NY State to shutdown

Posted by Ray on June 13, 2010 under Main | Be the First to Comment

In another testament to the resilience of this V shaped recovery the U.S. is currently experiencing there is news that New York State might not pass the emergency budget, which has been keeping the state alive for the past couple of months, on Monday. For those of us who live in NY we know that they never pass a budget on time, this is not news and it amazes me that the same people always get reelected, but now this is a serious situation. If they do not pass the emergency budget on Monday the entire state will shutdown, everything.

First off, NY State is in rough shape and is going to go broke without a federal bailout, period. For all the talk about NY is going to make it, CA as well, is all wishful thinking. No one wants to make the tough decisions and because of that, and years of spending well beyond the states means, here we are facing a shutdown because of NYS fiscal condition. The deficit NY faces is huge and will only get worse because even in the face of everything going on no one wants to really cut spending which is a bit insane. Sure, they will make concessions here and there, but nothing really meaningful or that will improve our situation in the future. The worst part of it all is that if, that is a big if, things ever get back to “normal” the state will just ramp up spending again like nothing ever happened. Hey, if people will lend you the money, why not.

However, this shutdown is major and will serve as a wakeup call to most people in the state who thought this would/could never happen here. According to the Associate Press here is what is at stake in the shutdown:

What would a New York state government shutdown look like?

No one is sure. But they agree a shutdown, possible if the Legislature fails to approve an emergency spending bill Monday, would include:

-Suspension of lottery games, safety inspections of cabins for youth, and other nonessential services.

-Closing of parks and campgrounds, courts and unemployment offices.

-Businesses wouldn’t get paid for goods and services provided after June 13.

-Social service payments for children and family services including welfare and food stamps would be frozen.

-Schools wouldn’t get funding for education of homeless children.

-153,000 state employees wouldn’t get paid on June 23 as scheduled.

Prisons and state police patrols would continue, but likely with reduced staffing.

What is happening in Albany? Well, a couple of Democrat Senators are deciding to vote against the emergency budget which will cause the shutdown. The likelihood that they will actually follow through on their threats is minimal, but possible. The one thing you can count on about all politicians is that they like to be reelected and no one wants to be the one responsible for shutting down the state, but anything is possible. That being said, the list above is inevitable simply because there is no way the state can solve its fiscal problems and the debt markets, at some point, will demand a premium for the state’s debt to be issued.

I can attest that the population is already overtaxed and is unwilling to pay more in state income taxes, property taxes or sales taxes. What will happen is people will vote with their feet, they already are as illustrated by my daughters kindergarten class of which 1/5^th of the students are moving out of state for economic reasons. That is a huge number and this being my second child through elementary school, I can say that this is unprecedented in my experience. Businesses are not going to stay in NY because it is not a business friendly state from a tax point of view so there are layers of problems, not just that taxes are too high.

I await Monday’s vote to see the outcome, but rest assured the emergency budget will pass. Also rest assured that at some point the listed shutdown items above will be implemented because of insolvency because our elected leaders do not know how to manage money o government. It all goes back to my previous statement, politicians bribe us with our own money and we fall for it, not realizing we are better off if we say “no” to it so we are not taxed to pay for the bribe we just gave to ourselves.