As budget talks in Albany founder, Gov. Mario M. Cuomo yesterday turned up the heat by urging lawmakers to consider the dire consequences that would occur if bond raters lower the state's credit rating.
Gov. Cuomo said the ratings on school district bonds would fall along with the state's and that institutional investors may balk at buying state paper.
"The rating agencies have already announced that a failed agreement will heighten their concern and their scrutiny," Gov. Cuomo said in a statement. "This could produce another downgrading. That would produce consequences beyond the millions of dollars in added interest costs for years to come."
At the moment, it appears Assembly and Senate lawmakers are miles apart on any agreement to close a $875 million budget gap projected for fiscal 1992, which ends March 31, and a $3.6 billion gap forecasted for fiscal 1993.
The rating agencies have warned Albany that in order to avert a downgrading, the budget crisis must be addressed soon and without relying heavily on-one shot revenue gainers.
The consequences of a downgrading are no secret to Gov. Cuomo and lawmakers. After years of climbing back up the ratings ladder, they were stung in 1990 when both Moody's Investors Service and Standard & Poor's Corp. dropped their respective ratings to A, making it one of the lowest rated states in the nation.
And this week, Assembly lawmakers were given a list by their finance committee showing the current bond ratings of the state, state authorities, and a number of school districts and municipalities, a source in the Assembly said.
The list also forecast which issuers could be adversely hurt by a downgrading of the state, the source added.
As a result of a budget impasse, Gov. Cuomo said that every school district in the state would be downgraded if the state's rating is reduced. And if the state's short-term rating were dropped, it could "make it very difficult to sell out notes to institutional investors."
Gov. Cuomo said that three of the four public authorities in the state that finance state construction programs are rated triple-B plus, and that a downgrading would make it difficult for them to tap the capital markets.
State Senator Roy Goodman, R-Manhattan, said, "I sense that the governor has correctly framed the question."
But Gov. Cuomo has paid "lip service" to the immediate crisis and has not addressed the overall problem of downsizing state and New York City government, Mr. Goodman said.
Gov. Cuomo has proposed a $875 million deficit reduction plan for fiscal 1992 that includes deep mid-year cuts in school aid. State Senate Majority Leader Ralph J. Marino, R-Muttontown, has said Republican Senate members will not support mid-year school cuts.
And Assembly Speaker Mel Miller, D-Brooklyn, whose fate as a force in the budget negotiations hangs in the air, has warned that the budget cannot be balanced on the backs of the poor and elderly. Mr. Miller, indicted earlier this year on fraud charges relating to cooperative apartments he and a partner sold in the mid-1980s, is awaiting a verdict from the jury.
Gov. Cuomo, who has said he will not commit to running for president in 1992 until some sort of plan is in place to solve the state's budget crisis, has also offered to work on a multi-year gap-closing plan covering 15 months. While lawmakers have decided to pursue such a proposal, they have not agreed on any specific plan.