Gotham Gazette https://www.gothamgazette.com/component/tags/tag/547 Tue, 14 Jul 2020 23:55:26 +0000 Joomla! - Open Source Content Management en-gb webmaster@gothamgazette.com (Webmaster) With No Relief from Washington in Sight and Billions in Budget Cuts Looming, What Can New York State Do? https://www.gothamgazette.com/130-opinion/9424-no-relief-washington-billions-budget-cuts-new-york-state-cuomo https://www.gothamgazette.com/130-opinion/9424-no-relief-washington-billions-budget-cuts-new-york-state-cuomo gov cuomo outlinesfy

Gov. Cuomo delivers a budget address (photo: Darren McGee/Governor's Office)


Despite pleas from New York Governor Andrew Cuomo and state and local government leaders across the nation for major new federal help for budgets devastated by the COVID-19 recession, there is still no clear path to Washington acting quickly to provide financial relief. 

Although on May 15 the House of Representatives, with its Democratic majority, passed a $3 trillion aid bill for the country that included $1 trillion for state and local governments, President Trump announced he would veto the bill if passed in both houses of Congress and many Republican senators, who hold the majority in that chamber, were quick to announce the House bill dead on arrival. When serious negotiations on a new relief package will occur, or when an aid package might ultimately get passed, is not clear.

State Cutbacks are Coming, No Doubt
It’s been seven weeks since New York leaders adopted the state budget on April 2. That budget anticipated implementing $10 billion in spending cutbacks from what had been the original $105 billion budget submitted by the governor in January for the 2020-21 fiscal year. 

The state has yet to act on those massive cuts despite reaching a benchmark set in the budget that would trigger them, holding out hope for federal action.

Where New York is Now: Tax Receipts Plunge by 70%, 2 Million File for Unemployment
The state’s first benchmark was made public on May 15 by State Comptroller Tom DiNapoli and it is ugly.

STATE COMPTROLLER APRIL CASH REPORT

STATE FUNDS Executive Budget
April Estimate
April
Actual
Drop from 
Estimate
% Drop from 
Estimate
TOTAL TAX RECEIPTS
TOTAL
$11,746.0  $3,583.9  -8,162.10 30.5%
DISBURSEMENTS $7,479.0  $4,373.0  -3,106.00 58.5%

This benchmark, presented in the table above, involved comparing New York’s actual tax receipts in April 2020 to an estimate constructed in the governor's Executive Budget for that month. The table shows the Comptroller’s cash report for April 2020 compared to the Executive Budget estimates. The Division of the Budget was authorized to begin implementing spending reductions if receipts were less than 99% of estimates. The receipts were 30% of estimates, according to the Comptroller’s May 15 report.

Tax receipts plunged about 70%, more than $8 billion, compared to the adopted budget projection, which used April 2019 as a normal baseline. 

The problem is two-fold. The economic downturn in New York is massive; more than 2 million New Yorkers have filed for unemployment in the last 8-eight weeks, about 20% of the state’s workforce. And the ordinary April 15 deadline for filing returns for both federal and state income taxes was extended to July 15, leaving New York bereft of normal tax revenues for months. The state is borrowing money for the short-term, but that won’t offset the overall plunge in revenue associated with the economic downturn.

New York State Faces Unprecedented Financial Challenges
New York state government now faces unprecedented challenges in attempting to manage a risky, uncertain set of dynamics that include:

1. Not knowing how much federal aid may come to the rescue, or when, or how deep New York’s own problems may be.

2.Not knowing how to use much of the federal aid already provided by Congress in the initial rescue packages because the U.S. Treasury’s guidelines for use of the funds has been unclear.

An analysis by the State Comptroller indicated that although New York State can utilize some funds provided by Congress for education and Medicaid, $5 billion allocated to New York in the first plan sits in limbo while New York awaits use guidelines. But with so many new expenses associated with the virus in health care and emergency response, much of that money could be unavailable for general budget relief.

3. The possibility that the job losses will drive up enrollment in the Medicaid program, increasing health care costs far more than currently anticipated and increasing the size of the state budget deficit.

