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Fiscal Reality

New York
Fiscal Reality
Schulthe Roth's Jeff Lenobel, Richard Ravitch, and Mill Pond Capital's Adam Marsh
We’d be on a tropical island if we just finished a stint as NYS lieutenant governor only 10 days ago. But not Richard Ravitch. Yesterday, he spoke at National Realty Club’s luncheon at the Friar’s Club, where we snapped him (center) with Schulte Roth’s Jeff Lenobel and Mill Pond Capital’s Adam Marsh. He warns that we have a very pervasive lack of sophistication about the fiscal problems New York State faces. Although what we’re experiencing is not fundamentally different from other states—expenditures rising faster than revenues—this isn’t a problem rooted in the recession, but 10-15 years ago, when impactful decisions were made on subjects like Medicaid, healthcare, and education.
Richard Ravitch
The state has already used up to $28B in “one shots” to balance the budget and strained to avoid higher taxes and “politically painful” cuts, but has dramatically cut money for higher education andinfrastructure. The MTA (Richard once headed it) and DOT are “extremely concerned about the level of depreciation,” he says. How do states deal with financial obligations? Not in the 25 to 30 schemes he’s aware of to kick the can down the road, he says. The greatest risk we face is confiscatory taxes—history suggests that courts want government to exercise its tax power to meet obligations. For NYC, this could mean an added $2.5B to $3B to the deficit.