he says could have closed the budget shortfall. "Actions have consequences, choices matter and people are going to remember who stood up to confront a crisis and who stuck their heads in the sand and shirked responsibility," said Paterson, who noted that he expects legal challenges, but believes he is in the right. "If the Legislature won't act, I will." He added that if he didn't take action, the state would turn out bouncing checks, which "in itself is really what's illegal."

Legislators say that Paterson has crossed the line: "Case law says the Legislature is the branch of government with the power to enact and amend the budget," Sen. Eric Schneiderman (D-Manhattan) told the tabloid. "He may have difficulty working with the Legislature, but it is his constitutional obligation to do so." Education groups have already prepared lawsuits if their funding is withheld.