The governor and Division of the Budget are undoubtedly still holding off because they know immediate implementation of cuts would be devastating. The governor’s daily press briefings display warnings of cuts to schools, hospitals, and local governments in the 20% range, meaning very large job losses for teachers, health care workers, transit workers, cops, firefighters, and other front-line government personnel. They are holding off despite realizing that too long a delay in making the cuts could make the situation worse for the providers of services that might be affected if little federal aid is forthcoming. Anyone getting a cut in their budget is better off knowing sooner rather than later so they can make plans to cope.

New York’s Current Plan to Mitigate Budget Cuts (short-term)
The state’s Financial Plan, issued April 25, showed that the state had backloaded about 40% of its $10 billion in spending cuts to next year, the final quarter of the state’s fiscal year, from January 2021 to the end of March 2021. 

Congress also permitted the state to defer payment of Social Security and other payroll taxes for its own workforce to save $1 billion or more, providing additional cash flow relief. 

The state’s Financial Plan indicates an effort to borrow $4.5 billion in May and June to cover initial revenue losses due to the tax filing extension and the recession. However, the adopted budget permits the state to borrow up to $11 billion short-term during the fiscal year (ending March 2021), and even permits the state to convert the short-term borrowing to long-term bonding. That means the state is permitted to borrow to cover operating deficits.

The State Comptroller’s analysis of the adopted state budget indicated the state could also re-evaluate its capital budget to defer nonessential projects to save cash and re-allocate financial settlement funds not yet spent for economic development projects. This could hurt recovery efforts in the future, however.

New York Can’t Count on Federal Help
A May 19 hearing in the United States Senate featured competing views on rescuing the economy. Federal Reserve Board Chair Jerome Powell said failing to help state and local governments could result in hundreds of thousands of layoffs and further damage to the economy. Steve Mnuchin, the Treasury Secretary, claimed the best way to help the economy was for the states to ‘reopen’ by easing social distancing restrictions and let people go back to work. It was also reported that President Trump met with Senate Republicans to strategize about new federal legislation, but remained circumspect about what he would support. The House returns to work after Memorial Day, from May 27-29, but many Senate Republicans want to wait longer than that.

Many states dominated by the Republican Party are already reeling from state and local government financial problems. The Center for Budget and Policy Priorities is tracking state fiscal problems and has produced an analysis showing major problems in Louisiana, Kansas, Arizona, Missouri, Kentucky, Wisconsin, and Oklahoma. An update to the Center’s report says Georgia has just announced across-the-board state budget cuts of 14%, and Texas announced state agency budget cuts of 5%.

One hopes additional federal aid will arrive soon, but it seems unlikely to be anywhere near as generous as the House bill provides.

Should New York State Borrow Money to Cover Operating Expenses? Yes
The state budget permits New York to convert up to $11 billion in short-term borrowing, envisioned to deal with the extension of filing tax returns to July 15, or possibly longer if the Federal government grants another extension, to long-term bonding. In other words, the state could sell bonds for 5 years, 10 years, 20 years, or 30 years, to pay for its operating deficits this year. This, of course, would avoid some or even a large part of the spending cuts.

Bond raters, budget watchdogs, fiscal experts, ordinary people, and even I agree that borrowing long-term to cover your operating expenses is ordinarily a mistake. However, the alternative — eliminating tens of thousands of jobs including hospital workers, teachers, cops, transit workers, and emergency responders as the pandemic continues, has severe consequences for both those workers and the tens of millions of New Yorkers who depend on them.

New York should make a firm decision it will borrow some of the money it needs to sustain public services in a pandemic-induced near-depression if it can’t get covered by the federal government.

Governor Cuomo, at one of his press conferences, said if the state had to make cuts and later received federal aid, he would restore the cuts. New York could still make modest cutbacks and hope ultimately the Democrats in Washington will be successful with a new round of assistance for the American people, in part through state and local governments. But if needed New York should borrow a large portion of the money to cover its operating expenses this year while addressing the long-term problems created by COVID-19.

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Jim Brennan was a member of the New York State Assembly for 32 years, where he chaired four committees. On Twitter @JimBrennanNY.

