Gotham Gazette https://www.gothamgazette.com/component/tags/tag/1049 Thu, 20 Jun 2019 13:41:28 +0000 Joomla! - Open Source Content Management en-gb webmaster@gothamgazette.com (Webmaster) Uncertain Future for Secretive State Pork Program Tied to Renegade Democrats https://www.gothamgazette.com/state/8461-uncertain-future-for-secretive-state-pork-program-tied-to-renegade-democrats https://www.gothamgazette.com/state/8461-uncertain-future-for-secretive-state-pork-program-tied-to-renegade-democrats cuomo klein via gov

Cuomo and Klein (photo: governor's office)


Few New York residents have probably heard of the State and Municipal Facilities Program, or SAM, but in recent years, it has been one of the top avenues by which state lawmakers “bring home the bacon,” providing many millions of dollars in funding for district projects. Otherwise known as “pork,” these projects include things like new or renovated parks, schools, libraries, and more, with far greater funding going to legislators based on their political power.

However, in this year’s recently-adopted state budget, there are no new appropriations for SAM. And SAM is also different because it is lump sum appropriation, with specific project funding decided outside the budget process by the governor and legislative leaders.

Started in 2013, SAM is a creation of Governor Andrew Cuomo and legislative leaders. It is controlled by the Dormitory Authority of the State of New York (DASNY), one of the state’s many public-benefit corporations, responsible for assisting state and local governments, as well as non-profits and colleges, with construction, financing, and other services. Currently-planned SAM projects include everything from renovations to the Brooklyn Public Library to creation of a skateboard park in Albany to new fire trucks and patrol vehicles in Poughkeepsie.

DASNY’s board consists of five gubernatorial appointees, an appointee from the President of the State Senate, another from the Assembly Speaker, and four ex-officio members: the State Comptroller, Education Commissioner, Health Commissioner, and the Budget Director.  The health commissioner and budget director are both appointed by the governor and the education commissioner is appointed by the state’s Board of Regents.

The program has long been criticized as an unnecessary discretionary fund -- in other words, a politically advantageous “slush fund.” SAM is one piece of the state’s larger capital budgeting, mainly for construction projects.

In his assessment of the 2018 state budget, Comptroller Tom DiNapoli criticized “the state's use of lump-sum appropriations that leave broad discretion for use of funds with limited disclosure.” He specifically cited SAM, which received a 25% increase in appropriations that year, saying “the need for additional discretionary spending authority was not made clear.”

Criticism has also come from good government and fiscal watchdog groups. E.J. McMahon, research director for the Empire Center for Public Policy, said last year that state lawmakers were “basically like teenagers with credit cards” when it comes to using SAM.

“It’s just pork. There is nobody even pretending that there is statewide importance to any of these,” McMahon told The Buffalo News. “There is no process. No airing. There’s complete discretion.”

David Friedfel, the director of state studies for the Citizens Budget Commission, told Gotham Gazette “these lump sum appropriations are not a wise investment of state resources. The allocations are a product of political expediency instead of a thorough analysis of the state’s needs. It’s nice for the communities that receive these grants, but the state taxpayers shouldn’t be footing the bill.”

Surprisingly, in this year’s state budget, there were no new appropriations for SAM. However, Friedfel notes that state lawmakers “have not allocated all of the money previously appropriated so they may have decided to just spend down existing appropriations this year.” There still remains over $1.9 billion in SAM appropriations that have gone unspent since the program’s creation in 2013, and that money is carried over into the new fiscal year 2019-2020 budget that took effect April 1 of this year.

As of April 8, 2019, there are over 1,800 grants currently administered by DASNY under SAM that amount to over $900 million in planned spending. This leaves a little over a $1 billion in discretionary funds for state lawmakers to access, which is more funding than SAM has ever spent in a single year.

Freeman Klopott, a spokesperson for the state’s Division of the Budget, which is under the governor, said in a statement “there were no capital additions to the Budget and, as we have said already, additional capital funding will be addressed in June at the end of legislative session when we have a better sense of the State’s fiscal picture.”

There has been little indication from Albany leaders if there will be additional SAM funding in the capital budget when it is decided. The state’s current fiscal outlook, the availability of reappropriated funds, and the demise of the Independent Democratic Conference (IDC) all appear to make additional SAM appropriations unnecessary or unlikely.

The program’s 2013 introduction coincided with the first state budget following the 2012 state legislative elections, in which Democrats won a majority of State Senate seats. However, the IDC partnered with Senate Republicans to maintain the Republican-led majority. The addition of a new discretionary spending program a few months after the deal was struck was suspicious to many. There has been reporting to indicate, as well as widespread belief, that Governor Cuomo, now a third-term Democrat, preferred and encouraged the creation of the IDC and its coalition with Republicans.

SAM was utilized over the years to benefit members of the IDC handsomely, while the funding also benefited Senate Republicans and Assembly Democrats.

Several years after its creation, in the 2018 budget, an additional $90 million was added to SAM’s annual appropriations. This was a few weeks before the IDC’s dissolution -- a deal Cuomo brokered -- and five months before that year’s primary elections, when six of the eight IDC members were defeated by Democratic challengers.

Former State Senator Jeff Klein, who had been the leader of the IDC, was one of the primary beneficiaries of SAM projects before his loss to Alessandra Biaggi in the 2018 state legislative elections. A 2015 article in Politico New York explained “Jeff Klein’s alliance with Republicans has paid off.” Klein received almost $12 million in earmarks, much of which came from SAM, over three years between 2013 and 2015, according to Politico. Klein’s earmarks were triple that of any other state senator at the time, though other members of the IDC also reaped significant benefits, as did other legislators.

In an April 1 interview with WAMC Northeast Public Radio, Cuomo acknowledged that the capital budget and capital projects were not “fully included” in the recently-passed state budget. He said that “we have to negotiate on the capital side and we’ll do that in the coming weeks.” He also reiterated that the state’s $150 billion infrastructure plan “is the most aggressive infrastructure plan in the United States of America.”

While Cuomo’s major infrastructure projects continue apace, it is unclear what the fate of the SAM program will be, whether the reallocated money will be spent down or whether new money will be added.

On April 12, Cuomo issued 123 line-item vetoes to cut $44 million in capital spending added by the Legislature, in order “to maintain a properly balanced budget,” the governor wrote, and for technical reasons, such as being duplicative or were unnecessarily held over from several years prior.

While SAM is among the largest sources of funding legislators can use for capital projects in their districts, it is not the only source. And according to Friedfel, the final state budget also took out a provision that would have given the state’s inspector general greater oversight of discretionary spending.

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by Andrew Millman, Gotham Gazette

Read more by this writer.

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Uncertain Future for Secretive State Pork Program Tied to Renegade Democrats Thu, 18 Apr 2019 04:00:00 +0000
Agenda 2019: City & State Budgets on Mostly Solid Ground, with Major Questions Looming https://www.gothamgazette.com/state/8147-agenda-2019-city-state-budgets-on-mostly-solid-ground-with-major-questions-looming https://www.gothamgazette.com/state/8147-agenda-2019-city-state-budgets-on-mostly-solid-ground-with-major-questions-looming Cuomo budget presentation

Gov. Cuomo (photo: The Governor's Office)


This is part of AGENDA 2019, a joint Gotham Gazette-City Limits project
Find the rest of the series here

New York’s economy has seen several rosy years in the decade since the Great Recession, with a run of steady growth, increasing job numbers, rising wages, and reliable tax revenue that has defied historical trends -- and led to growing city and state government budgets. But 2019 may be the peak of that economic swing as economic experts predict a long-expected slowdown to set in before 2020. New York City, the experts say, seems better equipped to weather any adverse effects of slowing growth and the state may struggle, presenting some hard choices for Democrats who will fully control state government come January and have a long list of priorities, some of which have financial costs attached.

Also complicating the fiscal pictures as the state and city levels are projected budget gaps that must be closed, looming negotiations over how to fund the next MTA capital budget plan and its tens of billions of dollars to fix the subways, and the still unclear effects of recent federal tax reforms, among other outstanding questions. The finances of New York City continue to show a rosier picture than those of the state, with the city economy essential to the state’s ability to spend more each year, though the state has grown its budget in much more limited fashion than the city under Mayor Bill de Blasio.

In January, Governor Andrew Cuomo will present his State of the State address and executive budget for the fiscal year that begins April 1. Afterward, de Blasio will respond to the governor’s budget plan -- which will set the stage for negotiations with the state Legislature, de Blasio, and others -- and release his own preliminary budget for the next city fiscal year, which will begin July 1. Once the state budget is finalized, the city will be able to take its details -- funding levels, new mandates, and more -- into account as it creates its own budget. The specifics of the annual struggle over what the state is asking or requiring of the city are to be seen, though Cuomo has already indicated he plans to seek more money for the MTA from de Blasio.

Budgets are statements of values as much as they are financial planning documents and Cuomo and de Blasio, both Democrats, face pressure each year to balance their policy priorities with fiscal restraint, as well as the demands of others, especially members of the respective legislative bodies each must negotiate with. The governor prides himself on having passed eight on-time or nearly on-time budgets with a 2 percent cap on increased spending, though he is known to manipulate the numbers to say he has stuck to that limit even though some years he has not. De Blasio boasts of record amounts of savings, though watchdogs regularly say that he is not socking away enough given the extended economic boom while he is spending too much, especially in recurring costs like through a significant expansion of the city workforce.

The agreed upon state budget was more than $168 billion for the current 2019 fiscal year, with savings that are far too minimal according to every expert. And the mayor’s administration, though praised by fiscal monitors for its responsible financial planning, has overseen ballooning expenditures, passing a nearly $90 billion budget for fiscal 2019 -- it was $72.7 in the final year of the Bloomberg administration.

But New York City revenue is largely based on property taxes, which would remain relatively stable even in the event of an economic slowdown. The state on the other hand is far more vulnerable since personal income tax and sales tax contribute a bulk to state revenue.

Barring any unforeseen circumstances, the current economic expansion, the second-longest in the country’s history, will continue through most of 2019, bolstered by the federal tax cuts passed in 2017 (even if many New Yorkers’ tax burdens increase due to the new cap on state and local deductibles). It should allow both the state and the city to keep spending, though experts warn that both should prepare for what will happen down the line. Both the Cuomo and de Blasio administrations, along with the state Legislature and City Council, respectively, should be putting more money towards rainy day funds, fiscal experts say; particularly the state, especially as necessary infrastructure investments loom large and add to already rising debt obligations.

New York State
The state budget remains far more precariously placed in the case of a downturn, even though one isn’t expected to hit soon. The governor has reiterated in recent months that he will continue to abide by a self-imposed 2 percent limit on increased annual expenditures, which presents little wiggle room to add major spending initiatives, though it remains to be seen if the governor will employ one of his many budget maneuvers to obscure actual spending increases. For instance, the State Fiscal Year 2019 budget, which began April 1, included a provision that funnels Payroll Mobility Tax revenue directly to the MTA instead of going through the state, effectively shifting $1.5 billion out of the budget.

“Part of the problem is they’ve technically abided by it but they’ve only done that by shifting things around and reclassifying things, not necessarily through stringent cost controls,” said David Friedfel, director of state studies at Citizens Budget Commission, a nonprofit watchdog. “The more they play those tricks, the harder they will be to find in the future if that’s how they choose to close the gap.”

The New York State Division of Budget’s mid-year financial update, released in November, predicted that the state will meet its revenue projections by the end of the fiscal year. Even at the state level, budget gaps remain manageable, at about $3.1 billion for fiscal year 2020, a number that is quickly cut if the 2 percent growth is factored in.

