As Paul Krugman put it, states that cut spending in a time of recession are like 50 little Herbert Hoovers.

Well, welcome to New York State, whose governor just slashed payments to schools and local authorities in a bid to keep the state solvent.

DailyNews: New York City will lose at least $84 million in funding under Gov. Paterson's plan to withhold payments to keep the state afloat this month.

Saying the "day of reckoning" for cash-strapped New York state is here, Paterson announced Sunday he is unilaterally withholding 10% of nearly $1.9 billion in school and municipal aid funding that was to be paid Tuesday.

For the city that means its school aid payment will be about $60 million short and its municipal assistance payment $23.9 million lower than expected, Paterson's budget office said.