The man who helped save New York City in the 1970s unveiled a drastic new fiscal plan today – one that pledges to bail out the state in five years through a combination of spending caps, bond selling and borrowing.
Lt. Gov. Richard Ravitch's proposal, which he drafted at the governor's behest, has already drawn staunch cries of disapproval from Mayor Michael Bloomberg for its reliance on borrowing what could be millions of dollars to help cover the ballooning deficit.
"If you borrow money to get through these times you postpone the pain for the following year and you'll have a bigger debt," Bloomberg said. "Then the year after, you'll project an even bigger debt. I just don't understand how that will really work."
The state faces a $9 billion deficit this year and is looking at a $15 billion shortfall for the following year. While Ravitch's plan would involve borrowing, it would place a cap on how much could be borrowed -- only $2 billion a year of the total budget -- to discourage legislators from using borrowing as an excuse to avoid making the tough decisions on where to reign in spending.
"I believe that a very limited amount of borrowing may be necessary to accomplish our goal," Ravitch said, adding that he hoped to restrict borrowing to the first three years of his five-year plan. "This is transitional borrowing, and the state can't do any borrowing without a budget."
For some immediate cash relief, Ravitch's proposal allows the state to sell bonds to help cover operating costs, but there's a catch: The bonds can only be sold once lawmakers produce a balanced budget. To further that end, the plan calls for the establishment of a five-member financial board that could give one official broad power to determine whether that's been done.
"We have to clean up this mess," Ravitch said. "Expenditures are growing faster than revenues and unless we realize that significant cuts in the budget are essential, we are going to be forced to deliver essential state services only by raising taxes and the economy of this state will not fare well if that's the long-term alternative."
Paterson said Tuesday the "control board" proposed by Ravitch would be an independent panel that would decide whether a budget deal struck by the Legislature and governor is balanced under uniform accounting rules. If not, the governor — or potentially another official such as the comptroller — would gain extraordinary powers to make final spending cuts and other decisions.
Paterson said the idea, even if accepted, wouldn't likely be used this budget session.
But he said it could be critical in ending Albany's notorious overspending. He said recent spending has risen 8 percent annually while revenues increased just 3 percent a year, placing New Yorkers among the highest taxed Americans.
"I think what we are moving toward in this state is a shift in which there will be a final decider," Paterson said. "I think this whole idea that you can govern by committee is just not working where fiscal management is concerned."
But politics as usual can threaten the achievement of a timely, truly balanced budget, and Ravitch emphasized the state doesn't have time to entertain personal agendas.
"We're eating our seed corn. The real tragedy of running from crisis to crisis, year to year, is that we can afford less and less to invest in education and in economic development," he said. "If we don't get this budget in true structural balance, we're not going to have the opportunity to reinvest in the growth and the future of this state."
The idea has some tepid support.
"It's an interesting concept that's worthy of consideration," said Democratic Assembly Speaker Sheldon Silver. "He's worked hard to come up with a plan that works."
Ravitch also proposed the start of the fiscal year be changed from April 1 to June 30 to allow time to collect financial data.
The lieutenant governor has orchestrated economic recoveries before. Widely respected for his business acumen and negotiation skills, Ravitch has been credited with recapitalizing the poorly funded and maintained transit system in the late 1970s and early 1980s. He also transformed a near bankrupt state financing agency into a prosperous authority that completed tens of thousands of low-income apartments and recouped the state's credit.