So not only do we have mountains of waste in the private sector but it seems that the public sector has had to resort to dubious cuts in taxes and spend the bank empty, just to keep things at an even keel. I've been in NYCity for 32 years and seen this cycle happen twice. Both times with the party of monetarism at the keel. NYCity not only takes care of the UN and its public expenses but it takes care of welfare folks from around the country who come here to take advantage of the types of programs that are necessary to keep us from having a revolution considering that we live so close together and ride the same subways.
Practices that are "out of sight, out of mind" in the countryside and in the massive single family dwelling cities of America are "in your face" on the NYCity subway. I now take cabs because the disease rate is so bad on the subway that my 60 year old immune system won't tolerate the germs and when I'm sick, singers don't come for lessons because they have to be pristine because bankers won't pay to hear sick voices. This is not to mention the noise volume issue that destroys the tools necessary for training the world's great singers. Wearing earplugs at a time when you must be alert to urban dangers is to court death so the only answer is the Taxicab. We could remove immigration from all who don't have jobs in the city and a place to live but that would harken us back to the State's rights fights of the founding of the republic. Go to go. I have to teach Leonora in Fidelio. It's amazing what studying these masterworks of art about the greatness and nobility of mankind, and the struggle for Freedom, does to you. It makes the normal seem idiotic, stupid and irrelevant. In fact embarrassing. Ray Evans Harrell, artistic director The Magic Circle Opera Repertory Ensemble, Inc. [EMAIL PROTECTED] February 21, 2002 Mountain of 90's Debt Looms as City and State Feel Pinch By RICHARD P�REZ-PE�A and JAMES C. McKINLEY Jr. ew Yorkers say their region stands alone in all sorts of ways, from the fabled baseball franchise in the Bronx to the cutthroat capitalism practiced on the floor of the stock exchange. But few citizens of this sprawling city and state know it is the undisputed leader in a less-exalted arena: government debt. New York City and New York State are far and away the largest debtors in the nation, outside the federal government. The city has $42 billion in loans outstanding, and the state has $38 billion. No one else is even close, the State of California running a distant third, at $25 billion. Now, as New York navigates the narrow fiscal straits brought on by recession and the Sept. 11 attack, and surpluses have given way to yawning deficits, those debts loom larger, fiscal monitors say. The state and city each spend about $4 billion a year on debt payments, limiting the money available to weather a crisis without cutting essential services or resorting to fiscal gimmicks that push today's costs onto future generations. In announcing his budget plan last week, Mayor Michael R. Bloomberg proposed that the city take on even more debt, $1.5 billion, to help cover a $4.7 billion budget gap. That would mean selling bonds to cover day-to-day expenses, something the city has not done since the fiscal crisis of the 1970's. Mr. Bloomberg acknowledged that doing so was an extraordinary step, and all but pleaded with bond-rating agencies to accept the tactic, promising that borrowing to reduce coming years' deficits would not become an annual tool. The mayor also wants to refinance some debt, to reduce the interest payments over the next several years to get through this tough stretch. Borrowing money can play an important, valued role in government - one accepted by even the most conservative critics - when it is used to pay for high-cost, long-lasting assets like bridges, railroads and power plants that would otherwise take decades to buy. The question, then, is not whether to borrow, but to what degree. There is no question that Mr. Bloomberg inherited a dire situation, much of which was beyond any official's control, but there are those fiscal monitors and budget watchdogs who contend that the new mayor was left without any cushion because of the mountain of city debt accumulated and the high spending that occurred during the economic boom. Mr. Bloomberg's predecessor, Rudolph W. Giuliani, and Gov. George E. Pataki, both Republicans, took office in the last decade as fiscal conservatives, promising to bring discipline to what they characterized as spendthrift governments. Both increased spending sharply after their first few years in office, and cut taxes simultaneously, as did governments around the country. The state built up significant reserves for the first time in generations. The two also presided over enormous borrowing, approved by legislators, Democrat and Republican, even as many cities and states around the country instead used the boom to tame their debts. State debt has risen by about one-third, or $10 billion, since Mr. Pataki took office seven years ago; city debt rose by more than half, or about $15 billion, in Mr. Giuliani's eight years. In other words, critics on the left and right say, in New York, the good times were paid for partly with borrowed money. Pataki and Giuliani officials have argued that the state and the city had considerable needs during the last 10 years, with quite a few projects on the runway that had been stalled by the recession of the early 1990's. Among the projects paid for in part with borrowed money, they said, were new schools to meet rising enrollments, repairs to highways that had suffered years of neglect, a fleet of new subway trains and buses, major additions to university campuses and a raft of new government buildings. "Governing is more complicated than just looking at a single issue," said