A Candid Ravitch Warns of $25 B. Budget Gap, Hints at Tax Overhaul

richardravitch 0 A Candid Ravitch Warns of $25 B. Budget Gap, Hints at Tax OverhaulLieutenant Governor Richard Ravitch does not have a rosy view of the state’s finances.

Speaking Wednesday morning at N.Y.U., Mr. Ravitch, the state’s point man on the ongoing fiscal crisis, warned of tremendous new budget gaps in coming years, saying the state faces a deficit of about $25 billion over the next two-and-a-half years, about $15 billion more than previously estimated by the state.

“The State of New York, has in the remainder of this fiscal year a deficit of $4 billion–$3 or $4; people argue about it,” he said, speaking to students and transportation professionals at NYU’s Rudin Center for Transportation Policy. “Next year it’s between $7 and $8 [billion], assuming revenues level off. The year after that, when the stimulus bill no loner provides any one-shots for the State of New York, the deficit will be between $15 and $18 billion.

“These are numbers that are unprecedented.”

(As of April, the estimated deficits were zero for the current year, $2.5 billion for next year and $8.8 billion for the following year).

To hear Mr. Ravitch speak, particularly in front of a policy-focused audience, is to hear unusual candor from a top official in the state government. A private citizen until the summer, he manages to come across as if he is both freely speaking his mind–on multiple occasions he freely acknowledged his hypocrisy over budget-cutting issues on multiple occasions, and he lauded the concept of hiking the gas tax–while not offering the disparaging comments about legislators that are so tempting for someone in his position. Then again, he has a clear incentive to play up any bad news on the economy, as it makes his job of getting cuts through the legislature a bit easier when the public acknowledges that there’s a crisis and a need for shared sacrifice.

In the context of his cataclysmic estimates on the budget, he suggested the Paterson administration would consider reforming the entire tax system in the state, perhaps forming a commission to recommend a new structure.

“We are going to examine very carefully the tax system in New York State,” Mr. Ravitch said. “California appointed a commission which suggested a different method of taxing business, and we’re going to look at it in the sense of being revenue-neutral.”

I asked him after the event more about this, and he didn’t offer much more other than to say he wanted to put something together in the coming months, and suggested I look at what California recommended.

The California proposal to which he seemed to be referring recommended last month a complete overhaul of the state’s tax system, calling for the creation of a new consumption-based approach that adds a new tax to all receipt by business in the state, and reduces income taxes.

“There are different ways of taxing people, and I just want to see if there’s a more efficient way of restarting the economy without costing us revenues,” Mr. Ravitch told me.

He also spoke out strongly against the concept of new income taxes, saying, simply, that we’re at our limit.

“There’s an increasing amount of anecdotal evidence that locational decisions are being made aversely to the interests of New York because of our very high income tax structure,” he said. “So I think we’re at the outer limits of elasticity of our tax structure, and we cannot look at the revenue side as a way of solving these budget deficits.”

Mr. Ravitch hinted that layoffs were in the cards–again, such warnings could strengthen his hand in negotiating with unions–particularly if the legislature does not pass a new, less generous benefit package for public employees.

And on the subject of transit–ostensibly the topic of the forum–he brought up his favorite abrasive topic: congestion pricing (he led a failed push for East River Bridge tolls earlier this year). He suggested the new head of the M.T.A., Jay Walder, would try once again to get some sort of congestion pricing through.

“I have no doubt that user fees or whatnot will come back and back, and they will happen,” Mr. Ravitch said. “I think the new chairman of the M.T.A. is a very bright guy, and I think he’s committed to trying to reintroduce the concept of user fees and tolls.”

Mr. Walder hasn’t taken a strong position on the topic, only to say that he isn’t planning to bring up the issue.


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