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
Dagong Global Credit Rating Co.,Ltd
29/F, Unit A, Eagle Run Plaza, No.26 Xiaoyun Road,Chaoyang District,Beijing, P.R.China 100125
Re: US Rating agencies will face a large liability for improper ratings for NY State Bonds. Default/bankruptcy coming shortly. Catastrophe in waiting: Average NYS non-financial sector income of $50,400 a yr. results in less net income than average NYS dole benefit of $42,000 a yr.
Dear Rating Agencies:
How long do the rating agencies think this can continue in NY State? While NY State pays the average public assistance person $42,000 a year in benefits according to Lou Dobbs's radio show on 8/15/2011, the average non-financial sector NY State income was $50,400.* And NY State relies more heavily on personal income tax for its revenue than other States.* When will the federal government cut off NY State's Medicaid program which is run as a fraud, where NY State mischarges the federal government $22 billion dollars to fund its non-medicaid State budget? Andrew Cuomo's business friendly NY has fizzled. Meanwhile, Andrew Cuomo failed to begin to change the NY Constitution to end unaffordable pension costs.
"A word to the wise is sufficient." The US based rating agencies will have a large liability, if NY State bonds are improperly rated. The future possibility of repaying NY State bonds not backed by a dedicated revenue source is non-existent. NY State bonds finance State agencies as well as State government. Some bondholders, such as Thruway bonds or Dormitory bonds, receive first dibs on revenues, if the State doesn't pay on time. Other bonds are backed by the full faith and credit of NY State without a dedicated revenue source. But if the State doesn't have enough cash in revenue, how can it pay?
These are the details:
First, this is the text from NY State Constitution: §7. After July first, nineteen hundred forty, membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired. (Adopted by Constitutional Convention of 1938 and approved by vote of the people November 8, 1938.)
Then, in regard retiree costs:
1. Although, Chris Christie reformed pension and benefit costs in New Jersey, Andrew Cuomo failed to ask this session of the Legislature for a Constitutional Amendment to change the above clause which prohibits NYS from changing any retirement contractually promised benefits, such as Health Insurance and Pensions. Such an amendment must first be passed by this and then the next legislative session and then finally approved by the voters.
2. NY State has not funded its retiree health benefits which were part of State workers' contracts with NYS and are constitutionally protected. NewYork Adds $56.3 Billion To Its Unfunded Liabilities
3. NY State's pensions are a Madoff style Ponzi scheme where NYS promises a 7.5% "safe return" when that is impossible. All the undeposited funds needed to properly fund the pension funds and the losses of up to $7.3 trillion dollars are liabilities of NYS. Any higher taxes to fund this shortfall would create a stampede of taxpayers getting out of NY State..
Then in regard taxpayers
4. Taxpayers are fleeing NYS at the largest rate in the USA. Who'll repay the bonds?
5. NY State has the highest local and State debt per person and the second highest taxes paid per person of any State but New Jersey. New York Debt per person including local debt is at $24,195. For a family of four about $97,000. Will NYS raise taxes even higher and borrow more?
6. Andrew Cuomo will not attract business or its potential taxes to NYS because NYS has the next to lowest business friendly rating of all the States. When NY businesses repay the $ 3.6 billion dollar Unemployment Insurance loan to the Federal government this November 2011, NYS will become a business pariah.
7. What happens when the millions of NYS taxpaying residents earning the average non-financial $50,400 or less discover their net income is less than the average dole recipient's $42,000 a year? Do they leave the State or go on the dole?
Then, in regard State revenues:
8. The NY Comptroller predicts rising numbers of non-taxpayers in the NY State Medicaid system*.
9. NY State funded 14% of its budget this year with one time funds that will not be available in future years.
10. Andrew Cuomo's Budget director says, he has no ability to finance spending commitments already. This was recorded at a 7/20/2011 hearing of Cuomo's Commission on Judicial Compensation: "We don't even have the ability to finance the spending commitment that are already in place, said Robert L. Megna."
The Bottom Line:
- a rapidly rising NYS expenditure for retiree and others' benefits
- a reduced number of businesses in NYS paying taxes and paying workers
- more NYS Medicaid non-taxpayers
- taxpayers fleeing the State
- NY State will run out of cash from its diminishing revenue sources
- NY State either defaults or goes bankrupt if Congress enables State Bankruptcy by a new law
- a tax revolt when those millions earning the average non-financial income of $50,400 or less realize that the average NYS dole recipient receives $42,000 yr. in benefits
*See Financial Condition Report for Fiscal Year 3/31/2010
P.S. Please access website for working links to all data.