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Wall Street bankers let NY delay budget woes: Lt. governor
NEW YORK |
NEW YORK (Reuters) - Wall Street's eagerness to earn fees by helping New York state borrow even more money is worsening the state's fiscal time-bomb, Lieutenant Governor Richard Ravitch said on Thursday.
In contrast, the decision by three bankers to stop underwriting New York City's debt in its mid-1970s fiscal crisis forced politicians, business leaders and public employee unions to accept painful solutions, he said.
"Strangely enough, the financial community is willing to lend the state all kinds of money -- they have 20-odd schemes they are suggesting to Albany and the legislature about how the state can borrow money," Ravitch said at an Association for a Better New York breakfast.
Although Ravitch offered no details about Wall Street's latest financial creations, Democratic Governor David Paterson has, for example, repeatedly rejected a plan to save $500 million by refinancing tobacco bonds.
The lack of a crisis that would force the kinds of harsh remedies New York City had to accept, from thousands of layoffs to balancing its books by using generally accepted accounting principles, is one of the main reasons the state has not forged a timely budget, according to Ravitch.
"In my judgment the problem the state faces is even more serious -- it lacks a precipitating event and behavior has not changed enough though the consequences of the path we are on are as serious if not more serious than in 1975," he said.
Ravitch, whom Paterson appointed after he became governor, helped New York City avoid a bankruptcy in the 1970s, a measure that is only available to municipalities, not states.
The federal government, grappling with its own deficit, is unlikely to offer states more cash, which means New York state will have to "make very significant and very painful cuts in the areas of the largest expenditures of the state -- your local aid," Ravitch said.
That will hurt New York City and school districts, which may have to lay off teachers.
Ravitch said the next governor could inherit about a $15 billion deficit in the fiscal year that starts next April 1.
A new governor will be sworn in next January; Paterson quit his election bid due to a series of ethics probes.
Ravitch said he hoped lawmakers enact a budget in the next few weeks, though he noted the state's history of late budgets and the difficulty politicians have grasping the depth of the current problems. Often in the past, he said, they heard cries that "Apocalypse is around the corner" but were able to dodge the bullet by borrowing or using nonrecurring revenues.
"It built the cliff higher off of which we will all fall when the money stops," Ravitch said. Federal stimulus aid ends this year and a state income tax surcharge expires at the end of 2011.
Other states face similar budget woes, Ravitch said. Some have avoided the fiscal discipline New York City's bankers imposed in the 1970s by sequestering cash to repay debt, which ensures they are not locked out of credit markets, he said.
Ravitch criticized New Jersey Governor Chris Christie for proposing to delay billions of dollars of pension contributions, a plan Ravitch said was the equivalent of borrowing from future generations.
The GOP New Jersey governor also proposed deep spending cuts. His spokesman, Michael Drewniak, responded to Ravitch's comment by e-mail, saying: "If and when he gets a real understanding of what years of Democratic control of the Legislature and Governor's Office has wrought in New Jersey -- including a stunning $10.7 billion budget deficit -- he might have a marginal voice on the extreme outer edges of the discussion."
(Reporting by Joan Gralla in New York; Editing by Dan Grebler)
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