2010-03-19 / View From Here

The View From Here . . .

By Bob Morgan, Jr.

As this is written, the health care debate is in full throttle, with possible votes this weekend, although further delays are also possible. I frankly do not know what will happen. Published whip counts at this writing seem to indicate that the Democrats are well short of the votes needed for passage in the House (they cannot count on any Republican support), especially in light of the leadership’s unwillingness to make any changes in the abortion provisions. These provisions are a flash point for a number of Democratic members led by Rep. Bart Stupak of Michigan. On the other hand, it remains to be seen whether Democrats, even House members nervous about November, will defeat the President’s number one domestic priority.

However, since the health care debate is such a rapidly changing story, the focus in this space this week will be on the upcoming New York state budget and an intriguing, if controversial proposal by newly appointed to reorganize the budget in these difficult times. As usual, the views expressed here are solely my own.

Basically, the state budget deficit is approximately $9.5 billion this year, following the passage last year of a rather irresponsible $132 billion budget that relied on tax increases and one-shot revenue sources to raise spending by 8.5% over the previous year.

Mr. Ravitch, who is pessimistic that the legislature can actually bridge the $9.5 billion gap, proposes instead that consideration be given instead to a five year plan to eliminate the structural budget deficit. Basically, he proposes that the state borrow $2 billion a year for next three years to close immediate deficits while also establishing a financial review board that would determine if the budget is in balance. If it is not, and the legislature does not act quickly, the governor would be empowered to make across the board spending cuts. Also, as an additional disciplinary measure, the state bondholders would be entitled to accelerated payments if the budget were out of balance. The goal of the plan would be to put the budgetary house in order in five years (i.e., to put receipts in line with expenditures) without new taxes.

Normally, Mr. Ravitch’s plan would be a nonstarter. A pretty good analogy is a family in debt who decides to borrow money for living expenses rather than reduce outlays. And, as former New York City official Henry Stern points out, Mr. Ravitch would have strengthened his case if he also put forward specific areas where he believes the budget should be cut, since reductions will be necessary whether or not the $2 billion is borrowed. And, of course, there is great concern whether the legislators and governor will have the political will to make the difficult budget cuts. There is a fear, as state senate Republican leader Dean Skelos points out, that the new borrowing will become a “revolving fund for the next governor to grab money.”

Under the difficult circumstances, however, Mr. Ravitch’s ideas are worth a long look. Albany, and in particular the annual budget negotiations, has become dysfunctional in recent years, with costs spiraling out of control, taxes putting the state in an uncompetitive position and well connected special interest groups largely dominating the budget process. However distasteful additional borrowings may be, if they can be coupled with ironclad guarantees of a significantly more orderly budget system going forward, they may be worth the cost.

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