Hugh Carey

Hugh Carey, who as governor led New York through the fiscal crises of the 1970s and helped keep New York City out of bankruptcy, died on Sunday. He was 92 years old.

A fundamental question confronted Mr. Carey on his first day in office: How would New York pay the bills for more than a decade and a half of a dramatic expansion of government services under his predecessor, Nelson Rockefeller?

Mr. Carey and his aides answered by setting up creative financial mechanisms, winning concessions from banks and unions and pushing a reluctant federal government to help save New York City from bankruptcy. During his tenure, he slowed the growth of state government.

"Governor Carey faced this challenge with tenacity and a conviction that gave New Yorkers hope that government could lead our state through the crisis," Gov. Andrew Cuomo said in a written statement. "He called for shared sacrifice and asked all New Yorkers to come together. New Yorkers across the state heard the Governor's call to action, followed his lead, and the ship was righted."

Mr. Carey, a Democrat, launched his 1974 campaign for governor just after the death of his first wife, Helen. He had represented parts of Brooklyn in Congress for 14 years, but was a relative underdog. Still, he won the Democratic primary and went on to defeat Malcolm Wilson, the Republican incumbent who had taken over the governorship after Mr. Rockefeller's resignation in 1973.

Throughout four terms as governor, Mr. Rockefeller had spent billions on building new roads, housing, social programs and new branches of the State University of New York. By the time of Mr. Carey's inauguration on New Year's Day 1975, Mr. Rockefeller had been sworn in as President Gerald Ford's vice president.

Days after his inauguration, Mr. Carey made clear that his time in the Executive Mansion would be very different from that of Mr. Rockefeller.

"This government and we as a people have been living far beyond our means," he said. "Now the times of plenty, the days of wine and roses, are over."

Mr. Rockefeller's expansion of services and construction of massive public works like the Tappan Zee Bridge relied in large part on public authorities that issued debt. State government, meanwhile, faced deficits brought on by increasing spending and declining tax revenues. Something similar had happened in New York City, which would be the biggest source of problems for Mr. Carey.

New Yorkers weren't sure what to expect.

"Wall Street blatantly ignored him," wrote Felix Rohatyn, the investment banker who would go on to become an adviser to Mr. Carey, in his memoir. "It seemed to me that he had none of the background, or the political instincts, that would have prepared him for the economic disaster he was about to face."

An early test came from the Urban Development Corporation, an authority that borrowed to build public housing. The UDC issued an unusual sort of bonds: They were backed by revenue from the authority's projects. If that wasn't enough to pay back bondholders, the state would have a "moral obligation" to make up the difference. But that was not the same as a binding bond covenant.

After Mr. Carey and his aides tried to find a way to save it, the UDC eventually defaulted, sending shock waves through the municipal bond market. The larger problem, though, was New York City.

Beset by a declining tax base, growing workforce and huge debt load, the city was facing a cash shortfall in the summer of 1975 and couldn't find the financing to fill the gap. The bond market was reluctant to lend New York the money it needed. Bankruptcy loomed.

Mr. Carey's administration devised a structure to relieve some of the city's debt burden while giving the state some say over its finances. Later, he and Mayor Abe Beame rounded up more financing while wringing concessions and contributions from both financiers and unions.

That, combined with other cuts, helped convince a reluctant Ford—an old congressional colleague of Mr. Carey who had been determined to teach Democratic New York a lesson—to sign a federal bailout of the city.

"The fundamental gap between customary politics and the enormity of the fiscal problems was what he dealt with with particular skill," said Carey aide Richard Ravitch, who would later serve as lieutenant governor under David Paterson.

Still, Mr. Carey's later years in office were checkered by gaffes and low approval ratings. He eventually chose not to run for a third term in 1982 and returned to private law practice.

But his influence persists. As Mr. Cuomo confronts fiscal problems unseen since Mr. Carey's tenure, he has pointed to Mr. Carey's deals with unions and budget cuts as examples of the ideal road ahead for New York.

In a statement, Mr. Carey's family said he died "peacefully" at his summer home on Shelter Island in Suffolk County. Mr. Carey and his first wife, Helen, had 14 children, 11 of whom survive him. He is also survived by his second wife, Evangeline Gouletas, whom he divorced in 1989.

Born on April 11, 1919, Mr. Carey grew up with five brothers in Park Slope. His father and oldest brother started companies that delivered oil around the city.

He served in the infantry during World War II, and his unit was among those that liberated the Nordhausen concentration camp in Germany. He said later the experience convinced him governments shouldn't be able to take the lives of their citizens, leading to his stance against capital punishment.

After the war, Mr. worked in the family oil business. In 1960, he challenged the incumbent Republican in his heavily Irish-Catholic district and won on the coattails of John F. Kennedy. He held the seat for 14 years before running for governor.