"Dick" Offers Up Advice On Saving State From Fiscal Morass
In financial circles, when Richard Ravitch -- often credited with saving NYC from default -- speaks, governmental authorities typically stop and listen.
So when the Lieutenant Governor offered up a 5-year plan to salvage New York's sagging economy, folks stopped and took note.
Among the proposals placed on the table (though not altogether palatable) are:
- The paydown of the existing budget gap within 5 years;
- Creation of an independent financial review board;
- Borrowing by the State, within stringent guidelines, and conditioned upon a limited timeframe for repayment.
What? More borrowing? Isn't that what got New York into this deep hole in the first place? Ahhh. Till debt do us part...
Okay. All municipalities borrow. You can't operate government, or so it would seem, without at least a modicum of debt. [Why not?]
The Ravitch treatise is a long one. Sometimes well reasoned. Other times, rambling.
Greater oversight. Less spending. Prudent accounting. Transparent accountability. All good.
But what of the burden of property taxes, that keeps New York's economy from growing, and NYers constantly owing? How about reducing the size and scope of government? [Consolidation, anyone?] And what about spending no more than the Empire State actually has on hand -- as in, no more borrowing?
No, we guess you can't expect the State of New York to be run like a fiscally prudent household. [Why not?]
John Faso, late of GOP candidacy for governor and currently hobnobbing with New Yorkers For Growth, conjures up a response to the Ravitch Plan. It is partisan, to be sure, and offers little in the way of more than a topical salve to ease the State's financial woes.
Still, some points are well taken, and remedies -- though surely not of Albany's devise -- worthy of consideration, if not implementation.
The key to New York's financial salvation lies not so much in the obtuse or sublime. The solution is obvious, though decidedly painful, especially in a legislative election year.
Stop the spending. Raise income taxes. And cut, cut, cut. Ouch! [There. We said it. Then again, we're not running for public office...]
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From the New York Post:
Beyond NY's gaps
By JOHN FASO
LT. Gov. Dick Ravitch yester day outlined a five-year financial-recovery plan to plug the state's immediate $9 billion budget hole and address its looming $60 billion structural deficit over the next half decade.
His two big fixes? More debt to finance current operating deficits, and a new body to oversee long-term budget cuts.
Both are flawed.
Ravitch proposed that the state issue up to $6 billion of new debt over the next three years -- 10 percent of the five-year structural deficit -- to help ease its path to fiscal health. And he envisioned the creation of a financial-review board, composed of five independent citizens, to make sure the state is cutting its massive structural deficit.
"It is not, in my judgment, possible to cut nine and a half billion dollars . . . out of this budget this coming year," Ravitch said yesterday. "Not only because I believe it to be a political impossibility, given the varied dispositions of the members of the Legislature. But because there is a level of cuts, no matter what everyone's politics are, [that] affects employment, it affects human beings."
But interest costs on the state's debt are already now about $5 billion a year and rising, so borrowing yet more is hardly a great idea. The state repeatedly has tried to borrow its way out of its problems -- most recently after 9/11 -- and also routinely has enacted counterproductive tax and fee increases, all on the promise that it would be the very last time that it would resort to such "emergency" measures.
The financial-review board would determine whether state spending or revenues are seriously out of whack, then authorize the governor to make automatic reductions in spending. But unlike the financial-control board that the state imposed upon a bankrupt New York City in the 1970s, this new board would be powerless to address one of the main cost-drivers killing the state's economy: public-employee contracts, pensions and benefit packages, and the state laws dictating these agreements.
Ravitch has performed a public service by again attempting to focus the attention of state officials and its citizenry on the fact that New York has been living beyond its means for many years. As he pointed out, the state has squandered federal stimulus money and didn't restrain spending and taxes, and our fiscal dilemma has only gotten worse. Surely, a more disciplined budget process would help New York establish spending priorities and lessen our dependence upon fiscal gimmicks and one-time revenues to balance budgets.
But the short- and long-term issue for New York isn't budget reform. Instead, New York needs a radical overhaul in state and local governance. Government needs to be consolidated, especially at the local and school-district levels, and costs need to be cut. In this time of economic travail, it is instructive that public employees statewide are projected to receive more than $2 billion in raises during 2010. Yet, the new Financial Review Board would have no authority to disapprove state-employee union contracts, much less have any role in the more expensive local ones.
Plus, many in Albany and around New York still haven't come to grips with the fact that New York is an economic basket case. Ravitch's report highlights the loss of population we've experienced and the over-reliance upon Wall Street as the engine of state tax revenue. But will people listen?
New York does have a way out, but the path won't be cleared by rearranging deck chairs. Instead, the state needs to embark upon a radically different, pro-growth strategy emphasizing private-sector job growth.
That means:
* Cutting taxes on businesses, both large and small.
* Streamlining environmental and zoning rules to encourage private investment and speedier permit approvals.
* Reducing the size and scope of government by consolidating services and functions.
* Eliminating borrowing that isn't approved by voters.
* Capping property taxes.
* Cutting health-insurance costs by eliminating state taxes on health insurance and allowing insurers to offer a greater variety of plans.
* Abolishing job-killing taxes on energy to help create jobs.
Simply put, we need to make New York a state where business and entrepreneurs create private-sector jobs.
Ravitch continues his long and admirable record of public service by highlighting the need for the state to reduce costs and restore fiscal stability over the next five years. But to truly restore New York and make it a place where people want to work and raise their families, we need policies to promote private-sector economic growth.
John Faso, the 2006 GOP can didate for governor, is a co- founder of New Yorkers for Growth.
Both these guys make good points, but neither offer much of a roadmap detailing how New York can accomplish the measures they recommend in the context of a totally broken and dysfunctional political environment. Everybody knows, as Faso points out, that labor, benefit and pension costs - both current and projected -need to be reduced, and fast, before New York hits a fiscal wall. Everybody knows that property taxes can't keep going up and up without accelerating the exodus of people who just can't afford to live in New York anymore. Everybody knows that school districts, special disticts and Lord knows how many government agencies should be streamlined and consolidated to promote efficiency.
ReplyDeleteEverybody knows this stuff already, but nothing ever seems to get done to solve these problems. Why? Because Albany has become so politicized that the constituencies that would be negatively impacted by a meaningful restructuring of government(think teacher and other public employee unions, to say nothing of scores of state agencies, political contributors, special interest groups, etc., etc., etc.) have a proven track record of consistently and aggressively lobbying to maintain the status quo, otherwise known as their position at the public feeding trough.
Meantime, the taxpayer be damned.
Here's an idea that nobody has brought up. I'm sure this would meet with a groundswell of disapproval but I'll raise it anyhow.
New York should declare bankruptcy. Under Chapter 9 of our current bankruptcy code, a public entity can declare bankruptcy just like a private company can. What would this do? Well, other than causing all hell to break loose, it would allow New York to hit a reset button on all of its debt obligations, including labor and pension benefits, as well as provide a structure for consolidating everything from school districts to the bloated bureaucracy that is Albany. More importantly, it would take the process of re-structuring those and all other obligations out of the hands of our crummy legislature and into the hands of a court-appointed trustee, providing at least some insulation from the inevitable political pressures that emerge in this kind of process.
The idea is crazy and implausible and it would certainly be painful. But things are getting desperate now, and so we could use a few more "crazy" ideas and a little less "same old same old." Meantime, if you're an average taxpayer, you're already in pain.
The bankruptcy idea is an interesting one. Instead of a Chapter 9, I would suggest a Chapter 11. It might cause a little less chaos than an outright liquidation.
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