The Cuomo 2011-2012 Executive Budget is like fancy curtains placed in the window hiding a burnt out interior in the house. First, there is the new folly presented by Cuomo:
1. Cuomo expects government bureaucrats and committees could design programs to save money. (SAGE Spending and Government Efficiency, Medicaid Redesign Team, 10 regional Economic Development Councils, Right-sized Youth Detention into community-based programs, Mandate Relief Resign Team) Link to Committees. Grade D
2. Cuomo in his first sentence proposes to "eliminate a $10 billion dollar deficit without raising taxes or borrowing" and then he is borrowing $5.6 Billion dollars. Grade F
3. Cuomo says, "New York is number one in education spending and number 34 in results and number one in healthcare spending and number 21 in results." Cuomo expects the same State workers running these programs will change their stripes, now that Cuomo is Governor? Grade -Delusional/Incomplete
4. Cuomo has a creative "funds shift [that] would result in the use of state bond proceeds for payment of a portion of debt service on MTA revenue bonds." Grade F
Then there is the Cuomo folly reported yesterday on this blog:
5. Cuomo's budget will fail to deal with the elephant in the room and will not follow eight other State's models for laws and regulations which could produce at least $29 billion in savings per year. And Cuomo and his Medicaid Redesign Team is filled with trough feeders. Grade-Delusional/Incomplete
6. Cuomo's budget used the "Madoff-like" pension assumptions of 7.5% safe return on pension investments. and continue to allow borrowing to fund contributions. Grade F
7. Cuomo will fail to budget in the required repaying of the federal government for Medicaid frauds tolerated by New York. This is minimally estimated at $6.4 billion needed to added to deficit or be funded. Grade F
8. Cuomo reducing Medicaid waste and fraud is a joke, since Cuomo recovered only 0.6% of medicaid fraud while he was Attorney General. Grade -Delusional/Incomplete
9. Cuomo forgot what happens when New York's bond rate rises? and NY's borrowing costs will move up from $5.6 Billion to $18.8 Billion. Grade D
10. Cuomo forgot about repaying the Unemployment Insurance: State Trust Fund Loans of $3.1 billion. Cuomo must pass this on in higher unemployment contributions by New York Employers and watch the Cuomo Business Friendly New York fizzle. Grade F
11. Cuomo claims a $10 billion dollar deficit, when if he could add correctly he'd get $22.1 billion deficit, without even counting the pension shortfall from the phony 7.5% safe return and the "Build America" funding losses. Grade F
New York State Bonds will be rated overall Grade D- and the multiple delusional/incompletes show an impossibility of improvement.
The good News is Moody's acts slowly on bonds. Their downgrade of Egyptian Bonds reported on Monday, many days after any sane person would have.
In further regard of Bond Rating Firms: The Financial Crisis Inquiry Commission established by Congress and signed by the President Obama in May 2009 reported on page 25: "We conclude the failures of credit rating agencies were essential cogs in the wheel of financial destruction. The three credit rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. This crisis could not have happened without the rating agencies." [link to full report 600+ pages]You still have time to sell your New York Bonds before they are devalued. Or, you can hold on to your bonds and then later join the class action suit against rating agencies to recover losses.
