Governor Andrew Cuomo's annual budget address earlier this week.
Ravitch accused Cuomo, who had congratulated himself for checking state spending and generating an asserted $2 billion budget surplus, of playing a smoke-and-mirrors game using hidden borrowing to create the illusion of solvency.
The state economy could end up in a Detroit-sized ditch if this practice goes unchecked, Ravitch said.
When Ravitch, who co-chairs a panel investigating troubled state finances nationwide, outs New York for gaming employee pension funds with promissory notes, you listen.
The borrowing, which he called "inexcusable" and "indefensible", didn't start with Cuomo, Ravitch admitted. It started with the passage, under Gov. David Paterson, of a law allowing the state, its cities, counties and school districts, to cover pension contributions with debt.
Public servants who expect their pensions to be there for them when they retire should worry about the fact that those pension are not funded, Ravitch said.
Ravitch knows what he's talking about. Tapped by Hugh Carey to help rescue New York from near-bankruptcy in 1975, Ravitch was among the bankers, union leaders and public figures who saved the day.
Things were "pretty far gone" by then. Facing a formal declaration of default, the city was about to grab for its assets before the banks got to them.
It was the city's unions, notably the United Federation of Teachers and District Council 37, that came to the rescue by investing millions of their pension dollars to pay off the banks and avert a formal declaration of default.
Then began the long, painful stretch of layoffs, tight budgets and harsh new measures to keep the city from spending its way back into debt again.
Ravitch saw first-hand the hidden game of borrowing to pay off rising government debt that nearly put the city in the ditch in 1975. In the 7 years before 1975, the city had racked up $8.5 billion in unsecured debt.
Why, Ravitch wondered, had the banks kept lending money after they were no longer willing to underwrite the city's debt?
He's still asking the same question: why do the banks keep lending? And why do the editorial boards and civic leaders say nothing, as New York -- and other major cities, counties and school boards, borrow money to cover pensions and infrastructure costs?
New York's cities and counties are in serious trouble, Ravitch said. Long Island's Nassau County is under a fiscal control board and neighboring Suffolk County is deep in debt. Ignoring what happened to New York City in 1975, they are borrowing to cover their operating deficits.
Because the lessons of 1975 are still unlearned, Ravitch said, New York and other states should be required to pass multi-year budgets and follow the same accounting rules that private corporations follow, accruing and paying expenses in real time, instead of putting them off indefinitely.
No more promissory notes.
And New Yorkers, if they plan to continue spending at the current rate, must confront the explosive question of raising taxes, said Ravitch.
But that's not how the game is played in Albany or in city and county governments around the state, where the politically safe move is to keep taxes fraudulently low, run up unpaid bills, and kick the can down the road until the next election cycle.
But, Louis warns, those New Yorkers who remember the painful aftermath of the fiscal crisis of 1975 -- the tens of thousands of laid-off city workers, the closed businesses, the gutted social services -- know how that story ends.
The column from the Daily News.