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With No Relief from Washington in Sight and Billions in Budget Cuts Looming, What Can New York State Do? Tue, 26 May 2020 04:00:00 +0000
Coronavirus Crash Prompts Renewed Calls for New York Divestment from Fossil Fuels, But Comptroller Stands Pat https://www.gothamgazette.com/state/9354-coronavirus-crash-calls-new-york-pension-divestment-from-fossil-fuel-stocks-comptroller-dinapoli-climate-change https://www.gothamgazette.com/state/9354-coronavirus-crash-calls-new-york-pension-divestment-from-fossil-fuel-stocks-comptroller-dinapoli-climate-change divest ny fos

A protest to push for New York pension system divestment from fossil fuel stocks (photo: @350)


The oil and gas industries are experiencing significant upheaval as the coronavirus pandemic decimates economies across the globe. The price of crude oil in the United States temporarily fell below $0 per barrel for the first time ever last month, prompting renewed energy among activists and elected officials in New York who want to rid the state pension fund of all investments in the fossil fuel industry.

But the one person they must convince, State Comptroller Tom DiNapoli, has remained steadfast that the stocks remain good investments, though he's made a number of concessions, investing in more renewable energy companies and studying options around divestment.

In recent years, as the threat of climate change becomes evermore urgent and parts of the world have made moves away from fossil fuels, New York State has passed sweeping energy sector reforms and set goals and regulations to transition towards renewable sources of energy. 

But the New York State Common Retirement Fund, the public pension fund for over a million current and retired New York employees, continues to invest heavily in fossil fuel company stocks. Currently worth $210.5 billion, the fund had more than $13 billion invested in fossil fuel companies at the end of March last year, according to an analysis by 350.org, an international climate change advocacy movement that has been at the forefront of the push to get public entities to divest from fossil fuels. The group’s report found that, in the last year, the pension fund has lost more than $1.5 billion in value in its investments in 16 oil and gas companies, a trend that they said is unlikely to be reversed even after the coronavirus pandemic passes. 

As the sole custodian of the pension fund, Comptroller DiNapoli, a Democrat who has held the seat since 2007, has taken steps towards investments in fighting climate change through the pension fund. In June of last year, he released his Climate Action Plan, which aimed to double the pension fund’s investment in sustainable climate solutions from $10 billion to $20 billion over ten years, and to promote climate risk management and assessments in the companies under the pension portfolio, among other steps.

DiNapoli has resisted calls for divesting the fund from the fossil fuel industry, even as some New York City public pension officials have moved aggressively toward divestment. DiNapoli has consistently argued that fossil fuel industry investments continue to produce sound returns, satisfying his number one obligation to retirees, and that he can be an activist investor and push companies to adopt more environmentally beneficial policies.

“Climate’s a big issue and just selling stock in fossil fuel companies is not gonna solve it,” he said in a general election debate in 2018 when he was running for reelection. “[W]e have to go through a societal change and for now, in the short run, we still are making money from the oil and gas stocks.” 

Even after the value of oil went negative in April, DiNapoli indicated no change in his approach. “Our position remains the same on divestment,” said Jennifer Freeman, a DiNapoli spokesperson, in an email. “Across the board, industries have been hurt by COVID-19. We continue to move forward on our Climate Action Plan. No developments that we'd comment on.”

DiNapoli’s arguments don’t hold water for activists, who point out that fossil fuels have been a bad financial investment for years overall. The fund’s investments in companies that use fracking to extract fossil fuels are also seen as particularly hypocritical in a state where the governor banned the practice five years ago and with the Legislature codified it into law in this year’s budget. 

“Yes, divest for moral reasons, but my goodness, you really should be divesting for financial reasons,” said Mark Dunlea, co-founder of New York’s Green Party, who ran against DiNapoli in 2018 on the single issue of fossil fuel divestment. 

“When you have world leaders saying, ‘We have to stop using fossil fuels, whether it's five years from now or 15 years from now’...That's not a viable business model moving forward,” he said about maintaining those investments.

In recent weeks, activists and elected officials have escalated their push for the Fossil Fuel Divestment Act, sponsored by Manhattan State Senator Liz Krueger and Brooklyn Assemblymember Felix Ortiz, both Democrats, that would require the comptroller to divest the pension fund from major oil, gas, and coal production companies over five years.

