Curiouser and curiouser

by E.J. McMahon |  | NY Torch

Lt. Gov. Richard Ravitch still hasn’t publicly released his long-term plan to restore structural balance to New York’s state budget, including a rumored proposal to bond out a portion of the state’s budget shortfall.   But the details emerging so far from officials with some knowledge of the plan make this sound like a dubious proposition, to say the least.

For example, Assembly Speaker Sheldon Silver reportedly has indicated that Ravitch is proposing to tie a bond issue to some sort of financial control board, similar to those created by the state to straighten out the finances of insolvent municipalities.

The 76-year-old Ravitch forged his reputation as chairman of the financially troubled Urban Development Corp. during the New York City fiscal crisis of the mid-1970s, followed by a crucial stint at the helm of the Metropolitan Transportation Authority.  If he is talking about a “financial control board” for the state of New York, it’s a troubling indication that he’s fighting the last war.

New York City in 1975 was functionally bankrupt, saddled with a huge rolling short-term deficit that it could no longer refinance.   The city is legally subservient to the state, which took control of Gotham’s budget away from the Mayor and the old Board of Estimate (which then had a budget-making role superseding that of the City Council) and handed it to an Emergency Control Board dominated by gubernatorial appointees.   The state Legislature has since imposed similar mechanisms on Yonkers, Troy, Nassau County and Buffalo when those governments were at risk of insolvency.

Albany’s current situation at the moment is different in crucial respects.  The model of “control” is ill-suited to the state government itself–which, after all, is a sovereign entity.

Beyond all that, most importantly, someone is already in financial control of state government.  That someone is the governor of New York–David Paterson, at least for the time being — who can veto any spending added to his budget proposal by a Legislature.  Practically speaking, there is no way the state Senate could muster the votes to override such a veto–not even a veto wielded by an extraordinarily weak and unpopular governor.

Borrowing is not needed to close next year’s $9 billion budget gap; Empire Center’s “Blueprint for a Better Budget,” for example, lists roughly $2 billion in savings ideas not included in Paterson’s Executive Budget, starting with a deep cut in the Legislature’s own spending and pork-barrel reserve.  It’s difficult to see how any supposedly separate or “independent” entity could usurp the authority of the governor and the Legislature to shape the budget without running afoul of the state Constitution.  The legal doctrine of non-delegation would seem to make this idea a complete non-starter.

But again, here’s the key: the governor is in control of this situation.  At this late stage in the budget process, with barely three weeks to go in the fiscal year, it’s time he indicated that he intends to exercise that control in some meaningful way.

Meanwhile, the Citizens Budget Commission has issued a timely reminder of how much debt the state as been piling on in recent years, and how its debt service is already headed.  Key take-aways from CBC’s summary:

• New York State’s debt burden is greater than that of all but three states: New Jersey, Hawaii, and West Virginia.
• All four of those states, as well as Delaware and Louisiana, have debt burdens that fall within a “danger zone;” their burdens are far above national norms and make them divert resources from service provision to debt service.

In this op-ed in yesterday’s New York Post, I explained that a deficit borrowing would need to be linked to hard-and-fast controls on spending and debt to be even worth considering in current circumstances.  But at this point, there’s no sign that the Ravitch plan meets that condition.

P.S. — One fiscal crisis precedent that can and should be revisited is the exercise of the state’s authority to freeze public-sector wages, as proposed here and in our “Blueprint.”



- E.J. McMahon is the Research Director at the Empire Center for Public Policy.