Faced with the biggest New York City fiscal crisis in nearly two generations, the state’s Financial Control Board has punted. The board decided last week that the city’s budget isn’t balanced but not quite imbalanced enough to qualify as an emergency. The inaction demonstrates a grim reality: In the ’70s, when the state created the FCB, New York state was in a political position to rescue the Big Apple. No more.
The FCB is part of the fable that Gotham’s Wise Men tell about the Bad Old Days. In 1975, when the city’s lenders cut off New York City from borrowing, pushing it to the brink of bankruptcy, the state Legislature and Gov. Hugh Carey passed a law. The Financial Emergency Act enabled the new board, heavy with financial experts, to control the city’s budget. (The governor controls four out of seven members.)
For 11 years, the board did good — most importantly, freezing government wages. In the Ed Koch administration, during the early ’80s, the board served as “bad cop” when unions asked for high raises; Koch could say the board wouldn’t let him.
But New York never got its fiscal house in order. The board was also a pioneer in what would become the global economy’s mantra, starting in the ’80s: If you’ve borrowed too much already, just borrow more.
In the mid-’70s, banks thought that New York had borrowed too much money, to pay for day-to-day expenses, not long-term infrastructure. The solution, approved by the board, was for the city to borrow more to pay off those bankers. We still owe that money.
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