State Comptroller Tom DiNapoli released his own financial update in November, estimating that overall tax revenues would decrease by 1.8 percent by the end of the state’s 2019 fiscal year (end of March). Though personal income tax revenues are expected to fall by 2.5 percent, business and consumption taxes are set to increase by a total of 6.5 percent, the report estimated. Tax revenues are expected to increase by 5.9 in the 2020 fiscal year and then at a lower rate, 2.4 percent in the 2021 fiscal year.

Similar to city representatives, officials in DiNapoli’s office said in a background briefing that they expect a soft landing for the economy, despite the volatility in national and international markets. They have yet to determine the full impacts of the federal tax code overhaul, which capped State and Local Tax (SALT) deductions at $10,000 annually, raising concerns that high earners facing larger tax bills would in some cases fold to out-migration pressures, leaving the state and taking their tax dollars with them. Given New York’s position as a high-tax state, even many upper middle class homeowners in expensive New York City suburbs, and in the city itself, will be facing increased tax burdens, though it is not immediately clear that these factors will lead to a significant increase in the number of higher earners leaving the state. New York has consistently seen out-migration each year and has lost a net of 1 million residents since 2010, according to The Empire Center, a think tank. A report issued by the center in March suggested that the state should undertake several reforms to encourage the economic competitiveness which could help reverse that trend.

The state took measures to decouple state tax provisions from the federal tax code, including decoupling from the SALT limit to prevent higher state taxes, and changes to the child tax credit and the single filer deduction. The state also created two new programs -- the Employer Compensation Expense Program and the State Charitable Gifts Trust Fund -- in an effort to limit state taxpayers’ exposure to federal tax changes, but neither program appears to have caught on in any significant way. Officials in the state comptroller’s office said the impacts of the SALT deduction in particular wouldn’t be evident until during next fiscal year, particularly if it encourages people to move out of state.

Other risks in federal funding to the state seen in recent years -- Republican proposals to repeal the Affordable Care Act and make drastic cuts to Medicaid -- have also mitigated, the officials said, since those proposals have failed to come to fruition. But federal funding does remain uncertain as Congress is in the middle of negotiating the current federal budget with President Donald Trump, who has threatened a government shutdown if Congress does not approve funding for a wall along the southern border that he had promised Mexico would pay for. The ballooning federal deficit incurred from the Trump-led tax cuts have also increased pressure on federal spending, which could trickle down to the aid that New York receives for transportation, health care, and education, among other things.

“The state is in decent financial position but not when you consider the fact that we are nine years or so into an economic expansion,” CBC’s Friedfel said. “The state has been gifted with $12 billion in financial settlements and some additional revenues yet the state’s reserves are not where they should be or could be. They haven’t been added to in about four years. And liabilities are still out there.”

As Friedfel noted, the state’s rainy day funds stand at only about $2 billion, a pittance when looked at in the context of a downturn. In the case of a recession, Friedfel estimated, the state could face up to $50 billion in combined losses over a four-year period. “California is doing a very good job on their reserves. They’re gonna have close to 10 percent of state operating spending in their reserves, which is really what New York should be aiming for,” he said. “Instead of $2 billion, we should be closer to $10 billion.”

As with the city, the state’s debt also continues to rise, particularly with the governor having launched an ambitious infrastructure program that includes modernizing existing facilities and building new ones across the state, including bridges, airports and bus systems. The state’s debt service payments for fiscal year 2019 stood at $5.5 billion and are projected to rise to $6.6 billion in 2020. New York currently ranks second-highest in the country, behind California, in outstanding debt.

Year after year, DiNapoli has waved a red flag over the state’s debt obligations and officials in his office are keeping a close eye on whether those will increase in the upcoming year. There will be particularly pressing needs -- the MTA, NYCHA -- where the state will have to work with the city to fund large capital improvements. The current 2015-2019 MTA capital plan remains underfunded and the Fast Forward Plan, proposed by New York City Transit President Andy Byford to modernize the city’s subway and bus systems, may cost nearly $40 billion, with no plan proposed to pay for it in its entirety. A congestion pricing program for New York City has been embraced by the governor and many in the state Legislature as a funding stream, but even if implemented quickly and without carve-outs it would fall far short of meeting the goal.

“That’s one of the biggest questions,” said Gelinas from the Manhattan Institute, “especially if the economy continues to do well. How much does Governor Cuomo go after the city for MTA funding and in multiple billions of dollars...and does that cut into the city’s other priorities?”

IBO’s Lowenstein also echoed that concern. “The state has a great deal of leverage over the city and its own fiscal concerns and it would be unreasonable to expect these issues get resolved without city participation.”

Last time Cuomo and de Blasio negotiated the MTA capital plan, the governor successfully convinced the mayor to significantly increase city funds for the authority. Cuomo has repeatedly stated publicly in recent months that he will be pushing the city to pay “its fair share” for the MTA. De Blasio has called for an added tax on high-earners to provide dedicated funding for the MTA, a proposal that Cuomo has publicly mocked as fantasy on several occasions.

The state Legislature next year will also include several newly-elected Democrats who expressed support for increased education funding, per the Campaign for Fiscal Equity decision, which could add billions to the state budget. The state Board of Regents recently proposed a $2.1 billion increase in education funding for next year, which would be a significant jump from the current fiscal year’s increase.

New York already spends nearly twice the national average on per-pupil funding, said CBC’s Friedfel, but doesn’t necessarily allocate funding to the districts that need it most. CBC has argued for changing the key formula, known as Foundation Aid, noting that many wealthy districts receive it despite already spending more than the national average and more than the already-high state average by leveraging local tax dollars.

Another open question is what the state will do with about $900 million in unspent or unallocated one-time funds from Extraordinary Monetary Settlements, recovered from the financial industry in the wake of the 2008-09 market crash. Since state fiscal year 2015, the state has received nearly $11.2 billion in those settlements.

Though the governor has repeatedly said he will divert those funds to capital investments, and he mostly has, he has also used them for budget balancing purposes, DiNapoli’s office noted.

“The governor should be putting much more money of any one-time revenue sources aside for the MTA, things like court settlements or just better-than-expected revenues,” Gelinas said, noting the dire need to fund the transit agency. “We haven’t put enough of that money aside for the MTA.” Cuomo has, on the other hand, dedicated financial settlement money to his signature infrastructure projects, like the new Mario M. Cuomo Bridge.

Unlikely to impact the next state budget, but certainly on the negotiating table in the new legislative year, is the push to revolutionize how New York provides health insurance and health care. Several legislators, long-time and newly elected, are pushing for the New York Health Act, which would establish a single-payer health care system in the state and could cost nearly $140 billion in additional state expenditure by 2022, according to a RAND Corporation study. Though the act could reduce total health care spending by 3 percent by 2031, the study found. Cuomo has said he supports a single-payer system, but has insisted that it should be implemented by the federal government rather than the state, and said that he does not see it make fiscal sense for New York.

New York already has one of the largest Medicaid programs in the country, comprising a huge chunk of the state budget (education and Medicaid are the two biggest spending programs). But enrollment has been relatively flat over the last three years. If that trend continues, Friedfel said, the state could find more savings in the budget.

Friedfel also noted at least one development on the horizon that could have a significant impact on state tax revenue. “The million pound gorilla in the room is what’s gonna happen with the state’s millionaire’s tax,” Friedfel said. The tax is due to expire on December 31, 2019, and though prominent elected officials have called for extending, and even expanding, the program, CBC’s position is that it should be allowed to sunset to help with the state’s economic competitiveness and to keep high-earners from leaving because of the SALT deduction cap.

While Cuomo has overseen its repeated extension and he has dismissed calls to expand it, during the recent election cycle he was mum about what he wants to do with the current millionaire’s tax.

New York City
The city released its latest budget modification in November, revising spending up by $1.4 billion, for a total of $90.56 billion for the 2019 fiscal year, which ends June 30. That marks a high point for city spending, and an $18 billion increase from before de Blasio came to power in 2014. The city’s Office of Management and Budget projects a manageable $3.17 billion budget gap -- the difference between expected revenues and projected expenditures -- for the 2020 fiscal year starting July 1. OMB expects that gap to rise to $3.36 billion for fiscal year 2022, the end of the current four-year financial plan period, by when expenditures are projected to reach a whopping $99.6 billion.

As City Comptroller Scott Stringer noted in his latest financial report released on Friday, OMB tends to issue more conservative estimates of revenues in upcoming years, allowing the administration more leeway to adjust spending. Stringer’s report estimates the budget gap to be lower, about $2.6 billion in FY2019 and $2.8 billion in FY2022.  

“We’ve come out of a run of a number of years of good economic conditions and good fiscal conditions here in the city...but we’re not seeing anything in the numbers that suggests it’s going to end anytime soon,” said Ronnie Lowenstein, director of the Independent Budget Office, a nonpartisan city-funded agency.

In a background briefing, an official at Comptroller Stringer’s office acknowledged that there’s significant uncertainty, with even the Federal Reserve appearing divided about where the economy is heading. There are mixed signals in the market -- unemployment is markedly low which should lead to higher inflation, but hasn’t.

But the comptroller’s office is cautiously optimistic and no economist currently projects a recession -- though one is never out of the question -- but rather a return to a slower rate of growth by the time 2020 rolls around.

“[We’re] expecting a great deal more softness in economic growth,” said IBO’s Lowenstein. “Not a recession but a much softer U.S. economy. And as far as the local economy’s concerned, we’ve already begun to see the weakening.” She pointed to the drop in job growth over the last few months and also noted that though the job market has diversified with more jobs created outside the financial industry than before the last recession, most of the new jobs have been in lower-paying industries.

But she said that slower growth won’t create out-of-control deficits. “We’re looking at gaps that are readily manageable, of the size that we’ve managed in the past,” she said.

The official from the comptroller’s office agreed that the city has the capacity to manage outyear budget gaps, particularly with a strong budget surplus each year that has allowed the city to maintain a healthy, if not optimal, level of reserves. The de Blasio administration put away added rainy day funds in the current fiscal year, responding to demands from the City Council. The result included a total of $1.25 billion in the general reserve, $4.35 billion in the Retiree Health Benefits Trust Fund, and $250 million in the capital stabilization reserve.

The city’s budget cushion has been increasing over the years and stood at about 11.2 percent at the start of the current fiscal year, though the comptroller has urged the administration to maintain levels between 12 and 18 percent, the lower range of which would have required more than $6.3 billion to hit the upper end.

agenda19v2 aThere are of course various risks that the city must manage. One big vulnerability, according to the official from the comptroller’s office, is the size of the city’s workforce, which has added more than 30,000 workers under de Blasio.

“If you look at the November budget update...the biggest issue is the increased expected spending on labor,” said Nicole Gelinas, senior fellow at the Manhattan Institute, a think tank. She noted that the report increased the labor reserve for fiscal year 2020 by $704 million, for 2021 by nearly $1 billion and for 2022 by about $1.4 billion.

“It just shows that these labor agreements that the mayor is making with the unions are costing a little bit more money than expected,” she said. “So the basic story is if the economy keeps doing well, we can probably squeak by with balancing next year’s budget...but if the economy does fall into a recession, with the higher labor costs making these deficits a little bit bigger over the next few years, they would pose a bigger problem for the city.”

Gelinas said the city must take aggressive cost-cutting measures in labor agreements, particularly health care spending, to help avert layoffs and service cuts in the case of a recession. “Longterm, health care savings have to be much more aggressive,” she said. “The healthcare fringe benefit budget for the upcoming fiscal year will be almost $11.5 billion and it’s continuing to rise. It’s going to $12.5 billion by the end of the financial plan.”

