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Albany and the City's Budget


With the June deadline for an adopted city budget fast approaching, the State Legislature in early May – independent of Governor George Pataki — cobbled together a $2.7 billion plan that will fill much of the city’s $3.8 billion budget gap for 2004.

In an Albany scenario even more bizarre than usual, Senate Majority Leader Joe Bruno and Assembly Speaker Sheldon Silver have agreed to increase state taxes - which makes it possible to restore many of the governor’s education, healthcare, and other cuts to New York City - and give the city permission to raise a variety of tax and non-tax revenues. If the governor persists in opposing this plan, the legislature will have to override his veto. (For more on how the legislature reached its agreement, see related articleby Assemblyman Scott Stringer)

However, balancing the city’s budget for 2004 depends not only on the governor and legislature’s actions, but also on current negotiations between the Mayor Michael Bloomberg and the City Council.

The state legislative package, for instance, seems to eliminate any need for the mayor’s “doomsday budget” that would have cut $1 billion. However, it has re-opened the question of whether some of the mayor’s earlier $600 million preliminary-budget cuts should be restored.

On the city revenue side, the State Legislature has, as expected, rejected the mayor’s proposed $1.4 billion commuter tax, but replaced it with several new ideas.

The biggest is an increase in the personal income tax on individuals earning more than $100,000 a year and couples making more than $150,000 a year. This will be worth more than $400 million in 2004. Also the state plans to take over the city’s remaining $2.5 billion Municipal Assistance Corporation debt (stemming from the city’s 1970s’ near-bankruptcy) – which will apparently produce $500 million a year for the city in each of the next five years.

Mimicking the legislature’s increase in the state sales tax (0.25 percent), the mayor and the council have approved a smaller city sales-tax increase (0.125 percent) as part of the package (adding up to a new total sales tax of 8.625 percent), along with a modest surcharge on landlords who rent out small properties.

If these actions go through, the mayor and the council must still find a way to fill a $1 billion hole in the city budget.

The remaining weeks before the city budget is adopted will feature more familiar fights between the mayor and council over still substantial cuts to education, youth, senior, health, library, cultural, and other human services.

Play Gotham Gazette’s Interactive Budget Game
Read A New Way of Doing Business in Albany by Assemblyman Scott Stringer

 

 

 

 

 

 

 

 

 

A New Way of Doing Business in Albany


Facing a spectacular budget deficit, the New York State legislature has produced a good budget that will help New York City avoid Mayor Michael Bloomberg’s “doomsday” scenario of massive cuts in programs. New Yorkers certainly have a right to be disappointed that the State Legislature this year relied on the regressive sales tax to boost revenue instead of enacting the commuter tax that most city officials had wanted. But, on balance, the agreement will benefit New York City.

The legislature restored many of the cuts to school aid, the largest attempted education reductions in New York’s history. We also restored more than hundreds of millions in state funds for Medicaid, public health and Health Care Reform Act programs, as well as to higher education.

What is most unusual about the events in Albany is that they have inadvertently accomplished what good government and legislative reformers have been pushing unsuccessfully for years: the end of the fabled “three men in a room.”

This year, by necessity, individual members of the legislature became part of the budget process. And for the first time in memory, the budget battle took place in the light of day.

Because Senate Majority Leader Joseph Bruno and Assembly Speaker Sheldon Silver had to keep the members of their respective conferences united, daily briefings were given to legislators who were going to be asked to vote not once, but twice on the budget. (The first vote was the budget and the second vote will be on an anticipated override of Governor George Pataki’s threatened veto.) Speaker Silver, in particular, provided members with updates and actively involved them in strategy decisions.

For decades, the Democrats in the Assembly have enjoyed a controlling majority, and Republicans have been increasing their majority in the Senate. The huge majorities allowed leaders of both houses to confidently push through the budget deals they negotiated with the governor. This year, legislators in both chambers made it clear that there was no way they could go back to their constituents with the large scale cuts to social services that Pataki put forth in his budget plan. As the legislature struggled to create a balanced budget, Pataki walked out of the process, creating a unique opportunity for bipartisan cooperation. In an override vote, every legislator counts. There are 103 Democrats in the Assembly, and 100 votes are needed for the override. In the Senate, there are 38 Republicans and 42 votes are needed for the override. Therefore, four Democratic senators must join with the Republican majority to override the governor’s veto.

Suddenly, individual members who have long complained about being shut out of the budget process are being courted by their leaders. And important programs such as health care and education spending have been restored as a result of both Democrats and Republicans responding to the needs of their districts and the demands of their constituents. The more the public knew, the better the budget became. Without anyone planning it, the process has improved.

This year the governor did not speed along the budget process by handing down a message of necessity, an order that allows a bill to skip the customary three days waiting period before the legislature can vote on it. Expedited voting is such a common practice that long-time observers of the state legislature cannot remember the last time the budget was put to bed without a message of necessity. Without it, this year, legislators were actually able to read the budget bills before voting on them.

As favorable as many of this year’s developments have been, the real question is: What happens after the override vote? Will this trend toward reform last?

Real conference committees, which bring together the Senate and the Assembly, would be a natural outgrowth of this year’s conferences. Conference committees have been used sporadically in recent years. For example, in 1998, Assembly Democrats worked in a conference committee with Senate Republicans under the impression they were reaching compromises to pass the budget. Yet, after the budget passed the legislature, Pataki line-item vetoed all of the Democratic pieces of the budget while the Republicans made out like bandits. The system worked better last year when the Health and Wellness Act passed the legislature, partly because of the efforts of a conference committee. I view this year’s budget as a product of compromise and cooperation, much like the work of a conference committee.

