Rating Agencies Informed As Cuomo's Budget's Imagined $ 4.3 Billion In Revenue Increases Disappears

Charles Dickens advises Andrew Cuomo:  Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.


     Poor Andrew Cuomo praised Obama's economic policies this month, but Cuomo does not have Obama's ability to print money to accommodate revenue shortfalls.   When Cuomo's budget doesn't get enough revenue, he must borrow or increase taxes and those nasty bond purchasers will demand higher interest rates.

      First, The Cuomo Business Friendly Bubble Burst, when NY was ranked 49th out of 50 States as Business Friendly.   While the Cuomo stooge at the NY Economic Development Agency described his own policy as "anyone proposing nano-scale technology in Syracuse should be taken out to the woodshed."  Then, Cuomo's expected tax revenues took another dive into red ink with latest report.  "A gauge of manufacturing in New York State showed the sector unexpectedly contracted for the second month in a row as new orders worsened, while core inflation rose at its highest pace in three years."

       This business contraction affects the revenue increases which finance Cuomo's spending in his budget.  The Comptroller in his "Report on the State Fiscal Year 2011-2012" says a "structural imbalance" exists because general fund spending growth is still more than double projected revenue growth.  Cuomo had balanced his budget with imagined revenue increases and Cuomo used temporary sources for 14.7% of his budget revenue, such as, Federal stimulus money (threatened in present federal debt debate), "voluntary contributions" from NY Power Authority and other authorities (they'll charge you higher rates) and delaying paying NY State Income Tax refunds.  Cuomo's unrealized revenue fantasies reported by the Comptroller include:
1. Personal Income tax receipts in 2011-2012 will increase $2.9 billion or 7.9% (but, see decreased employment reported above)
2. User taxes and fees (sales and tobacco taxes)will increase $467 million or 3.3 % (but, see tobacco tax increase will fail link 1  link 2 and workers earning less or unemployed spend less)
3. Business taxes will increase $894 million or 12.3% (but, see above business results)
4. Payroll Tax will increase $63 million or 4.6%  (but, rising unemployment including State layoffs decrease payrolls)
The total fantasy budget's revenue increases of $4.3 billion dollars will not materialize.  A budget shortfall of $4.3 billion dollars must be borrowed this year.

     When Cuomo borrows this $4.3 billion, will the bond rating agencies downgrade NY debt and force up borrowing costs in the Cuomo budget, or will they understand that Cuomo meant well?  What will happen when those other things that Cuomo forgot to fund in his budget need borrowing to fund them, such as:
1.  New York Pension Books are Cooked
2  The Cuomo 2011-2012 Budget proposes to "eliminate a $10 billion dollar deficit without raising taxes or borrowing" and then is borrowing $5.6 Billion dollars.
3. Cuomo has a "funds shift [that] would result in the use of state bond proceeds for payment of a portion of debt service on MTA revenue bonds."
4. Cuomo's budget used the "Madoff-like" assumption of a 7.5% safe return on pension investments. and continues to allow borrowing to fund contributions.
5. Cuomo failed to budget in the required repaying of the federal government for Medicaid frauds. This is minimally estimated at $6.4 billion.
6. Cuomo forgot what happens when New York's bond rate rises and NY's borrowing costs  move up from $5.6 Billion $18.8 Billion. 

     All of the above ignores the Medicaid fraud by NY State, which Cuomo defended as NY Attorney General, and which, if Congress block grants Medicaid, Cuomo could immediately end.   See letters to Congress on this blog.  link 1     link 2

    The following letters were sent to the ratings agencies:
Letters by registered mail:  CuomoTARP.blogspot.com   July 18, 2011

To: Moody's Investors Service Inc.
101 Federal Street, Suite 1900
Boston, MA 02110

Standard And Poors
55 Water Street
New York, New York 10041

Fitch's
One State Street Plaza
New York, NY 10004

Re: protecting buyers of NY bonds and your potential liability.

Dear Sirs:
    Attached is a copy of the latest 7/18/2011 post on CuomoTarp.blogspot.com.    The Financial Crisis Inquiry Commission established  by Congress had reported on page 25: "We conclude the failures of credit rating agencies were essential cogs in the wheel of financial destruction." You realize your potential liability, if this occurs with NY State Bonds.    There will be lots of angry NY State Bond Holders who will look for compensation for your scienter (knowing) neglect and/or malfeasance, if you fail to act appropriately.        
         NY Debt per person including local debt for a family of four is about $97,000 (the highest in the USA).    Bob Brinker already recommended seniors leave the high tax States.   You need to protect NY State Bondholders with truthful ratings

      Also consider the Letters to Congress on this blog dated July 12, 2011 and May 23, 2011 which show a proven moral hazard and criminality in NY State Government and the likelihood of financial fraud.

Sincerely yours,
CuomoTARP.blogspot.com

Note: all links are available on the CuomoTARP.blogspot.com website where a copy of this letter is posted.
Attached: Blog post dated July 18, 2011

P.S. Tomorrow's 7/19 post will concern more lack of fiscal irresponsibility by NY Government and its committees and the costs thereof which must be borrowed in this fiscal year.