“No mayor has ever gotten through two terms without a recession,” she added on the eve of de Blasio’s sixth year in office.

The city’s debt obligations have also been rising, owing to a massive capital program, which pays for building and maintaining the city’s infrastructure such as roads, parks, schools, and libraries.

“Debt service is one of the two big sources of growth in city spending,” said IBO’s Lowenstein, referring to the annual debt payments that are included in the city’s expense budget. “It’s debt service and healthcare, and they’re both big and they’re both growing very fast.” Debt service -- which is accounted for in the city’s annual operating budget -- is budgeted at a total of $6.8 billion for fiscal year 2019, according to the November update, and is expected to rise to $8.3 billion by fiscal year 2022.

Unlike most other municipalities, New York City’s capital program is funded entirely through borrowing, incurring massive debt that must necessarily be paid off every year, which could pose problems in the long run. “It’s less that we can’t continue to pay the debt service on the commitments that we’ve made but rather that they’re crowding out other things that the city might want to do,” Lowenstein said. “And our ability to expand those capital commitments is not unlimited. Especially in an era when interest rates are rising.”

Rising debt service also gives the mayor and City Council “less leeway to budget for other things ranging from teachers to cops to road repair,” she said.

Stringer has repeatedly raised the issue of rising debt, though it’s not yet out of control. The rule of thumb for his office is that debt service should not exceed 15 percent of tax revenues, a level it is well below currently. And the City Council has also attempted to make changes to the mismanaged capital funding process, creating a new subcommittee this year dedicated to examining the capital budget, finding ways to make it more efficient and reducing cost overruns. Upcoming City Council budget hearings may indicate whether that subcommittee and its focus are having any real impact.

But there are big items that may add significantly to the city’s capital investments and therefore create an additional debt burden. Those include funding for the beleaguered New York City Housing Authority (NYCHA) and the state-run Metropolitan Transportation Authority (MTA). In both cases, the city may have no choice but to commit billions more dollars, particularly pending the outcome of negotiations with federal officials over NYCHA and with state officials over the MTA, for which the city typically kicks in significant capital funds.

“The city may not have choices so the speed with which this occurs may be out of our hands,” Lowenstein said.

This is part of AGENDA 2019, a joint Gotham Gazette-City Limits project
Find the rest of the series here

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by Samar Khurshid, senior reporter, Gotham Gazette
     

Read more by this writer.

Note - This article has been updated to ntoe that the Capital Stabilization Reserve is $250 million, not $250 billion. 

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Agenda 2019: City & State Budgets on Mostly Solid Ground, with Major Questions Looming Sun, 16 Dec 2018 05:00:00 +0000
Max & Murphy Podcast: Will Single-Payer Health Care Come to New York? https://www.gothamgazette.com/state/8139-max-murphy-podcast-will-single-payer-health-care-come-to-new-york https://www.gothamgazette.com/state/8139-max-murphy-podcast-will-single-payer-health-care-come-to-new-york mxm logo

Ben Max, left, of Gotham Gazette, and Jarrett Murphy, right, of City Limits


December 12, 2018 - Max & Murphy Podcast: Will Single-Payer Health Care Come to New York?

wbai dec12 400One of the most hotly-debated issues in state government is whether New York should or will move ahead with the New York Health Act, which would institute single-payer health care. State Senator Gustavo Rivera, a Bronx Democrat, is the Senate sponsor of the bill and will soon be part of the Democratic majority in the Senate, as well as the health committee chair. He joined the show to discuss the broader priorities of the Senate Democrats and the prospects for the New York Health Act when his party has full control of state government come January.

Then, Bill Hammond, director of health policy at the Empire Center, joined the show to dissect the New York Health Act and a variety of ways in which he thinks it is problematic legislation, as well as the political terrain ahead for it.

Listen to the conversation and let us know what you think -- we're on Twitter @TweetBenMax and @JarrettMurphy. You can listen to the show through the embedded audio below or download the episode wherever you get your podcasts, under "Max & Murphy," and listen to Max & Murphy live on Wednesdays at 5 p.m. on WBAI radio, 99.5FM or wbai.org

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by Ben Max, Gotham Gazette
     

Read more by this writer.

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Max & Murphy Podcast: Will Single-Payer Health Care Come to New York? Wed, 12 Dec 2018 05:00:00 +0000
State Commission Boots Charter Communications from New York, Raising Questions https://www.gothamgazette.com/state/7847-cuomo-commission-boots-charter-communications-from-new-york-raising-questions https://www.gothamgazette.com/state/7847-cuomo-commission-boots-charter-communications-from-new-york-raising-questions Cuomo Charter broadband

Gov. Cuomo at a broadband event (photo: The Governor's Office)


The revocation of Charter Communications’ ability to do business in New York State may be seen by many as a win for consumers and for striking workers, but several key questions remain unanswered, including what cable operator will replace it, and if the company will really be forced to relinquish its assets in the first place.

Charter is the largest cable operator in the state, with its umbrella including most of New York City (the Bronx and parts of Brooklyn are dominated by Cablevision) and large swaths of upstate New York. Cable companies are sometimes described as “cartels,” divvying up territory where each can be the only operator, enabling higher prices and poorer customer service. Some have accused cable companies of explicit collusion.

When Charter acquired Time Warner Cable, New York City’s previous main cable operator, in 2016, the state’s Public Service Commission (PSC) approved the merger on the condition that Charter provide statewide broadband at 100 megabits per second (mbps) by the end of 2018 and 300 mbps by the end of 2019, and to provide broadband access to 145,000 unserved or underserved households in rural parts of the state.

The state says that Charter failed to live up to its promises and attempted to deceive the public into thinking that it had fulfilled them, via advertising campaigns. As such, the state revoked its approval of the Charter-TWC merger on July 27 in a hastily called meeting without one of its most vocal members, and banned Charter from operating in the state.

The PSC ordered Charter to “file within 60 days a plan with the Commission to ensure an orderly transition to a successor provider(s).” Charter can appeal or sue to block the decision, but as of yet has not done so.

As it was for Charter, approval from the PSC of a franchise agreement for the replacement provider is potentially extremely lucrative. It is not clear which company will become the successor, though the list of potential suitors includes large donors to Governor Andrew Cuomo’s campaigns.

Cablevision, the regional behemoth that operates in the Bronx and upstate, has donated $617,500 to Cuomo’s gubernatorial campaigns since 2008, with $92,500 coming since July of 2017. The donations have come from various LLCs affiliated with local affiliates (e.g. Cablevision of New Jersey, Cablevision of Rockland/Ramapo, etc.) as well as from a corporate PAC, though all donations list the address of its headquarters in Bethpage on Long Island.

Cablevision is now a subsidiary of European telecom giant Altice, which is not listed as having ever donated to Cuomo under its name.

Comcast, which has a limited presence in New York State, has given Cuomo $164,700 since 2009, with $55,180 coming on November 27 of last year. With Charter being evicted from the state, Comcast, the largest cable provider in the United States despite being routinely criticized for poor customer service and anticompetitive business practices, may attempt to gain a foothold in the Empire State and the single largest media market in the country.

AT&T and Verizon, both of which compete with cable companies with fiber optic offerings, have donated $137,900 and $72,815.89, respectively, to Cuomo’s gubernatorial campaigns. AT&T donated $20,100 on May 28. Cuomo received $187,800 from Time Warner, whose parent company his administration banned from the state.

Asked whether the campaign contributions could influence the process to replace Charter, Cuomo spokesperson Tyrone Stevens called any such notion "baseless" and noted that the replacement process is controlled by PSC without interference from the governor.

“The Governor believes the PSC should not back down to a media giant that has failed to live up to its promises and violated its obligation to build out our broadband system," Stevens said. "The PSC stepped up and took aggressive action to enforce the law, and the Governor stands with New York consumers who deserve the broadband service Charter-Spectrum promised, but has failed to provide."

The PSC, which regulates public utilities in the state such as gas, electricity, water, and telecommunications, is made up of five commissioners, each appointed by the governor. The PSC fined Charter $2 million in June for failing to adequately expand its network.

Charter has 60 days to present to the PSC a six-month transition plan to another cable operator. Charter is entitled to make its preference known as to which company it wants to replace it, but any new operator must prove to the PSC that it intends to serve the public interest in order to be approved to conduct business, and the actual broadband contracts are with localities, not the state.

“The properties that are owned by Charter/Time Warner in New York State are very profitable, and they’re essentially a known entity,” said Richard Berkley, the executive director of the Public Utility Law Project, a non-profit representing low-income and rural consumers seeking better service and consumer protection by public utilities, in an interview with Gotham Gazette. “So I think you’d see a lot of private entities interested in that.”

Charter can seek a “temporary restraining order” from a court, which Berkley had expected the company to do, but as of Monday afternoon, August 6, Charter does not appear to have filed any motions for a restraining order, or filed an appeal or lawsuit.

“In the same way that the state had a role in deciding whether or not Charter could buy Time Warner, or for that matter Comcast could buy Time Warner, whoever is proposed by the company will have to go through that same process,” Berkley said of PSC approval.

A large and profitable network of infrastructure suddenly being up-for-grabs may lead to intense lobbying of the PSC for the franchise.

“I would assume to the extent that they’re interested in stepping into the shoes of Charter that they have probably started checking in with the department or the state,” Berkley said.

“It’s a very profitable enterprise, and there are any number of large telecom firms that would want to step forward and try to buy it. The thing which is gonna make it more difficult still is that they have to be responsible. They have to be able to run the operation.”

A spokesperson for Altice declined to comment. Spokespeople for AT&T and Verizon did not respond to requests for comment. A spokesperson for Comcast told Gotham Gazette, “at this time we aren’t commenting on this issue.”

A spokesperson for the PSC told Gotham Gazette, “The final decision as to who succeeds Charter is up to the PSC.” The spokesperson did not respond when asked whether telecom companies had been lobbying the PSC, or whether they were expected to. Cuomo told reporters Auburn on July 27 that the PSC is “talking to a number of companies.”

Cuomo has repeatedly publicly criticized Charter in the wake of its failure to live up to the terms of the merger deal. On July 31 in Queens, in response to a question about the Crystal Run straw donor scandal by NY1 reporter Zack Fink, Cuomo said that Charter/Spectrum had been “defrauding” the state. NY1’s future in a Spectrum-less New York is uncertain.

“You are defrauding the people of this state,” Cuomo told Fink. “That’s a fraud.”

A Cuomo spokesperson has insisted the governor was discussing Spectrum and has no ill-will toward Fink, a veteran reporter who has covered Cuomo for several years. Still, many noted Cuomo's response to legitimate questions about a campaign finance scandal that is being investigated by federal authorities.

In Auburn, where Cuomo was announcing a $10 million economic development initiative, the governor said that he asked the Attorney General to investigate advertisements making potentially false claims about Charter’s adherence to the conditions.

“They have breached their franchise agreement by being behind schedule in their build-out, even though their ads state the exact opposite, and they have not been forthright with the consumers in this state,” Cuomo said. “If you watch Spectrum-Charter, this issue has been going on for months. They haven’t even reported on it. Meanwhile, they’re running advertising that says the exact opposite. So, that’s why the PSC took that action today, and I support it.” Last Thursday, Charter halted its ad campaign touting its expanded broadband network, described by Cuomo and the PSC as misleading, a month after being ordered by the PSC to do so.

