Public Employee Press

Roberts on city finance: Politics is key

Panelists at a Jan. 25 New York University Law School forum on budget challenges facing the public sector agreed that state and local government finances seem to be in better shape now than in 2011, when doomsayers feared a wave of bankruptcies and debt defaults.

But worries remain and deficit hawks still rant and rave about so-called out-of-control budgets, unaffordable public-employee pensions and expensive services.

"Clearly the fiscal condition of many state and local governments remains weak," said Jonathan Ballan, a bonds attorney and former chair of the Municipal Assistance Corp., which was created to oversee New York City's recovery from its fiscal crisis in the 1970s.

"It's all about politics," said DC 37 Executive Director Lillian Roberts, the only nonlawyer panelist. Roberts blamed much of the city's troubles on its failure to collect outstanding revenue totaling as much as $2 billion and to rein in the vast waste and corruption in its contracting-out budget of over $10 billion a year.

Tax cuts starve government

Former Lt. Gov. Richard Ravitch, who helped the city survive near-bankruptcy in the 1970s, said New York's expansive public sector reflects the state's moral commitment to a "fair and just" society but is hard to finance with state and local governments constrained by limited federal support and poor economic growth, which cuts revenue.

Disagreeing with the explanations of the roots of the state and local budget woes offered by Roberts and Ravitch, Ballan said, "It's a spending problem, not a revenue problem."

The position of Ballan and other fiscal conservatives plays down the huge role of tax cuts in creating deficits, which have also been worsened by recession-driven revenue losses and spending on food stamps, Medicaid, and unemployment insurance.

Ballan noted the tension between service providers and the financial sector and warned, "If you don't pay debt service to bondholders, your access to the market will be cut off."

Roberts and other panelists offered suggestions for keeping the state's fiscal house in order, including establishing an oversight body and maintaining a rainy-day fund.