The Nation's Pulse/Cuomo's "A" Rating
Mysak, Joe
THE NATION'S PULSE CUOMO'S "A" RATING Get to know the name Stan Lun- V dine. Mr. Lundine is the lieutenant governor of New York right now, and he will be the lieutenant governor when Gov. Mario...
...Defending the Reign The governor is a man of infinite charm, a master of rhetoric...
...Dukakis's smash-up was not due to lack of competence...
...So much for projections, especially if the economy slows down...
...He's in training to be President," said one municipal bond investor...
...And if Cuomo sticks around for the blowup, neither will he...
...Among those who underwrite New York municipal bonds, Mr...
...The year before, the state projected that it would collect $28.9 billion in taxes...
...But as the Wall Street Journal noted, "No amount of explanation can dispel the fact that the modern governmental budget inevitably reflects the political philosophy of the chief executive," which in Cuomo's case is "traditional liberal redistribution...
...Most observers think not, and many investment advisers are recommending that their clients stay out of New York paper...
...And the New York Times, of all places, editorialized: "Years of sloppy fiscal management in Albany mean a downturn can quickly become a crisis...
...His opponents will point to how big-spending and big-borrowing practices hurt New York, its credit ratings in the municipal bond market, and, in the long term, its taxpayers...
...This works out to $2,279 per New Yorker—not number one, incidentally, but secure in the top ten...
...To be sure, there is a story here, but it is not the electoral torpedo conservatives hope it is...
...Shortly afterward, the newspaper quoted Cuomo as saying he was a victim of the "dumb blonde theory"—because he speaks well he must not be able to do anything else, like govern, he said...
...The latest Department of Commerce figures, and they are outdated, show that at the end of fiscal 1987 New York had gross longterm debt outstanding of $40.4 billion, far and away number one among states...
...What is it that you are telling people with your rating...
...Rinfret told the New York Times that he didn't believe in cutting the budget, yet he put his finger on precisely what Cuomo has meant for New York in a remarkable six-page open letter...
...It 30 THE AMERICAN SPECTATOR OCTOBER 1990 will not turn the tide this November...
...When does it end...
...His platform includes the more visceral, social issues that define him as the candidate of those who cherish traditional values...
...Cuomo is not entirely humorless, but he has no gibes for his critics, particularly those who note that New York spending has gone up either 80 percent or more than 100 percent during the Cuomo reign...
...But technically, it can continue the practice, which it drags along like Jacob Marley's cash boxes, as long as it likes, if the governor and legislature certify "both the need for additional borrowing and a schedule for reducing it to the [$4.7 billion] cap," according to the prospectus...
...What gave George Bush his 14-point turnaround, Joe Mysak, The American Spectator's chief saloon correspondent is the managing editor of the daily Bond Buyer...
...He calls himself "the real Republican candidate" and "the only alternative" to Mario...
...An A rating signifies a strong bond, with more than adequate resources topay principal and interest on its debt...
...We are burning the furniture for firewood in Albany, putting unneeded burdens on ourselves and future generations, all to keep up the pretense that the Governor knows how to manage the state's affairs...
...Next time, New Yorkers will not be so lucky...
...There is just the hint of danger sometime in the future: the dowager may or may not have to shut down a few rooms in the mansion, perhaps sell a few pieces of the family silver...
...Rinfret has surrendered the high ground with his comments on the budget, leaving London the field...
...The result is that nobody cares right now about how rotten the state's economy is...
...There is a certain belief in conservative circles that Cuomo can be beaten, if only we "lay the problem squarely where it belongs," as one conservative New York editor told me...
...Herb London, the Conservative party candidate, also uses the Municipal Bond Offense, calling Cuomo "the debt king of New York," and inveighing against the governor's championing of a $1.9 billion environmental bond issue on the ballot this November...
...It has cut taxes without restraining spending...
...Rinfret attacks Cuomo for continually rolling over short-term debt, moving spending off-budget, and postponing the third year of a scheduled tax cut, then details exactly how New York has taken advantage of various "one-shot," nonrecurring revenues since 1985, including refinancing bond issues in order to rewrite restrictive covenants on those issues' reserve funds—and then using those reserve funds...
...It has operated at a deficit and doesn't hesitate to roll debt from one year into the next...
...Cuomo...
...and William Satire pegged it right after it happened, was the Democratic convention, a televised spectacular of class hatred and looniness...
...A look at the prospectus for the state's $4.1 billion note offering is instructive as to why the state is in such a mess, and why it can look forward to another budget opera buffa in 1991: • On page 13 of the document, the state lists $915 million in "nonrecurring items" that it cannot count on next year, including the refinancing of certain bond issues in order to rewrite their covenants and loot their reserve funds...
...What this might mean to the average New Yorker is anybody's guess...
...Lundine's position will not be enviable, as New York heads into a financial crisis to rival that of the Commonwealth of Massachusetts, one that will demand either big cutbacks, big tax increases, or, more likely, both...
...He is a scrapper in a debate...
...He opens with the fact that New Yorkers pay the highest taxes in the nation: $2,934 per year in state and local rates—an old chestnut...
...Cuomo was objecting to Standard & Poor's Corporation and Moody's Investors Service cutting New York State's rating to A, third lowest in the nation, just ahead of Massachusetts and Louisiana...