Berkley is skeptical that the donations to Cuomo’s campaigns by cable companies would significantly influence the PSC’s decision. “In the end, the Public Service Commission is an independent entity,” he said, despite the fact that Cuomo has a history of interfering in purportedly independent entities. “The governor doesn’t sit on the board. Yes, he gets to pick the people who come before the Senate to be vetted and confirmed. But, you know, the Senate has the ability to say ‘no’ to people.”

Berkley said that, rather than looking at large donations to Cuomo’s campaign coffers, the greater political influence lies in how much money companies have invested in state and local economic development initiatives. The cable infrastructure is privately owned and constructed, but built on public land, which is what makes it a public utility. Time Warner had, as a public utility, invested in local economic development initiatives such as the governor’s now-tarnished Buffalo Billion, announcing in 2013 that it would build a new call center in Buffalo. The larger Buffalo Billion program was at the center of a major public corruption trial earlier this year, which resulted in the conviction of a top Cuomo economic development official as well as Cuomo donors.

Berkley is not optimistic about the chances for municipal broadband to take hold in New York over private companies. Democratic State Senate candidate Ross Barkan has higher hopes: he thinks that the state should create a publicly owned internet company to compete with private cable companies and “break these monopolies once and for all.”

“Many New Yorkers are stuck with expensive, slow internet, and can't even shop among companies,” Barkan said in a direct message. “A public option for the internet would force private companies to provide better service, lower their prices, and would guarantee everyone in this city and state has a right to access the internet.”

Barkan, who is running in a competitive Brooklyn primary to try to unseat Republican Senator Marty Golden, said that if the proposal could be done through the legislative, rather than executive, process, he would be on the front lines for it.

“Either way, we need it. If it came down to introducing and passing a bill, I would do it,” he said.

In contrast to Cuomo and the PSC, who blame Charter, the Empire Center, a think tank, has laid blame for the situation on the cozy relationship between Cuomo and the International Brotherhood of Electrical Workers Local 3, which represents Spectrum workers who have been striking for over a year. Just one day before the PSC announced Charter’s banishment, New York City launched its own probe into whether Spectrum was fulfilling the conditions of its franchise with the city, namely whether their “cable techs” were local union workers; the IBEW told the Daily News that Spectrum had begun utilizing out-of-state staffers. And on July 31, 23 New York City Council Members called for Charter to not be considered for any future contracts in New York City.

Ken Girardin, a policy analyst at the Empire Center, cited a speech by Cuomo at a rally for striking IBEW workers, where he questioned how Charter could “improve customer service without the workforce that knows how to provide customer service” in the wake of the merger and its attached conditions.

“Cuomo’s rhetoric makes it impossible to separate the PSC’s actions from the Charter-IBEW dispute,” Girardin said. He doubted that Charter would even be kicked out of the state at all, asserting instead that the PSC would revise the merger’s conditional deadlines if Charter acquiesced to the demands of the striking workers. Charter can seek a restraining order and settlement to block the state’s actions, but has not filed motions to do so at this time.

A spokesperson for IBEW did not respond to a request for comment from Gotham Gazette. The union and its affiliates have also donated generously to Cuomo’s campaign accounts.

In an interview, Girardin described the PSC as a “kangaroo commission,” an institution that is operating on Cuomo’s behalf unchecked by the state Legislature, and said that if the Charter decision stands it would allow the governor to extort favorable outcomes out of companies lest they be kicked out of the state, too.

“The governor makes no illusion about the control he exercises over the PSC,” Girardin said. “The PSC has done mental and legal backflips to implement policy on the governor’s behalf. And that ranges from inventing a way to subsidize nuclear power plants to creating a basis for expelling Charter out of the state. The PSC’s core mission is to ensure the reliability of utilities and to regulate the rates that they charge. Governors going back to Pataki have exploited the PSC’s statutory authority.”

Girardin is also more suspicious of the cable companies’ donations to Cuomo’s campaign.

“I can't speak to how contributions influence decision-making,” he told Gotham Gazette in an email, “but if the governor were to let the PSC operate as intended -- as an independent panel of experts focused on rates and reliability -- there would be less incentive for regulated utilities to contribute to his campaign.”

Cuomo has been a regular target of pay-to-play allegations given the state’s porous campaign finance laws, his acceptance of campaign contributions from entities with or seeking state business, and policy decisions that have favored donors. Cuomo’s office has consistently said that government decisions are based on the merits, not influenced by campaign donations of any size.

Nevertheless, Girardin said that, despite some seemingly political decisions such as the seizure of the Fitzpatrick Power Plant when the operator wished to close it, and bailouts for nuclear plants lacking in transparency, the banishment of Charter would be without precedent in the state.

“Nothing that the PSC has done in the past rises to this level,” Girardin said. Girardin said that the PSC, in normal circumstances, would simply levy a fine and lay out an enforcement plan against Charter, and that it should attempt to foster competition in the market instead of simply choosing a replacement for Charter’s franchise.

Republican gubernatorial nominee Marc Molinaro also claimed that the revocation of Charter’s franchise was politically motivated, in order to punish NY1, which is owned by Charter/Spectrum.

Molinaro called on the state’s Inspector General to look into the decision to revoke Charter’s franchise, to determine if the Cuomo administration had “orchestrated” the action for political purposes.

“I’ll come right out and say it: It looks to me like Andrew Cuomo is trying to send a chilling message to the news media—’don’t mess with me’—and I hope the Inspector General can prove me wrong,” Molinaro said.

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by Ben Brachfeld, Gotham Gazette

Read more by this writer.

Note: this story has been updated to reflect additional comments from the governor's office.

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State Commission Boots Charter Communications from New York, Raising Questions Mon, 06 Aug 2018 04:00:00 +0000
State Faces Budget Deficit Ahead of Possible Gut Punch from Washington https://www.gothamgazette.com/state/7370-state-faces-budget-deficit-ahead-of-possible-gut-punch-from-washington https://www.gothamgazette.com/state/7370-state-faces-budget-deficit-ahead-of-possible-gut-punch-from-washington Cuomo top aides budget

Gov. Cuomo and top aides (photo: The Governor's Office)


With the state facing a larger than usual expected budget shortfall for its next fiscal year, Governor Andrew Cuomo has been railing against the devastating impact proposed federal tax reforms would have on New York state finances.

The controversial reform plan that is still being negotiated in Washington, D.C. would either modify or completely eliminate the ability of New Yorkers to deduct state and local taxes from federal tax burdens and likely have deep economic impact for heavily Democratic states like New York, which typically have higher state and local taxes. As of Thursday, Republicans in the House and Senate say they have agreed on a tentative deal that would cap deductions at $10,000, reports NBC News. While negotiations are ongoing, Congress is expected to vote on a final deal this week.

Cuomo, a Democrat entering the final year of his second term, has said that the tax plan would “rape and pillage” New York at a time when the state is already faced with a $4.5 billion budget deficit -- the largest since Cuomo took office in 2011 -- and the governor has called on congressional Republicans from New York who support the tax plan to resign.

“There is no taxpayer in this state that lives in a congressional district that won't be hurt,” said Cuomo. “Because there's only one state budget. And we start with the $4 billion deficit. You put the state at a structural disadvantage. The taxes would go up on everyone. And that's not complicated math.”

In January, Cuomo will outline both his 2018 policy agenda in his State of the State speech as well as his executive budget proposal. The new state fiscal year begins April 1. As Cuomo and his team prepare that budget, there are troubling signs at both the state and federal levels.

State Comptroller Tom DiNapoli has projected lower-than-expected tax revenue for the current and upcoming fiscal years. State operating funds receipts will be $1.8 billion lower than projections in the Division of Budget’s August financial plan for this fiscal year, which ends March 31, and $2.8 billion lower in 2018-19, according to a November report by DiNapoli’s office. The $4.5 billion gap may be exacerbated in the coming fiscal year by fallout from federal tax reforms.

But, if the administration continues to adhere to Cuomo’s self-imposed 2 percent limit on annual growth in state operating spending -- and it intends to, according to a spokesperson for Cuomo’s Division of the Budget -- the deficit the state will be facing drops to $1.7 billion for next fiscal year. Federal reforms could make budget negotiations even more challenging. If New Yorkers lose most of their state and local tax deductibility, there will almost certainly be more calls for the state to cut taxes.

Additionally, Politico New York has reported that another $1 billion hole may be carved into the budget if the federal government defunds a portion of the state’s Essential Plan, sometimes called the Basic Health Plan, which provides low-cost health insurance to residents earning less than twice the federal poverty level. And, in March, the state will run out funds for Children’s Health Insurance Plan (CHIP), a joint state-federal healthcare program, if it is not renewed by Congress. The state relies on $1 billion in federal CHIP funds to insure 330,000 children.

“His problem is compounded because he'll have to go to battle over healthcare spending for the first time in history,” said E.J. McMahon, research director at the Empire Center for Public Policy, speaking of Gov. Cuomo. “It's going to be the most pressured budget since his first year in office -- easily.”

Cuomo, who is running for reelection in 2018 and has presidential ambitions, has prided himself on passing on-time budgets and restoring fiscal order to Albany. He has already said he would link any pay raises for legislators, which are long overdue, to whether or not a budget deal is reached in a timely manner. This year’s $153-billion budget for fiscal year 2017-2018 was passed nine days late

To address the existing budget gap, the state must either cut spending or increase taxes. Cuomo’s office is now tasked with devising a financial plan that will not cripple agencies or end needed programs, but that will also not drive out the state’s highest income earners, whose taxes provide 40 percent of New York’s operational funding.

It is unclear to what extent the final federal tax bill -- if passed -- will affect New York and its taxpayers, but some fear it could provide additional motivation for the state’s top 1 percent to take residency elsewhere. Passage would likely dash any Democratic hopes for an expanded millionaire’s tax, such as the policy advocated by New York City Mayor Bill de Blasio.

If millionaires and billionaires leave the state, “the burden then falls to everyone else: the middle class and the working families,” Cuomo said Wednesday in Albany at the awards ceremony for his 10 Regional Economic Development Councils.

Federal tax policy aside, experts say the widening gap between the state’s anticipated tax revenue and receipts is unusual given what is, overall, a well-performing economy and a booming stock market. While there are certain indications that suggest state personal income tax receipts have been depressed this year by taxpayer behavior in light of possible federal tax changes, the extent of any such impact is difficult to estimate, according to the comptroller’s office.

There is some debate as to how to handle the upcoming budget deficit, which Cuomo has acknowledged is likely to significantly impact education funding, which may not see the typical annual increases of recent years.

Comptroller DiNapoli has repeatedly urged that the state take steps to eliminate projected budget gaps and achieve structural budget balance, including, for example, minimizing use of one-time resources to support recurring spending and avoiding the use of administrative or accounting actions that lower the appearance of spending but do not eliminate the state’s obligation.

These recommendations are echoed by the fiscal watchdog group Citizens Budget Commission (CBC), which has highlighted how the state has created the appearance of meeting the 2 percent cap on spending increases by shifting certain personnel expenses to the capital budget.

"Education, Medicaid, and personnel are the three things that he could target. We certainly think a lot of the economic development spending should be curtailed, but that's a slightly smaller pot," said David Friedfel, director of state studies at CBC.

Cuomo’s administration often touts spending restraint and disputes the CBC’s characterization of its spending patterns. A spokesperson for the Division of the Budget said that the positions in question had been categorized as capital expenses because they had been associated with capital projects.

“Governor Cuomo has been rigorous and effective in constraining State spending growth, achieving more fiscally responsible results than those of his predecessors. The current year’s budget holds spending growth to historically low levels for the seventh consecutive year while balancing the budget and lowering taxes for all New Yorkers.” said Morris Peters, of the state’s Division of the Budget.

