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Former New York Lieutenant Governor Richard Ravitch on social expenses and how states need to reform their budgets.
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This is a topic that we hit each and every day on -- and company states that are going broke soaring Medicaid cost public look at pension obligations spying and brought out of control.
It's so bad but our next guest says he could even threatened the social order of the contrary.
This -- a star.
Former New York lieutenant governor Richard Ravitch is -- so welcome to the program.
Pleased to be here that you chaired the committee with so with pole -- And you looked -- the state of the state finances.
And you said look it is so bad.
And in the immediate future we're gonna be cutting social services and that would threaten the social order explain please well.
Is fundamentally.
Medicaid expenses and pension obligations and all have obligations health care obligations.
Two employees.
Of cities and states are growing faster than stable local revenues have grown.
And there is no reason to believe that that cap is -- -- close in the foreseeable future.
There is the possibility and indeed the necessity.
Of doing something about the federal budget deficit is well.
People are not conscious.
Of the impact that that would have on state and local budgets.
This -- like California.
And Illinois those two states in particular.
-- -- in the back of them minds are they hoping and praying for a federal bailout.
I don't think anybody has in the -- anymore about that.
And they are very different every state has its own constitution.
Its own statutory system.
California -- of fiscal waterfall they must apply Revere revenues first to the payment of their debt.
So about it is why they've accumulated so -- -- they can borrow.
On their general obligation very very easily so -- -- they're cutting services.
They're cutting aid to cities which is why -- -- three cities now in California who have been forced compiled by producing -- riots coming.
No I don't think the apocalypse is around the corner I think -- -- it's.
One it's amazing new medium.
Really appreciate your interest in -- subject how few people in the world community of torching it adds even think about this or talk about -- there's.
For every story about the federal deficit.
For every hundred stories about the federal deficit there's been -- one's story about him a state or local problem and that only comes up.
When somebody actually files bankruptcy.
They've been in a place like California and Illinois class sizes -- growing.
Because the education budget is being -- Police officers are being laid off because the pensions of -- gonna be paid all that -- -- and cannot be -- Can you can you tell me what is the end game in a state like California.
What happens I don't think there's been no go bankrupt city can go bankrupt but the state candles so once and -- -- that is correct.
I think he.
And gave me is that states have got to start.
Doing three things one to reform -- years their.
Budget system.
To go to some kind of a cruel or -- system of budgeting.
Which is what we did from New York City.
1975.
In New York City almost what -- -- -- -- accrual in the in the Republican.
That you're recurring revenues had to match -- recovering.
Expense without major economies must -- -- really as simple as that you've got to cut expenses and -- event here.
That's -- yes and no and nor raise revenues or both and as a practical matter and democracy on suspect that both will happen at the same time so doing.
Here we go down what you're talking about his multi year budgeting sort of a Texas does but the real fallacy mr.
rapids -- it was -- -- to say wait a second we're supposed to be balanced.
We're supposed to submit balanced budgets right yes that's a -- because it's only on paper not reality California -- -- as you have noted -- -- ensuing years right.
Good -- principally every state as a legal requirement have a balanced budget.
Kind of -- part of -- but they don't have following revenue so they use the proceeds of borrowings.
Or the proceeds of asset sales.
-- treat those as revenues for budget balancing purposes.
That is precisely what what god New York City.
In the early seventies to the verge of bankruptcy.
And the first thing we did we created control board.
And oversaw the city's budget we require the city to budget.
In accordance with generally accepted -- -- for a second please you can you've got to control -- yes you post the politicians and side.
The engine you know you -- a bullet that says Whitman and business the truth of the matter is.
You can't take the politics out of politics totally and democracy nor would you want to would you have -- discipline how big a body in this case chaired by the governor.
Who was fiscally very responsible.
And who understood.
That ultimately this stage and if -- Legally enforceable.
Obligation to the city's.
Had a strong moral obligations particularly when you plan -- put them in -- on seven.
Says a million people close to implement population of the state living in the -- exit departure put them into.
Yes thank you opening up and cut.
Are you thinking of moving to Los Angeles and the -- no sir but I don't think.
That -- -- too many people say that -- states.
Raise taxes people move somebody tell me everybody who moved to Nevada said that's great.
And they'll have to build the subway system in Las Vegas and you fix the New York City Subway.
