Lt. Gov. Richard Ravitch today formally released his five-year plan for achieving structural budget balance, including a proposal to authorize roughly $6 billion in “transitional borrowing” to help close projected budget gaps over the next three years.  The borrowing would be hard-wired, through bond covenants, to a series of changes including:

• moving the fiscal year to July 1 from April 1;
• budgeting on the basis of Generally Accepted Accounting Principles (GAAP);
• creating an “independent” Financial Review Board to determine whether the budget is balanced on a quarterly basis; and
• empowering the governor to impound spending if the board determines the budget is out of balance.

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Lt. Gov. Richard Ravitch still hasn’t publicly released his long-term plan to restore structural balance to New York’s state budget, including a rumored proposal to bond out a portion of the state’s budget shortfall.   But the details emerging so far from officials with some knowledge of the plan make this sound like a dubious proposition, to say the least.

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State Comptroller Thomas DiNapoli today issued a “Strategy for Fiscal Reform” that focuses on the budget process, but his most significant and potentially valuable recommendation deals with debt.

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New Jersey imposed a 4 percent cap on local property tax increases a year before Governor David Paterson endorsed the Suozzi Commission’s call for a school property tax cap in New York.  But unlike Paterson’s original proposal, the cap signed into law by New Jersey Governor Jon Corzine in 2007 contained a number of loopholes, including a clause exempting the cost of health insurance benefits.  Municipalities were also allowed to seek a cap waiver from the New Jersey Local Finance Board.

The result: “Nearly a third of the state’s 566 municipalities raised property taxes above the cap with the state’s permission last year,” the Newark Star-Ledger reports.   The newspaper says municipalities “were able to show they were facing virtual civic dysfunction” if taxes were capped.

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In a Times piece on Washington’s Wall Street bailouts and New York’s economy, the Fiscal Policy Institute’s James Parrott says that “the magnitude of the bailout has been so great that it will have wiped out whatever cumulative surplus” New York had built up in sending more money to Washington than it got back for decades. (more…)

From the folks who brought you New York’s “millionaire tax,” it’s … another millionaire tax.  And a stock transfer tax.  And a 50 percent “Banker Bonu$ Tax.”

Is this a great state, or what?

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State and local governments continue to use structured finance to obscure bad fiscal decisions. Today’s case: Louisiana’s convoluted proposed subsidy structure for the New Orleans Saints. The pending deal shows that conservative Republican Bobby Jindal isn’t shy about using state dollars for economic central planning, even at the expense of investing in basic infrastructure so that the private sector can grow on its own.  (more…)

The Drum Major Institute’s John Petro has a piece in today’s Daily News calling for New York to implement congestion pricing to fix New York’s transit problem. “We need a long-term solution that … creates a permanent, steady source of revenue,” he says, to raise at least $400 million annually after collection costs. Such a solution would finally address the “root cause” of MTA dis-investment, purportedly not enough money.

But the MTA should have no revenue problem right now.

The master plan that former MTA chairman Dick Ravitch unveiled in December 2008 was supposed to raise $2.1 billion annually for the MTA, not including fare hikes. The revenue-raising had two sources: a $1.5 billion payroll tax and a $600 million plan to toll free bridges.

Ravitch also directed the MTA to start raising fares in line with inflation to cover future operating gaps.

The plan the legislature enacted last May met that goal, in a different way. (more…)

Encima Global president — and economist – David Malpass has some incisive slides up on the firm’s website that relate well to municipal finance and “too big to fail.”

Slide #16 shows the growth in state and local government spending as a percentage of GDP. It’s gone up in recent years to near-1970s levels.

Slides #18 and #19 illustrate how cheaply municipalities have been able to borrow over the past year, despite historic economic and financial crises that should have shown how dependent states and local governments were on bubble-era revenues.

Record-low borrowing rates for state and city governments make no rational sense — except in a world of zero-percent interest rates and an expectation of bailouts on demand, both of which distort normal market signals.

E.J. and I have a piece in today’s Post on the MTA’s quickly deteriorating finances.

Especially disturbing is the MTA’s recent reliance on short-term borrowing to cover its operating costs (in other words, paying millions to Wall Street banks in financing fees and interest to pay for basic things like payroll).

Thirty-five years ago, profligate municipal entities in New York needed the state’s help in a crisis. Today, authorities such as the MTA are largely in trouble because of Albany’s continued craven decisions, including suddenly seizing money from the MTA to fund the state’s own operating deficits.