Legislative leaders are divided on how to approach the budget and looming deficit. Senate Majority Leader John Flanagan, a Republican from Long Island, has opposed increasing taxes on high-income earners.

"Senator Flanagan believes we must continue to strictly adhere to the two percent spending cap, which would cut the Governor's projected deficit in half, and review every single dollar the state spends," said Scott Reif, spokesperson for Flanagan, in a statement.

Assembly Speaker Carl Heastie, a Bronx Democrat, did not express much concern when speaking to reporters last week, noting that when Cuomo was first elected to office the state was forced to wrestle with a $10 billion budget deficit. “But we’re New Yorkers and we’ll find our way through it,” he said.

Cuomo’s budget director Robert Mujica is asking agencies to keep their budgets stagnant and others are questioning whether Cuomo’s signature infrastructure projects or economic development programs should see cuts, or perhaps a controversial tax break for the film and television industry that has cost the state $31 million since 2010.

While many have praised Cuomo for keeping the deficit relatively low since taking office, according to McMahon, the state’s fiscal situation in 2010 and next year are not necessarily comparable.

“In 2010, there was low-hanging fruit then that is not low-hanging now,” said McMahon, noting that Cuomo’s office significantly restructured state personnel. “The first place they will go is school aid. Medicaid is more complicated because there are three levels of payment and it is controlled by federal law.”

Education advocates pushed back on the suggestion that cutting education funding was the way to address the deficit. Instead, the state should reinstate the millionaires’ and billionaires’ tax to levels they were at before Cuomo took office and end tax loopholes for hedge-fund and private-equity billionaires, according to Billy Easton, executive director for Alliance for Quality Education of New York, a teachers-union-allied nonprofit.

“They shouldn’t say the outcome is we’re going to increase the deficit in educational opportunity for black, brown, and low-income kids,” said Easton.

The governor, meanwhile, has vowed to continue to challenge the federal government and members of congress who support the cuts. “I will fight this economic civil war every day that I am governor of the State of New York,” he said on Wednesday.

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by Rachel Silberstein, State government reporter, Gotham Gazette
     

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State Faces Budget Deficit Ahead of Possible Gut Punch from Washington Sun, 17 Dec 2017 05:00:00 +0000
Even Without Federal Cuts, Signs of Trouble for State Finances https://www.gothamgazette.com/state/7102-even-without-federal-cuts-signs-of-trouble-for-state-finances https://www.gothamgazette.com/state/7102-even-without-federal-cuts-signs-of-trouble-for-state-finances dinapoli phillips

State Comptroller Tom DiNapoli, right (photo: @NYSComptroller)


State Comptroller Tom DiNapoli is calmly ringing alarm bells about the New York economy and budget outlook. DiNapoli, the state’s chief fiscal officer, recently announced that overall tax collections for the first quarter of Fiscal Year 2018 -- April through July -- fell by $1.2 billion from the same period last year, a decrease of 6.1% in revenue.

Not only did tax revenues decrease by $1.2 billion from the prior year, but they were also $1.7 billion below a projection made by the Comptroller’s office in February, an indication that things are significantly worse than expected.

The findings were compiled in the comptroller’s monthly state cash report, issued in late July. In an accompanying statement, DiNapoli diagnosed a potential cause of the unanticipated shortfall in state revenues.

"We're three months into New York's fiscal year and personal income tax collections are falling short of what was expected," DiNapoli said. “Taxpayer anticipation of federal tax changes has contributed to the decline. Offsetting that, business tax collections are well over estimates.”

The comptroller, a few days after releasing the cash report, also released a larger fiscal analysis of the state’s enacted budget and other spending plans, including the capital program, which funds infrastructure projects. Already on unstable footing due to lower than expected revenues and questionable uses of budgetary windfalls, the situation is made worse by the looming cuts in federal aid by President Donald Trump and the Republican Congress, who have proposed deep cuts in areas integral to New York ranging from affordable housing to transportation and health care.

The comptroller’s fiscal report signals a potential crisis for the state in spite of what the DiNapoli refers to in his accompanying message as the nation’s “ninth year of economic expansion.” The larger analysis shows decreases in federal aid could have a large impact on the state’s ability to provide healthcare, for instance, with Medicaid funding at particular risk. Medicaid funding saw a significant increase in the new state budget, which was passed in early April after an agreement between Governor Andrew Cuomo and the two houses of the state Legislature.

The balance in the state’s General Fund, which is the state’s destination for non-earmarked revenue, is $7.7 billion, according to the report. According to DiNapoli, the figure “is substantially higher than the levels in the period during and immediately after the Great Recession, largely reflecting monetary settlements received in the past three years. But the State’s budgetary cushion is shrinking: the Enacted Budget Financial Plan projects that the General Fund balance will be one-third lower at the end of the current fiscal year than its recent peak two years previously.”

DiNapoli criticizes the apparent lack of credence paid to the very real threat of cuts in federal aid from the Republican-controlled Congress and White House in Washington D.C. The $153 billion state budget for Fiscal Year 2018 includes in its sources of revenue about $56 billion in federal aid, about a third of the $161 billion in revenue for FY18 according to the Citizens Budget Commission (CBC).

It is unclear just how much the federal budget could cut aid to New York, but the comptroller’s report suggests that the state’s Financial Plan doesn’t sufficiently account for the impact of the increasingly likely scenario of significant cuts in federal grants to New York. Cuomo and the Legislature did pass a new provision that allows the state greater flexibility to adjust the budget mid-year in the face of significant federal cuts, DiNapoli notes, but it is not completely clear how that process will play out and whether the state is truly prepared for such measures.

The comptroller also critiqued the use of funds acquired via financial settlements, which have amounted to about a $9 billion windfall over the past several years, as of January. The comptroller’s message states that the settlement money, which is “nonrecurring,” should be put towards financing capital projects rather than to balance budgets. According to the comptroller, through March 31, “the State had spent over $3.1 billion of its extraordinary windfall in settlement resources. Nearly half that amount had been used for various forms of budget relief, and another $461 million is planned for such use this year.”

In a statement to Gotham Gazette, David Friedfel, the director of state studies at Citizens Budget Commission, noted shared concerns between the comptroller and the nonpartisan, nonprofit budget watchdog.

“We echo many of the Comptroller’s concerns,” he said, “specifically the increasing use of settlement funds to close budgetary gaps. Likewise, it is concerning that personal income tax receipts continue to fall below projections, especially in light of potential cuts in Federal aid.”

Both CBC and the comptroller’s report also cast doubt on Cuomo’s claim that annual spending growth has stayed below 2 percent annually during his tenure. In May, CBC released a report explaining how Cuomo manipulated the numbers to tell his preferred story. The comptroller’s report says similarly, listing such budgetary tricks as “the use of prepayments; certain program restructurings which result in costs being reflected as reduced receipts rather than disbursements; shifting spending to capital projects funds; deferring expenditures to future years; and the use of off-budget resources to pay for certain program costs,” which, when accounted for, results in a 4 percent spending increase this year rather than Cuomo’s touted 2 percent.

“We are glad to see OSC voicing the same concern that state operating spending is really growing in excess of 2 percent,” Friedfel said. “The actual growth rate is still below historical norms, but by utilizing accounting adjustments and financial plan reclassifications, the State is undermining transparency to fit an artificial spending growth cap.”

Another nonprofit budget watchdog, Empire Center, had a similar reaction to the report.

"As usual, the Comptroller’s report was fairly thorough in identifying some of the most important budgetary trends obscured by the governor’s spin as well as the financial risks ahead,” said E.J. McMahon, research director at Empire Center, in a statement to Gotham Gazette. “However, one serious risk surprisingly overlooked by the report is the Trump administration’s proposal to eliminate the federal income tax deduction for state and local taxes, also known as the SALT deduction."

SALT refers to state and local taxes. The average SALT deduction claimed by New Yorker taxpayers is $21,038, the highest in the country and nearly double the national average, according to McMahon, in a July blog post.

"Given the state’s inordinate dependence on taxes paid by wealthy residents,” McMahon told Gotham Gazette, “the repeal of the SALT deduction could seriously undermine our tax base by increasing the net tax “price” of New York compared to states with low or no income tax, such as Florida.”

Other gloomy projections the report makes include $5.7 billion more in capital spending for the five-year plan than projected in the 2016-17 budget capital plan; a total lack of deposits to rainy day reserves in the previous fiscal year and the year that has begun; and an increase of $11.2 billion in out-year budget gaps from last year, to $17.4 billion. DiNapoli forecasts outstanding debt to increase by 4.1% to $63.9 billion this year and to $73.7 billion by the end of the current Capital Plan period in 2022.

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by Ben Brachfeld, Gotham Gazette

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Even Without Federal Cuts, Signs of Trouble for State Finances Tue, 01 Aug 2017 04:00:00 +0000
Reviews Are In: What Watchdogs Say About The New State Budget https://www.gothamgazette.com/state/7003-reviews-are-in-what-watchdogs-say-about-new-state-budget https://www.gothamgazette.com/state/7003-reviews-are-in-what-watchdogs-say-about-new-state-budget Cuomo budget presentation

(photo: The Governor's Office)


A new state budget was passed in April in typical Albany fashion: with almost no time for public scrutiny of the bills or proper review by the legislators who quickly voted them through. Since the $153.1 billion budget was passed, watchdogs both in and out of government have released analyses, helping to better inform citizens and increase accountability.

The budget was adopted a little over a week into the new fiscal year, which begins April 1, after compromises were reached among legislative leaders and Governor Andrew Cuomo on contentious issues such as raising the age of adult criminal responsibility, education aid, a college tuition affordability program, the allocation of large sums of affordable housing monies, and more. The frantic and secretive nature of state budget adoption leaves a lot to digest afterward.

Now, about two months after the budget was passed, those analyses by watchdogs can bring to light a few common themes and several other key points.

Aside from general criticism of the process itself, there are the issues of the large lump sum appropriations, projects funded by mysterious sources, and the governor faulty marketing of his budgetary discipline.

Comptroller Tom DiNapoli
State Comptroller Tom DiNapoli released a report on the state budget that includes critiques of the budgeting process and the end result. The budget continues to rely heavily on appropriations from the federal government, at almost a third of state revenue, despite the unpredictability of state aid from Washington, D.C. under President Donald Trump and the Republican Congress.

“Although the budget came together more than a week into the fiscal year, the Legislature and Executive acted on critical budget issues that will help New York move forward,” DiNapoli said in a statement. “However, billions of dollars in spending lacks key details that would better inform the public about how their tax dollars are being spent.”

The Comptroller’s report included a lengthy chart showing the legislature’s inaction on ethics reform, criticizing the fact that, among other things, the budget “intentionally omits” measures such as requiring advisory opinions on legislators’ outside income, closing the LLC loophole in corporate political contributions, and extending the Freedom of Information Law (FOIL) to cover the Legislature. The Comptroller was equally pointed on the state’s procurement practices, which have come under fire due to rampant corruption in the state’s contracting process, stating that the changes were needed to “ensure spending accountability and transparency” in a statement. A measure to authorize the IG to investigate criminal wrongdoing in the state’s procurements was intentionally omitted.

The Comptroller was critical of the quickness of the process, essentially disallowing public review. Also criticized was the prevalence of lump sum appropriations, which can make state money harder to track.

“It should concern all New Yorkers that budget decisions in Washington may force tough fiscal choices for the state and raise new questions for local governments and nonprofits that rely on state funding,” DiNapoli said. “Federal actions that could adversely affect New York, as well as economic uncertainty, are key risks to this budget.”

