Friday, March 12, 2010

Ravitch Plan Reprises '75

Ravitch Would Borrow Billions,

Impose Curbs on State Spending

By Henry J. Stern
March 11, 2010

The plan submitted by Lieutenant Governor Richard Ravitch to deal with the state's budget deficit for FY 2011, estimated at between 8 and 9 billion dollars, is now on the table. It basically consists of borrowing additional billions of dollars to postpone the pain of substantial budget reductions which would otherwise be required to take place by June 30. You can link to the press release describing the plan here and get the entire plan (19 pages) by linking all of it.

Covenants and sanctions are built into the plan to prevent future overspending and to promote repayment of the newly borrowed money, but one should never underestimate the ingenuity of the legislature's staff in finding ways to evade any restrictions that may be imposed in the current scare.

The plan does not discuss specific spending reductions, which will clearly be necessary whether the state is able to borrow or not. It seeks to blur opposition by not identifying the beneficiaries of state largesse, basically public employees and people who work for non-profits which are largely state-funded. It may take another blue-ribbon panel to write the report that does get down to prioritizing expenditures and defining just where cuts should be made. If LG Ravitch and his small staff do not undertake this task themselves, we would suggest Steve Berger, a former state official who headed the hospital closing study, or Frank Macchiarola, former schools chancellor and current chancellor of St. Francis College. Either would be a very good choice, if he were willing to accept the thankless task.

In any event, elected officials: legislators and the governor will make the final decisions on budget cuts, and neither is overly respected for judgment on the merits or fiscal prudence. We hope they rise to the occasion.

The plan is essentially a reprise of the 1975 plan in Fiscal Crisis, which enabled the city to avoid bankruptcy after an application for it had been prepared.

That plan was based on labor and management agreeing on cost reductions and the purchase of city bonds by the United Federation of Teachers, under the leadership of Albert Shanker. Whatever plan is proposed now would require the support of Governor Paterson and Mayor Bloomberg, which has not yet been obtained.

The columnists have generally been critical of the plan. The argument on its behalf is the least worst of the alternatives sort of like Winston Churchill on democracy.

The argument against it is that it is fiscal gimmickry, that some of its restrictive provisions are unlikely to be enforced, but that if even if they are, the wily elected officials, will find another way to satisfy their constituents and contributors by spending money that the state does not have.

Based on sad experience, we have little confidence in any promises that are made in Albany. We suspect there is no legal straitjacket which will be escape-proof when the lawmakers, aided by battalions of lobbyists and lawyers, set their teeth on it. We do suggest, however, in passing, that the legislature give the judges of New York State their long-overdue cost of living increases so they may escape the genteel penury in which some of them reside. It is unjust to tie judicial salaries to legislative salaries, which are enriched by lulus and expense money and supplemented by professional income which is unlimited.

In the end, it is likely that the Court of Appeals will decide the lawsuits that will arise out of the Ravitch plan if it reaches the stage of implementation.

The lieutenant governor should be commended for his effort, and for the ingenuity of some of his proposals. The report would have more credibility if it were accompanied by proposals for spending reductions, but he may feel that would be too much for the legislature to swallow in one bite. What he has offered them will be difficult to digest, unless they are confronted with bare cupboards. If that occurs, legislative salaries should be the first to be deferred. They created the recurring deficits.

The March 31 statutory deadline for the state budget to be adopted is, as of today, twenty days off and most unlikely to be met. A wise suggestion by Ravitch is to change the start of the state's fiscal year from April 1 to July 1. That should have been done long ago.

DIGRESSION: In the State of Alaska, there has been a betting pool each year since 1917, on the exact moment when the ice will break on the Tenana River. The river is frozen for the winter, as one would imagine. In the spring, the ice breaks, but the question each year is when this will happen.

Anyone can buy a ticket and choose to enter a specific time, to the hour and minute, and the date (in late April or early May) when the ice will break at a particular point along the river. Tickets are $2.50 and can also be bought online. Their website is In 2009, total bets reached $283,723. For New Yorkers, we suggest a friendly bet on whether the budget will pass before the ice breaks. Since the Empire State monopolizes gambling (to help education, of course), your wagers should be made privately. As of March 11, we would call the odds at 8 to 5 in favor of the ice breaking first, but you can suggest different odds if you are so inclined. END DIGRESSION

Action on the state's extremely serious financial problems has been deferred somewhat by Albany's preoccupation with the investigations of the governor's behavior. There is no point in working too hard on the budget if one doesnt know who is going to be the governor next month. With the heat on Paterson at least temporarily lowered, and the days drawing down to a precious few, it is possible that there will be more progress on the budget. The downside is that they will never be able to agree on a mixed package of taxes and cuts unless they are locked up together, and that is highly unlikely.

StarQuest #653 03.11.2010 1011wds

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