Where Have All the Dollars Gone?

Cuomo: A Man With a Plan,

But Where Is the $10 Billion

We Need to Balance Budget?

Day 62 - New York State without a budget

This week appears to be devoted to the Republican State Convention, which should divert some of the parties from considering the overdue state budget. Meanwhile, Governor Paterson is said to be working on a plan for massive layoffs, to take effect January 1, 2011. The reason he gives for not making the effective date July 1, 2010 is that he promised the unions there would be no layoffs in 2010 in exchange for their agreement not to oppose Tier 5, which reduces pension benefits for new employees of the state. Under a decision of the Court of Appeals, once the state employs a person, it is obligated never to reduce his pension rights and privileges, no matter what the state's financial condition may be.

The problem the governor has is that the federal court having invalidated his furlough plan, and with the unions insisting he keep his word on layoffs, there is really no way to reduce state expenditures substantially until after he leaves office on December 31. That is about seven months from now, and it is questionable how the state’s bills will be paid in the interim, considering current levels of revenues and expenditures.

It is possible that when the state runs out of money it will issue scrip, as Governor Schwarzenegger did in California. The scrip was redeemable for cash once revenues came in and the fiscal gap was bridged.

Now that Attorney General Andrew Cuomo has announced his candidacy for governor, we assume he will answer questions about his fiscal plans. Actually, we believe that he was quite right not to answer those questions in advance of his long-awaited declaration, which came the Saturday before the Democratic convention via a 21-minute video. By getting into the mix sooner, he would simply have alienated part of his base, whatever he would have said. Releasing a plan would also have exposed the reality that, not being in office, there is nothing he could do to implement it.

DIGRESSION: WHY TWEED? The symbolism of holding his announcement press conference in front of the Tweed courthouse on Chambers Street eludes us at this point. In his video, Andrew Cuomo said that "Albany's antics today could make Boss Tweed blush." Although it is a distinction for a man to be mentioned in a political announcement 132 years after he died in the Ludlow Street jail, the reference cannot be considered as favorable. In fact, the old New York County Courthouse was never formally named for Tweed.

When its demolition was proposed 36 years ago by Mayor Beame to make way for a mall leading north from City Hall to a new towering Municipal Building, a committee was, inevitably and justly, formed to save the building, chaired by Paul O'Dwyer and Brendan Gill. Congressman Ed Koch was a member of the committee, and when he became mayor in 1978, the matter was settled. The cost of restoring the old building ended up close to $90 million, which was eight times what it had cost the city to build it initially over the twenty years (1861 to 1881) it took to complete. Of course, that cost comparison does not provide for a century’s worth of inflation, but to put it in perspective, the courthouse cost one and one half times as much as the United States paid for Alaska, a contemporaneous purchase.

While the building evolved from eyesore to historic treasure, it was given an informal name to honor the man who had made the most money from its construction. In fact, so egregious were the kickbacks collected by Tammany Hall, that after Boss Tweed was convicted in November 1873 of 204 of the 220 charges brought against him in an unfinished room of the Courthouse, the public's outrage was severe enough to bring construction of the courthouse to a near standstill for five years.

BACK TO THE FUTURE: The substance of Cuomo's financial plan appears to be fine as far as it goes. It does not, however, resolve the problem of what to do about the near $10 billion deficit in this year’s budget or the impending $12 billion in Fiscal 2011, which begins in just 303 days; that is, 365, one year, minus 62, the days this year's budget is late.

Meanwhile, we have heard nothing from the Republicans as to how they would balance the budget, or at least move in that direction. We watch and wait while the political parties contemplate what actions they can take which will give the least offense. Meanwhile, the governor relies on his promise to the unions to take no action while he is still in office. We can understand his reasoning: Cuomo wanted to be governor and so he pushed me out; let him solve the problem of the deficit.

Meanwhile, the longer it takes to start cutting, the deeper the cuts will have to be. The problem has been evident for years, but neither party in either house has taken the initiative. The Senate Democrats, in fact, want to initiate a property tax rebate which would cost the state almost a billion dollars. Albany lives in a "la cage aux folles" of its own making. As the days pass, it digs itself deeper and deeper into a financial abyss.

We'll check back in a few days. But we don’t expect the ice to break before then. The show continues to go on, but what will be the denouement?