Other reforms that must be implemented include a mandatory cooling-off period to allow legislators to read bills before voting on them. Real public hearings must be conducted to give the public the opportunity to speak on important legislation, encouraging more thoughtful debate among legislators, and freeing individual legislators to vote outside their party as well as to hire their own committee staff. This is an excellent time for reform and to build on the foundation of what has already taken place this year.

There has been a shift away from the “three men in a room” negotiations to two leaders who brought all 211 legislators into the room with them. While we are still far away from reforming the culture of business as usual in Albany, this is the first time in recent memory that members have walked away at the end of the day more hopeful than discouraged.

For more details about the effects of the budget, play Gotham Gazette’s budget game and read the city budget update by Glenn Pasanen.

Scott Stringer, a Democrat, represents the Upper West Side of Manhattan in the New York State Assembly.

 

 

 

 

 

 

 

 

 

 

 

 

 

The MTA's Funny Numbers And Smug Attitude


At the same time that recent reports by the State and City Comptroller add immeasurably to our understanding of the funny numbers the Metropolitan Transportation Authority used to justify the new fare increase, they also illustrate how unaccountable public authorities actually function, exposing the insular, smug attitude that MTA officials exude, even under the gun.

Representing a public corporation controlled by Governor George Pataki, these officials are blunt. They ignore public mandates, deny simple facts, and apparently think the average citizen is a fool.

IT DEPENDS ON WHAT "COULD" MEANS

State Comptroller Alan Hevesi's April budget report, "An Examination of the Finances of the MTA", (in pdf format) charges that the MTA hid more than $500 million of its surplus in 2002, which "foreclosed any consideration of [other] fare options." The result was that the public hearing process was a "sham."

The state comptroller found that the MTA kept two sets of financial plans, one public and one internal, and that its budget officials "cultivated an insular budget system," creating a "culture of secrecy." Officials "deflect requests by parsing language, invoking technicalities, and providing evasive responses to direct questions." When the comptroller's staff asked whether certain resources could have been used in 2003, Gary G. Kaplan, the MTA's Director of Budgets and Financial Management, "responded on three occasions that the answer depended on what 'could' means."

SHIFTING COSTS TO RIDERS

The state comptroller's report identifies the impact of the fare increases imposed through this flawed public process on subway, bus and commuter-train riders -- a full-year (2004) increase of $542 million overall, $430 million of which falls on Transit Authority riders; $430 million, ironically enough, is roughly what the old, repealed commuter tax generated for the city budget.

The report also showed how the state's share of capital spending is declining dramatically. The state share of the MTA's first two capital plans was 18 percent, but in the 1995-1999 plan declined to seven percent. (The state's share of the $19 billion 2000-2004 plan is not yet clear, but beyond some dedicated taxes, it is not expected to make any direct contribution)

The MTA recently restructured $13.5 billion in outstanding debt. This helped pay for current capital expenses and helped balance the operating budget. It also in the short run lowered annual debt service, but at the cost of higher future costs. In fact, the restructuring will mean a net increase of $5.8 billion in debt service costs between 2003 and 2032.

Debt service costs (which the MTA has now detailed only because the comptroller subpoenaed the figures) become more important as the MTA increasingly resorts to borrowing money. Nearly two-thirds of the 2000-2004 program will come from debt, far higher a share than the roughly 25 to 40 percent share in the four previous plans, going back to 1982. (The city share has been minimal - about $105 million a year - and Mayor Bloomberg has proposed a 30 percent reduction in that.)

The MTA's debt service has increased from 13.4 percent of revenues in 2000 to 19.7 percent in 2004 (before factoring in the fare hikes). One recent analysis projected an increase to 25.5 percent by 2020. All of these increases will impose new burdens on transit riders.

"INCOMPLETE, MISLEADING, AND OBFUSCATING"

City Comptroller William Thompson's April "Audit Report on the Financial Practices of the NYC Transit Authority," (in pdf format) tells a similar story. His report finds that the Transit Authority's "financial statements and budget documents were incomplete, misleading, and obfuscating." The key charge is that the TA "improperly included capital costs and interest expenses on long-term debt as operating expenses on its financial statements." The effect was to make it "impossible" for the public to judge whether a fare increase was necessary.

The numbers in question are huge: The report says that in 2001 financial statements, operating expenses were overstated by approximately $859 million, and in draft 2002 financial statements by approximately $853 million. The Transit Authority has subsequently revised its 2002 statements.

On public process, the city comptroller found that the TA "did not provide the public with complete, clear, and accurate information about its current and future financial position." The MTA did release on March 27, 2003 - three weeks after the fare increase was approved -- a revised budget with a more comprehensive version of the Transit Authority's financial condition. In response to the auditor's question about this timing, the MTA and Transit Authority answered:

"The finances of the MTA are complicated, which is why the case was set forth in what we believed were 'digestible' pieces that would make it easier for the public to understand MTA's finances." They also claimed the MTA budget process "is one of the most open of all governmental budget processes."

The auditor's comment rejected the notion of 'digestible pieces,' and suggested that "presenting bits and pieces of information at various times in various documents with changing numbers and assumptions makes it even more difficult to digest and evaluate the MTA's financial situation."

SUBWAY RIDERS VS. SUBURBAN COMMUTERS

In addition to its lively exchange on digestive processes and a democratic budget process, the Thompson audit report makes another important point, that city transit riders pay a "significantly higher percentage of TA operating expenses when compared to the percentage of operating expenses paid for by the ridership of the commuter railroads and Long Island Bus":

" TA riders will pay 53.87 percent of operating expenses in 2003
" Long Island RR riders will pay 38.83 percent
" Metro-North RR riders will pay 45.26 percent
" Long Island Bus riders will pay 35.03 percent

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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