Citizens Budget Commission
In a statement on the day the budget was adopted, CBC President Carol Kellermann said “achieving a fiscally sound budget is more important than an ‘on time’ budget,” referring to the emergency budget extender passed when negotiating parties couldn’t reach a deal on time. Still, CBC expressed dismay that the state budget was neither on-time nor fiscally sound.

In a later report, CBC also criticized Governor Cuomo for misleadingly saying that the adopted budget continued his “record of holding State Operating Funds spending annual growth to no more than 2 percent.” In reality, CBC explained, spending growth is closer to 3.7%, well above the 2% benchmark that Cuomo prides himself on. The budget is able to exploit this loophole by not “adjusting for payment timing differences and accounting changes,” such as through premature debt service payments or “shifting expenditures out of state operating funds spending.”

CBC has created a “budget navigator” to allow citizens to see how city and state money is being spent.

Empire Center for Public Policy
Empire Center, a conservative think tank based in Albany, has released a slew of criticisms of the budget. Condemnations expressed on the Empire Center blog cover health care spending, certain tax breaks, and the “free” college tuition program. Empire Center is also critical of the added tax deduction for union dues, “effectively a $35 million gratuity for an already privileged caste of (mostly government) workers.”

“The positives in New York’s FY 2018 budget make up a pretty short list—while the negatives are in some respects worse than usual,” wrote E.J. McMahon, Empire Center’s founder and research director, in a budget breakdown post on the Center’s blog.

McMahon argues for more transparency and accountability with the Water Infrastructure Improvement Act, which he says “used to be put before voters in New York.” Now that doing so is no longer a requirement, McMahon writes, “the governor and Legislature obviously figure, why bother?”

Citizens Union
Citizens Union identifies the budget’s large non-specific lump sum funding in its “Spending in the Shadows” report. The watchdog identified nearly $13 billion in the budget in nonspecific funding: around $3 billion “subject to decisions of one or more particular elected officials,” and nearly $10 billion “in approximately 40 different economic development and infrastructure pots listing no official with spending authority.” The group also found that there was “inadequate reporting as to how these funds are eventually spent.”

Citizens Union calls on the governor and Legislature to publicly identify all nonspecific funding and to publicly disclose information, such as purposes and the requester, regarding these funds, especially ahead of spending, not afterward as is often the case. Further, the organization calls for amending state finance law to introduce accountability and conflict-of-interest identification to public contracting, the disclosure of grants and contracts “awarded under nonspecific lump sum appropriations and reappropriations,” and for “aging the budget bills for three days.”

Reinvent Albany
Reinvent Albany has focused largely on procurement reform, which has become a major point of contention, particularly after the Buffalo Billion corruption scandal broke. Along with other watchdog groups, Reinvent Albany issued a release in May calling for “five clean contracting reforms,” all of which failed to make it into the budget:

1. Require competitive and transparent contracting for the award of state funds by all state agencies, authorities, and affiliates. Use existing agency procurement guidelines as a uniform minimum standard.

2. Transfer responsibility for awarding all economic development awards to Empire State Development Corporation (ESDC) and end awards by state non-profits and SUNY.

3. Empower the Comptroller to review and approve all state contracts over $250,000.

4. Prohibit state authorities, state corporations, and state non-profits from doing business with their board members.

5. Create a ‘Database of Deals’ that allows the public to see the total value of all forms of subsidies awarded to a business – as six states have done.

The groups have continued to call for such reforms, but legislative leaders have been hesitant to challenge Cuomo, who is opposed.

New York Public Interest Research Group
NYPIRG also criticized the opacity of the state budget process, which notorious for taking place largely behind closed doors, especially in terms of the final, major deals reached, with the infamous “Three Men in a Room” process determining what stays and what goes -- largely without public input. (There’s been a fourth man in the room of late given the addition of IDC Leader Jeff Klein along with the governor, Assembly speaker and Senate majority leader.)

“The process by which these decisions were made was awful and arguably worse than in the recent past,” said the organization in a statement shortly after the budget’s passage. “Virtually all the deliberations in developing the budget were conducted behind closed doors. There were no hearings, no open meetings, and with the three day legislative review period waived by the governor lawmakers were voting on bills that they had little time to comprehensively review.”

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by Ben Brachfeld & Jynn Schubert
@GothamGazette

Note: Gotham Gazette is an independent publication of Citizens Union Foundation, sister organization of Citizens Union. ]]>
Reviews Are In: What Watchdogs Say About The New State Budget Thu, 15 Jun 2017 04:00:00 +0000
Comptroller Pushes for Expansion of Tax Refund for Working New Yorkers https://www.gothamgazette.com/city/6750-comptroller-pushes-for-expansion-of-tax-refund-for-working-new-yorkers https://www.gothamgazette.com/city/6750-comptroller-pushes-for-expansion-of-tax-refund-for-working-new-yorkers stringer at city hall rally

 Comptroller Scott Stringer (photo: @scottmstringer)


In his testimony before the New York State Legislature last week on the state’s proposed budget for 2018, New York City Comptroller Scott Stringer called for the expansion of a tax credit that could potentially pull thousands of New York City residents out of poverty, continuing a push he began last year when he first floated the idea.

The centerpiece of Stringer’s proposal is to triple the city’s Earned Income Tax Credit (EITC), a refundable tax benefit aimed at working families that functions on federal, state and city levels. The credit, which incentivizes employment, grants individuals and couples who qualify anywhere between several hundred and a few thousand dollars, depending on the number of children they have. New York state matches up to 30 percent of the federal EITC and the city matches another 5 percent. Stringer’s proposal would see the city’s contribution increase to 15 percent. It would require state lawmakers to authorize the city to expand its tax credit and would need the City Council to pass legislation, and it would have to be funded in the city budget.

“Tripling the City’s earned income tax credit puts money in the pockets of those who need it most,” said Stringer, in a statement to Gotham Gazette, noting that one-fifth of New Yorkers live below the poverty line. “It’s one of the most effective anti-poverty programs in America, and an expansion would have extraordinary benefits across the five boroughs. It would stimulate our economy, boost small businesses, and support local communities. Most importantly, it’s the right thing to do at a time when so many working families are struggling to make ends meet.”

The federal EITC, based on a household’s total earnings, gives up to $6,269 to a couple with three or more children making a maximum of $53,505 in a year. An individual without children making a maximum of $14,880 can receive up to $506 in a tax refund. The federal credit along with the state and city’s contribution combine for a significant benefit -- a maximum of $8,463 for qualifying New York City residents -- that can inject money back into the pockets of low- to moderate-income New Yorkers and spur spending.

Studies have found that the credit is highly effective at raising employment rates for single parents and that families with children typically use the credit to pay for things like home repair, maintenance on vehicles that are used to commute to work, and in some cases, to continue their education. This success has made the tax credit popular for conservatives and liberals, alike.

The comptroller first released his proposal, accompanied by a detailed report, in September last year at an Association for a Better New York breakfast event. The report projects that tripling the city’s contribution could lift 15,000 families above the poverty line. The average credit for an individual who qualifies would increase from $110 to $330, and for about 6000 New Yorkers, it would effectively nullify their city income tax burden. The proposal would cost the city between $210 to $220 million, spending which is likely to go back into the city economy. According to the comptroller’s office, roughly 950,000 New Yorkers qualified for the EITC last year, receiving about $2.8 billion in tax refunds. That translates to about 150,000 families that escaped poverty levels.

One setback with the credit is that many New Yorkers do not realize that they qualify for it. Under Mayor Bill de Blasio, a progressive Democrat, the city has recognized the strength of the EITC program. In 2015, the Department of Consumer Affairs (DCA) launched a media blitz to promote the tax credit, including ads in the subways, on bus shelters, in print, radio and online. That ad campaign has become a staple in promoting the city’s free tax preparation program. According to estimates by Civis Analytics, a data analytics firm that helped the city with its “Start By Asking” benefits awareness campaign, of the 1.1 million New York City residents that qualify for EITC, approximately 120,000 of them do not claim the credit, which is the city’s current concern. DCA spokesperson Abigail Lootens, in an email, said the agency is closely reviewing the comptroller’s EITC proposition. “We are also dedicated to reaching those who are currently eligible but not claiming this vital credit,” she said.

At the state level, Stringer has found an ally in Senator Jose Serrano, a Democrat whose district includes the South Bronx and parts of East Harlem, low- and middle-income communities for which the EITC is a boon. Serrano introduced a bill in the current legislative session based on Stringer’s proposal, to allow New York City to expand its EITC contribution. The senator stressed that expanding EITC is an “organic approach” to reducing poverty. “While it does require a financial commitment by the city, a vast majority of that money goes right back into the community,” he said in a phone interview.

Serrano’s bill is currently before the Senate’s Cities Committee, where he hopes it’ll receive the necessary support. The committee is chaired by Sen. Simcha Felder, a Democrat who caucuses with the Republican majority. A spokesperson for the governor’s office said the proposal would be reviewed.

“It is really such a timely bill,” Serrano said. “Over the last few years, the rich have gotten richer and the poor have gotten poorer. This will help bridge that gap a little and help people get above the poverty line.”

Ron Deutsch, executive director of the nonpartisan Fiscal Policy Institute, said both the city and state should increase their EITC contributions “to help bolster low-income family earnings and help boost them out of poverty.” Aside from Serrano’s bill, there are multiple proposals before the state Legislature that enhance the EITC in some shape or form, including a bill sponsored by Assemblymember Robin Schimminger, an upstate Democrat. Schimminger’s bill, which increases the state’s EITC from 30 to 35 percent of the federal EITC, has been introduced in three previous legislative sessions but has never made it beyond the Ways and Means committee. Schimminger’s office did not return a request for comment by publishing time.

“This is one of those bipartisan issues where there’s agreement,” Deutsch said. “In terms of why it doesn’t get done, I think it’s always a matter of political will in Albany. Given how many New Yorkers are struggling to make ends meet, this would be a logical means to address that.” He believes the state should increase its contribution to 40 percent, which he said comes with a price tag of $400 million annually. “I would suggest it’s a good investment that spurs the economy,” he said.

It’s unclear, however, whether Stringer’s or Schimminger’s proposals will find support in either the Democrat-run Assembly or the Republican-led Senate. Spokespersons for Assembly Speaker Carl Heastie, Senate Majority leader John Flanagan and for the Senate Independent Democratic Conference did not respond to requests for comment.

E.J. McMahon, research director at the Empire Center for Public Policy, a conservative think tank, believes the cost of expanding EITC is likely the only reason it hasn’t been achieved though it has the backing of fiscal conservatives. “It’s the most effective way to incentivize and reward work,” he said, noting that it would work better if expanded at the state level. He added, “It would win broad support if we could pay for it.”

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by Samar Khurshid, senior reporter, Gotham Gazette
     

Read more by this writer.

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Comptroller Pushes for Expansion of Tax Refund for Working New Yorkers Wed, 08 Feb 2017 03:29:20 +0000
Calling for Efficiency, Cuomo Pushes Latest Municipal Consolidation Contest https://www.gothamgazette.com/state/6677-calling-for-efficiency-cuomo-pushes-latest-municipal-consolidation-contest https://www.gothamgazette.com/state/6677-calling-for-efficiency-cuomo-pushes-latest-municipal-consolidation-contest Cuomo red screen podium

Gov. Cuomo (photo: Governor's Office on flickr)


Since his time as attorney general, Governor Andrew Cuomo has painted a picture of New York as a state cluttered by redundant and inefficient municipalities, attributing the state’s notoriously high property taxes in large part to a bureaucratic web of overlapping government services.

