Bankruptcy May Be The Best Answer For New York State
As Gov. Andrew Cuomo of New York pleads for federal assistance in the various phases of the stimulus package, we should realize that he is hoping the Washington dollars can help him paper over a $6 billion deficit that his budget was showing before the virus hit.
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New York is, by far, the hardest-hit state in the nation.
Over 30 percent of all coronavirus deaths in the U.S. have been in New York, so much of the loss of economic activity and consequently of budget revenue will be there.
Cuomo is pretending that the entire need for funds in New York is due to the virus. But New York has a deeper virus — out of control spending and union contracts that drive the government’s need for revenue.
This demand for more money might eat up the bulk of the federal revenue like a tapeworm.
Senate Majority Leader Mitch McConnell has suggested that states like New York get the ability to declare bankruptcy in the current crisis.
Currently, localities can do so but the states cannot. While Cuomo dismissed McConnell’s proposal as partisan, it represents perhaps the only way out for New York.
If the state declared bankruptcy, it could get out of the public employee union contracts that are driving its deficits. These contracts saddle New York and other states with payroll and pension costs and inhibit efforts to increase worker productivity and efficiency.
No governor or legislature could do this kind of reform without facing certain defeat in the election.
But a federal bankruptcy reform could save the New York taxpayers.
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