Lt. Gov. Richard Ravitch today formally released his five-year plan for achieving structural budget balance, including a proposal to authorize roughly $6 billion in “transitional borrowing” to help close projected budget gaps over the next three years.  The borrowing would be hard-wired, through bond covenants, to a series of changes including:

• moving the fiscal year to July 1 from April 1;
• budgeting on the basis of Generally Accepted Accounting Principles (GAAP);
• creating an “independent” Financial Review Board to determine whether the budget is balanced on a quarterly basis; and
• empowering the governor to impound spending if the board determines the budget is out of balance.

But why create a new entity to monitor budget balance ?  Why not just give the governor the impoundment power he should have, period?  One can only guess that Ravitch was determined to recreate, in some fashion, the “control board” model of the mid-1970s New York City fiscal crisis, and this was the closest he could come to it.

I posted a critique in anticipation of the Ravitch plan yesterday; watch this space for more analysis and commentary in the days ahead. Meanwhile, today’s Buffalo News carries an instructive story on one of the most notorious deficit borrowing abuses in New York’s history: the 1990 “sale” of Attica Correctional Facility to the state Urban Development Corp., which issued $200 million in bonds to finance the transaction.  The upshot, as described by Tom Precious of the News:

A generation later, the state has so far paid back $344 million on that $200 million loan.

But, like a homeowner desperate for cash and unwilling to cut expenses, the state refinanced and in some years paid no principal on the Attica borrowing so that today New York still owes more than $222 million in principal and interest. All that on a borrowing two-thirds of the way through its 30-year term.

“It is symbolic of fiscal gimmicks used to avoid a more serious question of controlling spending in another part of the budget,” State Comptroller Thomas P. DiNapoli said of the Attica borrowing. This year, New Yorkers will spend $21 million in financing for a paper transfer that had no practical effect on the operation of the prison.

Today, state officials are again considering a less painful — though more costly over the long term — option to just cutting costs and raising revenues: deficit borrowing. And just like in 1990, during the administration of Gov. Mario M. Cuomo, and several times since then, a new possible round of borrowing is already being defended as fiscally sound and with plenty of built-in controls aimed at defusing critics.

But those controls all have something in common: Anything lawmakers agree to in 2010 does not have to be followed by lawmakers the following year, or the year after that, or ever. [emphasis added]

Ravitch would suggest that his proposal differs from the Attica gimmick because the reforms adopted as part of his plan will be secured by bond covenants, making any deviance a “default event.”  But that restriction would expire when the bonds are paid off, “in the shortest period practicable,” under Ravitch’s plan.