Cuomo’s latest attempt to detangle the web is an incentivized competition challenging two or more local governments to come up with a bold consolidation plan as a way to cut spending, increase efficiency, and lower property taxes. This could mean anything from localities deciding to share park maintenance services or fire departments, for example, or a plan to dissolve a smaller government into a larger one.

The program piggybacks on a series of tax caps and rebate programs Cuomo, a second-term Democrat, has initiated since taking office. The prize is $20 million, part of $70 million earmarked for improving government efficiency in the $155.6 billion 2016-2017 state budget.

In theory, streamlining government to ease taxpayers’ burden is a good idea, but it is essential to identify not just any municipal consolidation, but the types most likely to produce taxpayer savings. There is also some debate as to whether, and to what extent, municipal consolidation addresses the underlying causes of the New York’s property tax problem. Furthermore, in more affluent localities, residents often say they prefer to pay higher taxes in exchange for the personal touch of smaller government agencies.

In 2010, when Cuomo was running for governor, property taxes were rising at an unsustainable average rate of 5.7 percent per year, with homeowners in 33 of New York’s 62 counties facing a property tax burden surpassing the national median. Initiatives like the new municipal consolidation challenge have been successful at curbing the upward trend, according to Cuomo’s office.

“Over the past five years, Governor Cuomo has restored fiscal responsibility to the state – reducing costs, cutting red tape and delivering relief for New York taxpayers,” said Cuomo spokesperson Abbey Fashouer. “The Municipal Consolidation Competition marks another step forward in these efforts, incentivizing local governments to find innovative ways to share services, find efficiencies and ensure a stronger, more affordable Empire State for all.”

This latest contest supplements Cuomo’s 2014 property tax “freeze,” which is in reality a credit that incentivizes municipalities to find ways to cut costs and stay within the state’s cap of 2 percent annual increase in property taxes, and is projected to save property taxpayers more than $1.3 billion over three years. Cuomo has also instituted an informal 2 percent cap on annual increases in overall state spending.

The tax “cap,” which in 2017 enters its fourth consecutive year, seeks to prevent municipal and school tax levies from increasing beyond 2 percent or the rate of inflation, whichever is lower. This year, at .68 percent, the increase limit -- which applies to all localities except New York City -- is at a record low, and while this is in one way good news for homeowners, strapped municipalities are bound to feel the strain, according to state Comptroller Thomas DiNapoli.

"In what is becoming the norm, New York’s local governments must cope with extremely limited growth for property taxes to stay within the tax cap,” DiNapoli said in his announcement of this year’s tax cap. “Low inflation has positive effects for consumers, but it also reflects an uncertain economic environment. Local officials have faced growing fixed costs and limited budget options for years, but 2017 will necessitate even tougher financial choices.”

In response, a growing number of localities are voting to override the tax cap, with 26 percent opting out in 2016. Cuomo’s new contest, which targets the state’s 13 largest municipalities outside of New York City -- only cities, towns and villages with populations of at least 50,000 (according to 2010 U.S. Census data) may apply as the lead applicant -- may help mitigate that trend for the coming year.

One such municipality is the City of New Rochelle, which will be forced to break through the tax cap next year to invest in the city’s infrastructure, according City Manager Charles "Chuck" Strome III.

The city’s chief administrative officer, appointed by the New Rochelle City Council, Strome explained that the city has been searching for ways to share services with neighboring municipalities since before Cuomo took office, partnering with neighboring suburbs of Pelham Manor, Mamaroneck and Larchmont on services like street cleaning, snow removal, and sanitation.

“I’m not really moved by competing for prizes. For me, that’s just a show,” Strome said in an interview. “I think the state’s policies recently have been very detrimental to municipalities. We've been doing things in New Rochelle long before there was a prize at the end of the rainbow.”

Rochester, the state’s third largest outside of New York City, sees itself as a leader in the region on municipal consolidation, forming cooperative agreements with the Monroe County and neighboring municipalities on things like 9-1-1 dispatch services, waste management systems, telecommunication providers, and more. Officials there were more amenable to Cuomo’s consolidation contest, but said that the most “low-hanging fruit” has already been identified and implemented.

“Given that we've done a lot of this already, we're a little challenged to find additional opportunities, but we are open to it,” said Chris Wagner, budget director for the City of Rochester.

Cuomo often focuses on the number of municipalities in New York, suggesting overlapping and redundant governments are a main driver of rising property taxes. “The cost, the waste, the inefficiency of our 10,500 local governments is still this state’s financial albatross and that is what is driving up the cost,” Cuomo said during his 2016 State of the State address, on January 14.

While it is true that on average New Yorkers continue to pay some of the largest property tax bills in the country -- 13 percent of the average household income -- there is a lively debate among social theorists about whether fewer, and thus larger, governmental bodies results in more efficiency and lower property tax bills. And, the actual number of “local governments” is up for debate.

Some dispute the 10,500 figure, saying it includes “special tax districts” -- in-town sectioning created out of specific residential needs that are brought on by suburban growth -- which often amounts to paperwork rather than additional government expenditure. (The 2012 U.S. Census of Governments places the number of cities, towns, and villages in New York State at 3,453 -- which is fewer than the national average for states across the country.)

Since Cuomo took office, the number of government service providers has been reduced, though savings produced have been relatively small. For example, since 2011, 18 New York water districts consolidated into five with a projected annual savings of $1.2 million; 72 sewer/wastewater districts consolidated into three, with a projected savings of $522,000; and six fire and fire protection districts consolidated into two fire districts, with a projected annual savings of $959,570; all according to Cuomo’s office.

Full consolidation of services or government entities tends to elicit resistance, so functional consolidation is often the most politically expedient solution for overlapping services.

Functional consolidation, in which similar municipal agencies both remain in existence, but cooperate on whether to perform the same or distinct functions for a larger geographic area, has been shown to save money and improve quality of life. Either one government entity pays the other for services or one agency performs a specific function and the other agency takes on a different function in exchange.

These partnerships are typically evaluated on a case-by-case basis. In 2012, when the Town of Brighton voted to dissolve its understaffed West Brighton fire protection district and contract with the Rochester Fire Department instead, it resulted in savings for both taxpayers in Rochester and Brighton, according to Wagner, the Rochester budget director. “From our experience, it not only helps on the property tax side of things, but it helps to improve planning and response time to a situation,” Wagner said.

Meanwhile, several years ago, a plan for the City of Rochester to combine water supply systems with Monroe County was nixed when it was determined that it would not result in savings, according to Wagner.

E.J. McMahon, president of the Empire Center, a conservative think tank, notes that smaller towns and villages often prefer to see their tax dollars used for a personal, responsive touch from police, fire, and sanitation agencies. However, McMahon says, these more localized services are not the primary driver of New York’s property tax problem. McMahon points a finger instead at state-mandated Medicaid, pension, and education costs.

“Municipal consolidation is not a panacea and it’s kind of a dodge,” McMahon said. “[Cuomo’s] premise is we have too many local governments, and that’s why we have high local taxes, and that’s essentially untrue.”

A better way to slash property taxes, he says, would be to reform New York’s 30-year-old Triborough Amendment, which requires public employers to maintain contractual agreements, including automatic pay increases, for unionized employees after their collective bargaining agreement expires -- a policy that adds $300 million a year to school budgets across the state.

The governor’s administration says it has taken steps to reduce the number of unfunded mandates -- a term used to describe burdensome state requirements that do not come with requisite funding -- establishing a Mandate Relief Council in December 2013. But while rising local school costs are offset by huge amounts of state funding -- in the 2016-2017 budget, the state allocated $24.8 billion for education aid, up 6.5 percent from the prior year -- and the state has tried to to reel in pension growth, municipalities say they are forced to make painful cuts and delay important capital projects to meet the tax cap year after year.

Strome, the city manager, noted that municipal expenses account for only 18 percent of property tax bills in New Rochelle. The bulk of it comes from school and medicaid expenses. “Most people, if they knew the facts, they'd be happy to have multiple trash pickups and police and fire services and acres and acres of parks for $3,000 a year,” he said. “The state has dumped millions of dollars in increased school aid, but municipalities have gotten zero. In my opinion, until the state seriously looks at how it deals with education, we’d never address the property tax problem.”

nassau special service districts mapIn other areas, like Nassau County, where residents pay some of the highest property taxes in the country (the average annual property tax bill topped $9,000 in 2013, according to a Zillow report), the imbalance is starker. The Town of Hempstead made several difficult cuts this year, including laying off 36 employees, but only 9 cents per tax dollar homeowners pay goes toward municipal programs and services (incorporated villages pay about 2 cents per tax dollar to the township). More that 60 percent of Hempstead taxes go to schools and libraries, another 16 percent goes the county tax -- which includes Medicaid -- and another 5 percent goes toward special districts (which Cuomo counts among the New York’s 10,500 municipalities). (see map, via the Long Island Index)

Cuomo’s office disputes the charge that the governor has not addressed education and Medicaid costs. In addition to flooding cities with education aid, the administration notes both the governor’s Medicaid reform efforts have saved taxpayers an estimated $34 billion over the last five years and the Global Medicaid Cap, which eliminated any growth of Medicaid expenses for counties (meaning any amount of spending over counties’ fixed dollar amount is picked up by the state).

“Governor Cuomo has implemented a number of targeted reforms to deliver relief for New York taxpayers – and they are working,” said Fashouer, a Cuomo spokesperson. “Today, taxes are at their lowest level in decades, we’ve capped [growth of] property taxes at 2 percent, we’re making record investments in education while delivering quality healthcare more effectively and efficiently than ever before.”

The most ambitious type of consolidation is full-scale city-county merger, in which a city and the surrounding county combine to create a metropolitan form of government, or a “super” county. Over the last 30 years, major Upstate cities have faced rising poverty rates and an increased dependence on state aid to balance their budgets. Social theorists say that in addition to consolidating duplicate services, city-state consolidation can curb urban sprawl and compel suburbanites to contribute more significantly to services provided by the city, which are utilized by everyone.

Cuomo’s municipal consolidation contest coincides with the ongoing effort to merge the City of Syracuse and Onondaga County, called Consensus. The region was granted $500 million in a similar 2015 state-funded contest, a portion of which Cuomo said was contingent on Syracuse following through on its ambitious consolidation plan.

Studies on whether larger municipalities are actually more efficient have produced mixed findings. A study done 10 years after the 1998 amalgamation of Toronto, for example, indicates that larger governments become more less responsive and more sluggish, resulting in increased costs.

Not that taxpayer savings should be the primary, or only, motivation for large-scale municipal consolidation.

In the case of the Syracuse merger, more equitable distribution of better quality services across the the county is a major focus. One of the most influential advocates for this type of merger is David Rusk, the former mayor of Albuquerque, New Mexico, who long-argued for what he terms an “elastic city” — one free of geographic limitations — which could help rectify economic, social and racial inequities, he says, and encourage greater political participation county-wide. However, in places like Syracuse, people of color who live in the city fear they’ll lose political influence with a larger unified government, while suburbanites feel that the consolidation could dilute their quality of service.

City-county mergers are notoriously difficult to pull off. While there has been some success in other parts of the country, all recent merger attempts in New York, like a proposed Buffalo-Erie merger in the early 2000s, have failed. The state’s only major regional consolidation was in 1898, when the City of New York was formed out of five boroughs, and the Syracuse-area Consensus plan is seen as an experiment of whether a consolidation of this scale can work again.

Cuomo has enthusiastically supported the Syracuse merger, but as Politico reported, the plan is at risk of being derailed by long-standing differences among Cuomo, Onondaga County Executive Joanie Mahoney, and Syracuse’s Mayor Stephanie Miner, and there are still more questions than answers about how it would meet the at times conflicting interests of city residents and suburbanites.

