Goldmark: Congress needs to help desperate states, cities

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The Capitol Dome on Capitol Hill in Washington. The Capitol Dome on Capitol Hill in Washington. Photo Credit: AP

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Peter Goldmark Peter Goldmark, former publisher of the International Herald

Peter Goldmark writes a weekly column for Newsday. He is former budget director of New York State and

In this wild presidential campaign there is a fair amount of speechifying about the fiscal condition of the ship of state. The speeches are aimed at the most visible part -- the national budget and government, or what we might call the grand upper decks of the ship.

But below the waterline there is much worse trouble brewing, and few are talking about it. On the lower decks, where the other parts of the enterprise that we call state and local government are located, the ship is taking on water.

State and local governments deliver most of our vital services and employ some 19 million people, or about 15 percent of all those employed in this country. Which makes sense when you realize that this is where the teachers and police officers are.

There are three simultaneous adverse pressures at work:

The first is jobs. State and local governments nationwide have laid off about 700,000 workers since April 2009. And many are planning to lay off more.

Second, state and local governments face a budget squeeze. Revenues are stagnant or declining, and so is post-stimulus federal aid.

Third, the cost of pensions and other benefit plans are skyrocketing all over the country. And many states and localities, faced with declining revenues, are evading their obligations to these plans with gimmicks that will only dig a deeper hole later. Others are having to make drastic cuts.

There are local signs of this all around us. Suffolk County borrowed some $85 million in revenue anticipation notes this year -- cash flow problems, we were told.

In Chicago, one of the issues in the school strike was that the teachers pension system is just a few years away from running out of money, because the city hasn't been making appropriations to the fund.

And in New York City, Mayor Michael Bloomberg has directed city agencies to cut their budgets 10 percent below the level authorized at the beginning of the fiscal year, because revenues aren't coming in as planned.

To no one's surprise, the banks are taking steps to make sure that they don't get caught having to share the pain they way they did in the 1970s New York City fiscal crisis. Some banks are saying to municipal governments that want to borrow that they'll only lend if their state enacts a law forbidding cities to file for bankruptcy. That's because in a bankruptcy proceeding, financial creditors can be forced to take a hit along with employees and other stakeholders. But under federal bankruptcy law, a municipality can declare bankruptcy only if state law permits it.

So far the feds have been no help in this growing mess. Most lawmakers in Congress readily admit that impact on state and local governments is not a subject they give much thought during their furious and highly ideological budget battles.

We need a plan, and I see only one way to get it. That's for a bipartisan group of state governors -- say four or six representing a geographic and political cross-section of the country -- to meet with the congressional leadership of both parties and agree on the creation of a special joint committee. It would include both houses of Congress and work with the governors to give states the tools to make intelligent cuts, raise needed revenues, refashion pension and other obligations, and minimize layoffs in vital services.

What kind of governor might lead such an effort? Well, maybe one who has proved his fiscal responsibility but remains sensitive to the legitimate needs of the elderly and the vulnerable. It might help if he'd had some executive experience at the federal level, and came from one of the bigger states -- but a state that had urban, suburban and rural populations and concerns.

Can anyone think of a governor who fits that description?

Peter Goldmark, a former budget director of New York State and former publisher of the International Herald Tribune, headed the climate program at the Environmental Defense Fund.

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