Foreclosure Crisis Puts Pressure on New York Budget

The foreclosure crisis has put pressure on New York State budget. It may have to resort to borrowing to get back on the right tracks over the forthcoming years. This was the opinion of its lieutenant governor Richard Ravitch. He was focusing on the monetary problems the states were facing following the financial crisis.

It was during the 70's and 80s that Ravitch made a name for himself for his commendable activities for New York State during the time of the financial troubles. He has been given the responsibility of crafting a plan for the revival of the economy for New York State.

The plan was recently disclosed but it must get the green signal from the legislature of the state. The measures include locking the state from paying down the structural deficit for five years, setting up an oversight board consisting of five members to gauge the budget condition every quarter together with empowering the governor to do the necessary clipping if the legislators disagree on measures for closing the gap - all within a limited time schedule. Simultaneously long term measures would be taken for yearly budget talks for the future. The state is expected to put away more reserve funds for rainy days.

Ravitch said, "The current economic crisis did not cause New York's budget troubles. It merely exposed them."

New York State has always been suffering from gaps between earning and spending. It had passed it over with cash accounting permitting for "one-shot" budget fix ups. Accounting practices vary from one state to another.

For the fiscal year 20011 the budget deficit is expected to be over $9 billion - taking 1st April as the starting date. But he calculated that the structural deficit would be around $13 billion. Ravitch forecasted that unless reforms were undertaken the structural gaps would swell within another five years to be $60 billion. The only way such a gap could be bridged would be by the levying of "horrendous taxes."

He plans to shift to GAAP system of accounting - it being the norm for USA corporations. He would also change the fiscal year to 1st July - in keeping with the majority of other states.

The sober budget of New York could be indicative of what the nation would have to face as the legislators are grappling with the latest budget deficits. The recession has decimated the revenues coming from tax collection. It means the budget deficit would continue for years accompanied by reducing strength of tax and cutting services.