Occasionally, villages vote to dissolve themselves into neighboring municipalities -- since 1921, 47 village governments in New York have dissolved, 10 of them in the past five years, according to a recent Empire Center report (see graph below). As attorney general, Cuomo pushed through a bill easing the village dissolution process and sweetening the pot for eligible villages with a $58,006 “Community Empowerment Tax Credit” when the dissolution is approved.

village dissolutions nys

In these instances, however, the tax savings per household are usually small, and more often than not, villagers resist consolidation, saying they’d prefer to pay slightly higher taxes to retain their community identity and personal touch from local government.

An example of this is the Village of Cayuga Heights (the Ithaca suburb where this reporter grew up), which has its own mayor and government and where residents consistently vote against joining its fire and police services with neighboring municipalities. “I think if we were to say, ‘Oh, let’s just join up with the Village of Lansing,’ we’d be bigger than the city of Ithaca, but we’d lose a lot too,” said Joan Mangione, the village clerk and treasurer. “When our residents come in to pay taxes, they want to feel ‘this is my best tax dollar at work.’”

Despite an attachment to these extra amenities, Cayuga Heights officials tout the village’s extensive record of looking for consolidation opportunities that make sense: it is a partner in Bolton Point, a water supply plant built in 1976 that serves five municipalities and it is represented in Tompkins County Council of Governments (TCCOG), one of two county committees in the state that meet regularly to discuss shared services, including a progressive healthcare consortium that has saved taxpayers millions of dollars.

Other examples of residents electing to pay a higher price tag for uniquely responsive municipal services can be found in many towns, villages and hamlets of Westchester County, where residents consistently pay the highest property taxes in the nation (an average of $13,842 per household in 2013, according to Zillow). The bloated bill is often justified by the county’s exemplary schools -- where between $20,000 and $50,000 a year is spent on each pupil --- and a small town approach from police, fire, and sanitation workers.

Political scientist and SUNY New Paltz professor Gerald Benjamin, a proponent of municipal consolidation, says that these New York municipalities should be more open to compromise.

“Look, we want low costs, we want our services, we have to have a hierarchy of values, and we want democracy -- which we are not always getting, because it’s too complex,” Benjamin said. “If we want all those things, they run into each other; they are not all aligned. Sometimes you are presented a range of desserts at Thanksgiving — but if you eat them all, you are going to get fat.”

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by Rachel Silberstein, State government reporter, Gotham Gazette
     

Read more by this writer.

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Calling for Efficiency, Cuomo Pushes Latest Municipal Consolidation Contest Mon, 19 Dec 2016 05:00:00 +0000
Cuomo Seeks to Undermine Comptroller’s Check on His Power https://www.gothamgazette.com/state/6485-cuomo-seeks-to-undermine-comptroller-s-check-on-his-power https://www.gothamgazette.com/state/6485-cuomo-seeks-to-undermine-comptroller-s-check-on-his-power cuomo dinapoli flags state of the state

Cuomo, left, and DiNapoli, middle, in 2012 (photo: The Governor's Office)


Gov. Andrew Cuomo’s recent assertion that Comptroller Tom DiNapoli should “educate himself” and that the comptroller’s audits on state economic development projects are “dead wrong” and “opinion” drew a lot of attention. Many Albany observers took it as a sign of Cuomo’s growing sensitivity to criticism about his signature projects.

Those projects, like the Buffalo Billion, are the subject of a federal investigation headed by U.S. Attorney Preet Bharara. The state Legislature remained fairly removed from oversight of the projects until very recently. However, several government watchdogs say that Cuomo’s attacks on DiNapoli are part of a long-running pattern of Cuomo trying to weaken the comptroller’s oversight of the executive branch.

“The governor hates oversight and the governor actively works to undermine and weaken anyone who is keeping an eye on him,” said John Kaehny of Reinvent Albany, a group that has closely followed the Buffalo Billion economic development project. Kaehny noted that Cuomo and the Legislature approved a measure in 2011 that prevented DiNapoli from reviewing contracts at SUNY and CUNY ahead of time. “The governor has been undermining the comptroller from his first budget,” said Kaehny of Cuomo, who took office in January 2011.

A recent DiNapoli audit of the Empire State Development Corporation’s Excelsior Jobs Program, which gives businesses refundable tax credits for creating jobs in certain areas of the state, found that there wasn’t proper oversight to make sure companies were providing the jobs they pledged to create and that they weren’t simply relocating jobs from elsewhere in the state. Further, the audit found ESDC didn’t obtain the proper paperwork to justify handing out tax breaks to some organizations. Cuomo told reporters that DiNapoli’s audits on his economic development programs are invalid partly because DiNapoli is a former member of the state Assembly.

“The comptroller is not just the comptroller. The comptroller was an Assemblyman for many, many years. And that New York State Assembly, first of all, passed numerous economic development plans for many, many years,” Cuomo explained. “For an Assemblyman to now critique economic development programs in upstate New York - what did you do? What bills did you vote on? And how did you allow this situation to develop?”

When asked by a reporter from The Observer why he then put DiNapoli in charge of auditing New York’s homeless shelters, Cuomo responded: “You get in some audits the person’s opinion, right? ‘I think this about economic development.’ Some audits are pure quantifications: count how many people are in a homeless shelter. Go ‘one, two, three.’”

The combination of comments appeared aimed at undermining DiNapoli’s work and authority, and fit the Cuomo mold of punching back at critics, whether they are advocates, local elected officials, or the elected chief fiscal officer of the state, DiNapoli.

Empire State Development issued a detailed rebuttal to DiNapoli’s Excelsior audit that challenged some of its more damning assertions. ESD claimed DiNapoli’s staff failed to grasp how the program actually works and the mandate of certain statutes. DiNapoli’s office responded that ESD staff had not been cooperative.

Jason Conwall, spokesperson for ESD, issued a statement to media outlets after the report was released, stating: "Any truly objective review would show this program is cost-effective, performance-based, and incentivizes business growth by only providing tax credits to those that have achieved their job commitments and investments. The reporting requirements to this agency, as well as to the Department of Labor, are rigorous and companies have to demonstrate to ESD that they met their job commitments before any credits are issued."

The comptroller also recently released audits of Cuomo’s Charge NY program and of Medicaid. DiNapoli’s Medicaid audit found dead people were still receiving benefits.

Cuomo’s dismissal of the comptroller’s audits seems to discount the fact that the comptroller oversees an army of professional auditors that base their reports on figures and facts.

E.J.McMahon of The Empire Center, a conservative think tank, said that it is generally expected that there will be tension between a Comptroller and Governor and that it is unsurprising that Cuomo, who has a reputation for “ad hominem denunciation” over “the substantive argument,” is feuding with someone charged with monitoring him. Yet accounting for those points, McMahon said there is still something surprising about Cuomo’s animosity toward DiNapoli.

“Cuomo has exhibited a peculiar mix of antipathy and disrespect for Tom DiNapoli. It's hard to explain. After all, DiNapoli generally has been cautious and measured in his criticisms of administration policies, which reflects an institutional tradition in the comptroller’s office. He’s not exactly a confrontational kind of guy. If anything, DiNapoli seems to go out of his way to avoid taking potshots or unduly juicing up the wording of criticisms he does make..”

Representatives from Cuomo’s office repeatedly pointed to press releases of critical audits by DiNapoli’s office as salacious, saying they do not jibe with what is contained in the reports. During legislative hearings on economic development programs held earlier this month, administration officials quizzed on DiNapoli’s audit failed to provide detailed rebuttals, only indicating they did not agree with the audits.

Cuomo spokesperson Dani Lever said in a statement, “When someone makes false or misleading attacks, our administration aggressively defends and corrects the record and we make no apologies for doing so.” She did not offer comment to the assertion that Cuomo has worked to undermine the comptroller’s office. She also did not respond to a request to elaborate on what might have been “false” in DiNapoli’s audits.

In a statement, DiNapoli reiterated his role: "As state Comptroller, my office provides checks & balances and oversight to ensure that the state is working efficiently for our taxpayers. Government should always be working to improve itself. We have a job to do, and we will continue to do it.”

Cuomo and DiNapoli are both Democrats.

In October, as news about Bharara’s investigation broke, DiNapoli faced questions about why his office wasn’t more involved in providing oversight into how two SUNY nonprofits were awarding million-dollar contracts. He told Susan Arbetter of The Capitol Pressroom that Cuomo and the Legislature had taken away his ability to review contracts before they were issued by SUNY and CUNY.

Kaehny of Reinvent Albany said that it is important to note that these powers were stripped from DiNapoli as the Buffalo Billion program began to take off. “The governor has worked methodically to undermine and resist the comptroller’s oversight. His first budget stripped the comptroller’s oversight over SUNY Research Foundation, which has been essential in the unfolding scandals in what appears to be pay-to-play for millions of dollars of contracts,” said Kaehny.

Just as McMahon said, many watchdogs see Cuomo’s reaction to DiNapoli’s audits as concerning because they don’t believe DiNapoli has been as critical as he could be and has not hit some of the more sensitive areas of Cuomo's economic development programs.

At the same time they see DiNapoli as standing mostly alone as a check on Cuomo’s economic development spending given the Legislature has been relatively absent. “There is no question Tom DiNapoli has been standing alone on this,” said Ron Deutsch of the Fiscal Policy Institute, a liberal think tank. “The comptroller should be praised for doing his constitutionally-mandated job and the governor shouldn't begrudge him for doing it. The governor needs to learn to take the criticism along with the praise.”

Kenneth Giardin of The Empire Center agreed, “The comptroller has been picking up the slack that has been all but abandoned by the Legislature. The responsibility for oversight has fallen exclusively to the comptroller.”

In New York City, Comptroller Scott Stringer has released a series of troublesome audits of city government, which have painted different levels of waste, dysfunction, and ineffectiveness by the administrations of Mayor Bill de Blasio and his predecessor, Michael Bloomberg. While de Blasio has contested different points and looked to downplay the findings, he and his administration have not dismissed the office as one that simply delivers ‘opinion.’ Nor has de Blasio called Stringer’s work politically motivated, even though Stringer is thought to be a potential 2017 challenger to de Blasio.

Asked about the conflict between Cuomo and DiNapoli on Thursday, de Blasio said that he wasn’t familiar with all the specifics, but that the comptroller was asking “valid” questions about the efficacy of economic development programs and that he’s known DiNapoli to be a “a very serious public servant.” “And obviously the state Comptroller should be respected,” de Blasio added.

“The city comptroller does much, much broader audits,” said Kaehny. “When the state comptroller does an audit that looks at how the executive branch spends money they don’t pull back and ask questions about the bigger picture of nonprofits cutting million-dollar checks to campaign donors.”

Former Gov. George Pataki had a relatively cordial relationship with Comptroller Carl McCall despite the fact that McCall was a political rival. Former Gov. Mario Cuomo’s dislike for Republican Comptroller Edward Regan was not much of a secret - Regan was considered a possible serious challenger, though he never ran for Governor.

The New York Post recently reported rumors that DiNapoli could challenge Cuomo in a 2018 primary and capitalize on Cuomo’s weakness with liberal voters. DiNapoli dismissed the notion in an interview with Politico New York and said he plans to run for re-election as Comptroller.

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by David King, Albany editor, Gotham Gazette
     

Read more by this writer.

Note: this article has been updated to include ESD rebuttal to the Comptroller's Excelsior audit.

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Cuomo Seeks to Undermine Comptroller’s Check on His Power Thu, 18 Aug 2016 04:00:00 +0000