Notwithstanding media coverage predicting New York’s “latest budget ever,” it’s worth noting that all of the state’s 2010-11 budget appropriations already have been adopted.   What’s left hanging is a revenue bill encompassing $828 million in additional tax increases.

Assuming the pending legislation is adopted, New York’s per-capita state tax hikes over the past two years will come to $414 per capita — far more than any state including California, which has raised taxes by $312 per capita, according to this estimate. In fact, New York alone accounts for fully 29 percent of all the state tax increases proposed and enacted since 2009.   This may qualify New York politicians for yet another dubious achievement award.

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Goldman Sachs reported lackluster profits this morning, bringing some bad tidings to New York’s pols. Even after taking into account Britain’s one-off bonus payroll tax and the company’s $550 million SEC fine, profits fell by 44 percent from the same time last year. More important for New York, expected employee pay is down by 42 percent, roughly in line with the profit fall.

If this drop-off holds for the rest of the year at Goldman and its competitors, New York State and City will see a personal income tax drop as well as a drop-off in other revenues related to economic activity, like apartment-buying. The people earning these bonuses already seem to know that, as Goldman’s CFO put it, things are “pretty slow.”

Most news coverage of yesterday’s budget vote reflected the approach of today’s New York Times headline: “Albany Lawmakers Pass Big Cuts in Health Care.” In fact, net of those cuts, the state-funded share of Medicaid spending will increase this year year by more than 8 percent, based on data in the governor’s original 2010-11 Executive Budget documents.

Interested in finding an authoritative, plain-language summary of the health care actions in yesterday’s budget extender bill?   You’re out of luck: neither Paterson’s office nor the Legislature has posted so much as a news release on their websites.  As New York’s state budget deficit gets larger, hard budget data from official sources is becoming even more scarce than usual.

Think of it: including yesterday’s $50 billion Medicaid appropriation, the Legislature has now adopted roughly 40 percent of the entire state budget for 2010-11, without producing a scrap of supporting documentation to explain the financial plan impact.  Amazing, even by Albany standards.

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Would the “comprehensive reforms” unveiled today by the state Senate’s Majority Democrats “fix the state’s broken budget process and give New Yorkers a fiscally responsible budget,” as they claim?

Of course not.

There are, however, some good ideas in the package that would moderately boost transparency and encourage better long-term planning if properly implemented. (more…)

New York State entities continue to scrape the bottom of the barrel to scare up a few dollars. The Metropolitan Transportation Authority (MTA) will issue $475 million in short-term notes this week. The MTA pledges to repay the debt as soon as it gets some more revenue from the new downstate payroll tax on employers that the state collects on its behalf. The cash scramble likely will cost the MTA several million dollars in underwriting costs.

Meanwhile, MTA chief Jay Walder’s budget-balancing plans are beginning to look just as flimsy as New York State’s plans for its own budget. A few months ago, Walder proposed that the MTA start charging public-school students half-fares this year and full fares next year to raise $214 million, But after a meeting with the kids yesterday, he said he’d hold off on a vote on the issue.

It doesn’t much matter, anyway. Practically speaking, the MTA isn’t going to get much money from students one way or the other. Aggressive fare-beating action against back-packing toting kids this fall would be a nightmare for police-community relations and for Mayor Bloomberg and would consume valuable police resources.

These are all just diversions meant to keep the people who create and monitor New York’s budgets in a state of suspended disbelief.

State entities can still raise money for their fantasies, though, in part because investors expect taxes to go up, spurring their demand for tax-exempt debt.

The outlook for a timely and fiscally responsible New York State budget is as poor as it has ever been at this point in a fiscal year that ends March 31.

We like NY's proactive stance!

The lame-duck governor is thoroughly discredited and distrusted by lawmakers (Don Imus vote of confidence notwithstanding).

The deficit financing plan offered by Lt. Gov. Richard Ravitch raises novel and troubling questions, and a key lawmaker says it is unlikely to be taken up this year.

There’s little sign that anyone around the state Capitol is seriously intent on enacting a budget that will close next year’s projected $9 billion deficit, much less make a down payment on closing the longer-term gaps that overhang the future.

Somehow, however, this message has not penetrated the downtown Manhattan offices of Standard & Poors.  S&P just issued an updated report on the state’s creditworthiness — concluding that New York deserves an unchanged AA/Stable for general obligation debt and a top-notch AAA/Stable for personal income tax (PIT) bonds of the sort Ravitch wants to tap for deficit financing.

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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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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.