State budget shortfalls — not the worker’s problem

There is an old saying: If you borrow a couple of hundred thousand, it is your problem; if you borrow a couple of million, it is the loaner’s problem. I called the New York State Dormitory Authority (NYDA) and the Office of Mental Health (NYOMH) and asked them a simple question: How much of their budget goes to paying the bonds raised to build the various NYOMH buildings across the state? The responses I got ranged from “we don’t have that information” to “why are you asking” all the way to “that is confidential information available through the governor’s office only.”Here is why I was asking: The Dormitory Authority had held the title to the 850-acre Harlem Valley Psyche Center (HVP) because of outstanding bonds, all $16 million of them, which had been used to finance capital projects at the psychiatric center. The NYDA sold it all for $3.95 million to Dover Knolls Development Company. So, what did they do with the original $16 million construction and refurbishment bonds? Did they pay them off? Nope. Did they defease them? Nope. They simply moved them from an NYDA line item in the state budget to “another line item” somewhere. Taxpayers are still paying off those bonds. When we were first looking at changing the HVP in the early 1990s to private use, the problem was the bonds, big fat bonds, Michael Milken and Ivan Boesky bonds paying “investors” (bond holders) 22 percent and 24 percent a year. Yes, you read that right, almost a quarter of the original investment paid, every year, to Wall Street bondholders.Now, let’s not make a big deal out of one psych center. Never mind that there are 29 such centers in New York state alone. Let’s ask where the other New York state junk bonds are while taxpayers lay out horrendous interest. Airports, tunnels, bridges, highways, power grids, schools — all sorts of bond issues were arranged by Milken and Boesky for mega-interest payments. Across the nation it was happening everywhere. I have no doubt Wisconsin has these same higher-than-normal bonds in its budget. Barron’s magazine estimates that revenue bonds comprise 65 percent of all state debt, up from 40 percent in 1975.I doubt any journalist has ever done due diligence in rooting them out. Why is this a difficult task? Because the politicians want to get re-elected and it is hard to tell the taxpayers to tighten their belts, pay more tax, when your cronies and previous politicians have so poorly run New York state’s finances that taxpayers cough up, at least, $2.5 billion a year in sky-high interest. If the interest rate was closer to commercial rates, the bonds for New York state could only cost $320 million. And what is the state’s deficit projection? $4-plus billion? Seems to me that is reason enough for someone to look into regaining some $2 billion a year.When Argentina was bankrupt and could not pay its international loans, the government there defeased them overnight. In short, they cancelled them, passed a law shredding the contracts, and said, “You money lenders have made enough profit on our backs.” What happened? Outrage in Washington and Europe. Action? War? Sanctions? None. New loans were made in weeks at 1 percent and 2 percent interest. Argentina balanced its national budget within three years and that country is now booming. And they are still playing hardball with outstanding loans at 8 percent, wanting 2 percent! Why not? The country of Argentina is not leaving anytime soon. Simply put, they cannot default, so why pay higher-than-usual rates?I have a suggestion to states’ governors: Stop siding with the fat cats in Wall Street, stop being “honorable” while your predecessors sold the farm from beneath you. Stop blaming the civil servants you hired, the ones you have an honorable contract with, the ones who have paid into pension funds you have raided for decades. Try doing the really honorable thing: Defease the bonds, to hell with bondholders who have profiteered for decades, balance the states’ budgets and bring the economy back. Peter Riva, formerly of Amenia Union, lives in New Mexico.