New York Assembly Speaker Sheldon Silver introduced a bill Wednesday to create a financial review board to oversee the state’s fiscal health and borrow up to $6 billion to close the deficit.

A. 10408, the Financial Recovery Act of 2010, was modeled on a proposal by Lieut. Gov. Richard Ravitch and would allow for deficit borrowing as the state converted its cash-budgeting process to generally accepted accounting principles.

Silver introduced the bill as the Assembly met in conferences and started printing budget bills. At press time it had not passed a budget resolution, which the Senate accomplished Monday. Gov. David Paterson reportedly was preparing budget extenders in anticipation of the two chambers’ proposals being too far apart to reconcile by April 1, the start  of the new fiscal year.

Silver’s proposal would establish five-year “fiscal recovery period” beginning in the first year that deficit bonds — called “transition bonds” — were issued. Transition bonds would be limited to $2 billion annually for three years.

A five-member board and its staff would review the state’s budget and five year financial plan during the first and third quarters of the fiscal year. If the review board found the budget to be out of balance on a cash basis or on course to be out of balance at the end of the fiscal recovery period, it would inform the governor and Legislature.

The governor would then have 30 days to make administrative cuts to balance the budget. If those proved insufficient, the governor and the Legislature would then work to find a legislative solution

If the governor and Legislature could not agree upon a budget-balancing solution after 30 days, the state budget director would be empowered to make budget cuts.

One big difference between the bill and Ravitch’s proposal is that it makes no mention of bond covenants that would trigger events of default if the budget was out of balance and neither the governor nor Legislature acted.

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