Carole Stone, Mr. Pataki's budget director. She cited tax cuts, spending, debt and the building up of reserves, and said, "You have to balance these four important areas." A high-ranking official in the Giuliani administration said the city's capital needs, especially for new schools, drove much of the new debt. "If you use the surplus to pay down debt, it wouldn't be available and you would have to raise taxes or cut services," the official said. "The mayor believed one of the mistakes of the fiscal crisis was that they neglected their infrastructure. You can't have it both ways. People want to have space in classrooms and they want their debt burden to be low." For his part, Mr. Pataki did prepare for this downturn, squirreling away more than $3 billion in various funds. The state is using that reserve now, making it possible to survive the fiscal year that ends March 31, and the year after that, without deep cuts to most programs. Using some of that money to pay off debts might have done more for the state's long- term financial health, but without question, the state's savings are a tonic for its immediate ills. The city does not have even that going for it. It hit the recessionary wall with reserves of only a few hundred million dollars, because of a wide range of factors, including a heavier debt load and less control of its own destiny (the state abolished the city's commuter tax in 1999, wiping out half a billion dollars a year in revenue). Many fiscal monitors say government debt should not have grown at all during the late 1990's, a time of big surpluses, and that the failure to curb it will make climbing out of the current morass harder. "The boom that ended last year was a unique opportunity to get things under control, and they blew it," Tom Carroll, president of the conservative group Change New York, said of the Giuliani and Pataki administrations. "There wasn't the fiscal discipline we had hoped to see overall, but on debt, there was no discipline at all." The state comptroller, H. Carl McCall, a Democrat who is running against Mr. Pataki, has long railed against the borrowing practices of the city and the state. "We have not managed our debt well," he said. "We severely hampered our ability to respond to the kind of fiscal crisis we are about to face." But Governor Pataki and others defend the government's financial decisions, noting reforms and changes that lowered some of the risks of borrowing. Both the city and state have abolished the worst borrowing practices of years past, as when the state "sold" prisons and highways from one agency to another, borrowing to raise the cash. In the late 90's, improvements in New York State's finances led Wall Street firms to raise the state's bond ratings, saving the state hundreds of millions of dollars a year, and Mr. Pataki pushed measures through the Legislature that have begun the process of getting borrowing under control. "We've had credit rating upgrades, and we passed debt reform, the first significant debt reform legislation the state has ever seen," Governor Pataki said in a recent interview. Even so, the sheer amount of debt continues to rise each year, in both Albany and City Hall. In the context of the state's overall finances, the state's debt picture is about the same as when Mr. Pataki took office. For the city, with no new debt control measures and no rating upgrades, the picture is markedly worse than when Mr. Giuliani took over. "The problem is a culture that has existed in New York for a long time, that doesn't exist in most other places," said Robert A. Kurtter, vice president for state ratings at Moody's Investors Service. "In New York, debt has tended to be seen as a free good. People see the benefits, but not the costs." More Loans During Boom The conventional wisdom among some budget watchdogs is that government should resort to heavy borrowing only to get through a crisis, and should take advantage of surplus years by paying off debts and using cash more than bonds to build highways and railroads. Most governments try to follow that pattern, and many states and cities did so during the 90's. Virginia, for instance, had years in which it paid out of pocket for its capital projects, borrowing not a cent. Many of the most heavily indebted states and cities eased those burdens by paying off old loans ahead of schedule. Louisiana cut its debt load by more than half. New York kept racking up loans during the boom, relying more on bond sales than on surplus cash for capital projects, and headed into this recession more heavily weighted down with debt than at the end of the last one. Fiscal monitors and government officials say the conventional strategy of going deeper into debt to muddle through the downturn would only worsen things, and could harm the credit ratings of the city and the state. "I don't think either one has much capacity to take on additional borrowing," said Robin L. Prunty, a director in the public finance department at Standard & Poor's. New York City's debt problem is considerably more severe than the state's, and getting worse. When Mr. Giuliani took office in 1994, the city spent 15 cents out of every dollar it took in - outside of state and federal grants - to make payments on its bonds. Today, the figure is above 17 cents, and fiscal monitors project that it will top 19 cents later this year, boxing in Mr. Bloomberg as he tries to find ways to close the budget gap. "To the extent debt service is rising, you are excluding other spending, on police, teachers, parks," said Ronnie Lowenstein, deputy director of the Independent Budget Office, a city-financed budget monitor. City officials often protest that the city's finances cannot be compared with those of other cities, because New York City embodies what, in most places, would be three separate entities: city, county and school district, each with the power to tax, spend and borrow. A year ago, Moody's published a report that tried to account for those overlapping roles, comparing the nation's 30 largest cities. It concluded that New York City residents were carrying a heavier local government debt load - more than $4,000 per person - than the people of all but two other cities, Washington and Austin, Tex. In most cities, the burden was less than half that. The rating agencies agree on the city's credit, giving it lower grades (A2 from Moody's, and an equivalent A from S.