...New York's indebtedness is an "outrage," he says, that can only result in a conflagration not seen since New York City's fiscal crisis of 1975...
...When Does It End...
...That the presidential Cuomo will be bloodied by the fiscal crisis in New York cannot be denied, but the damage will be minimal if he steps down soon enough to distance himself from New York's inevitable financial catastrophe...
...It spent the most money on hospitals, $2.6 billion...
...He favors the death penalty...
...Of the 18 million people who live in New York, maybe 10,000 read Rinfret's letter...
...London is a smart man who will be fun to watch [see Roger Starr's reviewof London's The Broken Apple on p. 46 —Ed...
...He is not a stiff...
...He is pro-life...
...Well, in fiscal 1987, the state led the way in welfare spending, with $6 billion for "public welfare," ahead of California, which spent $5.3 billion...
...Mario, with the lone exception of abortion, which is not enough to swing the election in New York, leaves his challengers with nothing but the economy to campaign on...
...Which is also why Mario, after a cup of coffee in Albany, will be on the campaign trail next spring...
...But the state's rating won't be lowered until after the election, and New Yorkers won't be given the tax-increase body slam until next year...
...And he is right...
...Did the politicians really fix New York's "structural deficit," as they grappled with a budget fifty days into extra innings last spring...
...Those same experts who think that he can be sunk because he is "thin-skinned" are offering the same ruinous advice as those who think that the man's economic record will sink him: as General Patton said, all real Americans love a fighter...
...He favors a school voucher program...
...But he is running against the man who cloaks himself in The Family...
...THE AMERICAN SPECTATOR OCTOBER 1990 31...
...California was a distant second with $22.4 billion...
...And Mr...
...There is a gap between perception and reality, as TAS readers know, but perception is the key...
...The Challengers Consider Rinfret, an economist who happens to be a millionaire and colorless—everything the Rockefeller Republicans who still hold power find so lovable in a candidate...
...I don't see any real evidence that the people understand that...
...Can anyone doubt that we're mortgaging our future...
...Mario M. Cuomo wins reelection this fall...
...It brought in $27.3 billion...
...I don't understand your ultimate objective," Cuomo sniffed at the rating agencies earlier this year...
...Cuomo also argues that the Rockefeller Republicans who control the state Senate bear a good share of the responsibility for the big increase in spending, and he has a point...
...He's run three consecutive deficits...
...Cuomo's challengers, the Republican Pierre Rinfret and the Conservative Herb London, have both mounted the very rare Municipal Bond Offense...
...The state notes that "economic forecasts have frequently failed to predict accurately the timing and magnitude of changes in the national and the state economy...
...It has allowed short-term borrowing to mushroom to an all-time high of nearly $5 billion...
...What does New York spend it on...
...The Massachusetts Miracle was unraveling even as he ran for office, despite the willingness of rating agencies and just about everyone else in the national press to look the other way...
...Pretty soon...
...maybe 3,000 actually cared about it...
...Municipal bond salesmen and portfolio managers wonder how long the state will be worth, indeed, if it is now worth, that A rating...
...Nobody cared about Massachusetts in November...
...But he will be governor some time next year, when Democrats urge Cuomo to take the last lifeboat off the Titanic to concentrate on his run for the presidency...
...Finally, we have the state's $4 billion annual "spring borrowing...
...Although the state admits to only $13.2 billion of net tax-supported debt, London quotes figures that say that New York is in debt for $49 billion, a 62 percent increase since 1983...
...And it spent $4.1 billion on education, second only to California, which spent $6.9 billion...
...The state says it will pay this albatross off...
...But then he asks: "Can anyone doubt that state finances are out of control...
...With the election of the governor and the entire legislature coming up in November, "the recent budget process did not resort to spending cuts in a substantial way," as Moody's Investors Service put it when they assigned New York its A rating...
...Consider Michael Dukakis...
...What is it you're saying...
...But you can't stop a juggernaut by stepping in front of it...
...The editorial concluded: "Where is the governor...
...I found it amazing, but, then, I edit a daily newspaper that covers the municipal bond market...
...Everyone knows it...
...London believes in cutting taxes, extensive privatization, a pay-as-you-go approach to most financing, and taking a meat-axe to the budget...
...The state has consistently overestimated revenues...
...I think we have done extremely well when it comes to spending, for example, and spending restraint...
...His critics will have to defend against federal tax increases, the deficit Gargantua, and the savings-and-loan scam...
...When George Bush lost his temper against Dan Rather, his approval rating went right up...
...Conservatives should know now: the Municipal Bond Offense will not work, especially when it is run against the national economy...
...One New York banker said to me, "Reliance on one-shots, the spring borrowing, overestimating tax revenues—when does it end...
...But the longer the red ink washes over the gunwales, the less viable Cuomo may seem as a national candidate...
...It seems to me, as an investor, what I want to hear is, Will they pay the debt or won't they?' " This is black-andwhite talk from a politician who appreciates shades of gray...
...But it nonetheless believes tax receipts will rise 6.6 percent, or $1.8 billion, from fiscal 1990 levels...
...On page 8, the state lists projected and annual general fund receipts for by Joe Mysak fiscal 1990 and its projection for fiscal 1991...
...Cuomo's budgets, with the Legislature's concurrence, have relied too heavily on one-shot revenues and raids on the reserves of authorities and trust funds...
Vol. 23 • October 1990 • No. 10
