A number of major states and cities continued to thrash about last week, making little headway in their efforts to gain control of their revenues and expenses. Their ineffectiveness can only increase the doubts in the municipal bond market and push interest rates and borrowing costs higher.

New York City, which ended its fiscal year yesterday with an alleged budget surplus, was the sorriest case. Mayor Dinkins and the city coucil argued over spending cuts and higher taxes for fiscal 1992. The New York State Senate refused to budge on the city's request for a higher income tax. Concessions from municipal unions seemed remote. The Financial Control Board appeared anxious to avoid a takeover. The possibility of selling bonds to fund the fiscal 1992 deficit (but only as part of a credible, tough long-term plan) hovered in the background.

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