& P.) than those of nearly every other large city. In the last few years, even as the city ran annual surpluses in the billions of dollars, Mr. Giuliani sharply accelerated borrowing, increasing the city's capital budget by half, to $6.7 billion this year. Not paying cash for those projects when the cash was available, many budget experts say, was foolhardy. "We never used any of these surpluses to deal with long-term debt," said Alan G. Hevesi, the former city comptroller who, like Mr. Giuliani, left office on Dec. 31. "They were always rolled into the next year." A Matter of Priorities Mr. Pataki took office in 1995 as an updated supply-sider, putting deep tax cuts ahead of every other priority. That meant budget cuts in his first years, including spending less on the "pay as you go" contribution to capital projects, and borrowing more to make up for it. In his first term, he showed little interest in taming debt. "We were facing a $5 billion deficit and a state economy that was in a shambles," said Michael McKeon, Mr. Pataki's communications director, "and the governor believed that the most important thing to do to get things going again was to cut taxes." Then, as the governor ran for re- election in 1998, Tom Golisano, the Independence Party candidate, spent $13 million on ads mocking Mr. Pataki on a single issue: rising debt. After easily winning a second term, Mr. Pataki took the first real steps toward bringing the state's borrowing under control since Gov. Nelson A. Rockefeller put it on a steep upward trajectory 40 years earlier. Over the last few years, Mr. Pataki has paid off $1 billion in high- interest bonds ahead of schedule. In 2000, he won passage of a law that will eventually restrict state borrowing, though the version approved by the Legislature did less than Mr. Pataki wanted, and it will have little effect for several years. The curve charted by state debt has begun to flatten out, and administration officials predict that it will stop rising in 2005. Still, fiscal experts view the last several years as a lost opportunity. "It's great that they've begun to get things under control, but when you have $2 billion surpluses, that's a time to do a lot more pay-as-you-go, not to keep going deeper into debt each year," said Diana Fortuna, president of the Citizens Budget Commission, a private nonpartisan group that studies city and state finances. Standard & Poor's has raised New York State's credit rating three times under Mr. Pataki, reflecting the state's robust economic growth and healthy reserves. The current rating, AA, remains below average among the states. Moody's takes a harsher view of the state's finances, giving it a rating of A2, equivalent to an A rating in S.& P.'s system, and tied for worst among the states, with Louisiana. Strategies and Questions There are ways the city and state can manipulate debt for short-term advantage to squeeze through the crisis, but each of those moves carries either high risks or small rewards. Mr. Pataki has made or is proposing several relatively small changes in the way the state sells bonds, and his office estimates that the changes would save the state $225 million in the coming fiscal year. Mr. Bloomberg plans to postpone capital projects, putting off many so that the city can reduce interest payments over the next few years. A big question is whether the city will sell more bonds backed by the national lawsuit settlement with tobacco companies, cashing it in up front rather than waiting for it to be paid out over 25 years. Several cities, counties and states have gone that route, and New Jersey's new governor, James E. McGreevey, plans to. But budget experts frown on the practice, because it means taking on more debt, and it rests on the uncertain prospect that the major cigarette makers will stay financially healthy for the life of the deal. New York City was among the first to sell tobacco bonds, in 1999. Mr. Giuliani made plans to sell $2.8 billion, but the city went ahead with just $700 million. That means there is a potential pool of $2.1 billion waiting to be claimed, but the Bloomberg administration says it has not decided whether to tap it. The Pataki administration rejected the idea of such bonds, which could have raised about $6 billion for the state. The state also resisted the temptation to stretch out repayment of its outstanding bonds, a move that buys breathing room in the short run, but can make the problem worse over time. "Some of these changes might be good policy, but the payoff is small," Ms. Fortuna said. "And the things that would really generate a lot of money up front are risky and questionable policy. There's just not much room to maneuver." Copyright 2002 The New York Times Company | Privacy Information Advertisement The most important new auto technology is 125 miles high A floor lamp that spreads sunshine all over a room New micro circuitry puts a digital camera, video camera and webcam in your shirt pocket for under $80... New technology feeds your pet even if you're not home Carry 20 GB of data in your shirt pocket Aiwa introduces an elegant and stylish compact stereo... Space program research creates "smart bed" sleep surface If the world was flat, just about any antenna would do! Advertisement