The New York Youth Climate Leaders, a statewide youth coalition, held a virtual lobby day on April 21 ahead of Earth Day, speaking with nearly 40 members of the Legislature in virtual and phone conferences. They blasted out to lawmakers and on social media a video that features pensioners and high school students supporting the divestment call.   

Both Ortiz and Krueger have pledged to push for the bill’s passage in the limited time remaining in the Legislative session this year, though most legislation has been put on the backburner because of the pressing conditions imposed by the coronavirus outbreak. 

“I think the timing cannot be better in these horrible circumstances,” said Assemblymember Ortiz, in a phone interview, noting that the adverse impacts of climate disproportionately harm communities of color. “A tough time can give us the opportunity to bring vision solutions...I think we need to make sure that we continue to move the ball forward and continue to embrace this conversation.”

The Senate version of the bill recently gained majority support in the chamber, with 33 sponsors; the Assembly version has 52 sponsors and would need 76 in total for a majority. Even Governor Andrew Cuomo has supported divestment since 2017, though Cuomo has not been especially vocal about divestment nor taken up the Divestment Act in his lengthy annual agendas. The governor has taken his own efforts to pursue similar measures by the parts of state government he controls, made the aforementioned fracking moves, and worked with the Legislature to pass the sweeping Climate Leadership and Community Protection Act.

Krueger said though the bill has not passed, there have been similar models followed in other jurisdictions. “So we are moving the world while we're perhaps not speeding ahead of the rest of the world,” she said in a phone interview. Just the discussions around the bill and the pension fund’s investment in “stranded assets” like oil and gas that are slowly losing value have been effective in pushing DiNapoli towards their goal, she said. 

As Krueger noted, DiNapoli hasn’t completely ignored the advocacy efforts. In January of this year, DiNapoli announced that he would review whether 27 coal companies that the fund has invested in are moving towards more sustainable business models. “Investors who fail to face the risks and seize the opportunities presented by climate change put their portfolios in jeopardy,” DiNapoli said. “We are assessing minimum standards for transition readiness at coal mining companies first, because they face the greatest risk as the world turns to cleaner and renewable energies. If a particular company is not ready to move away from its reliance on thermal coal mining for profits, we may divest our holdings in that company.” The review was expected to last several months. 

“I would say it's probably five years too late for the coal industry,” said Richard Brooks, campaign coordinator with 350.org, who otherwise praised the move. “But if he's going to continue to do these reviews, he needs to accelerate these reviews and do it across all of the energy sector.”

Krueger echoed Brooks’ urgency. “If you look at [DiNapoli’s] handling of our pension funds, you can't really say he's not paying attention to the issue. He just doesn't want the Legislature to be able to insert itself into what he defines as his authority,” she said. “And he thinks that he is moving us in exactly what direction we should be going. I don't disagree with him on the direction, I disagree with him on the speed at which we are getting there.”

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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Coronavirus Crash Prompts Renewed Calls for New York Divestment from Fossil Fuels, But Comptroller Stands Pat Mon, 04 May 2020 04:00:00 +0000
Max & Murphy Podcast: Coronavirus' Impact on State Finances, with Comptroller Tom DiNapoli https://www.gothamgazette.com/state/9221-max-murphy-podcast-coronavirus-impact-on-new-york-state-finances-comptroller-tom-dinapoli https://www.gothamgazette.com/state/9221-max-murphy-podcast-coronavirus-impact-on-new-york-state-finances-comptroller-tom-dinapoli tom dinapoliwbai600

State Comptroller Tom DiNapoli on state finances (photo: Governor's Office)


March 18, 2020 - Max & Murphy Podcast: Coronavirus' Impact on State Finances, with Comptroller Tom DiNapoli

tom dinapoli wbai317New York State Comptroller Tom DiNapoli joined the show to discuss how the coronavirus crisis may impact state finances and more. The comptroller talked with us just after his office put out a new analysis, at the request of Governor Andrew Cuomo, of how the coronavirus outbreak and its impacts may reduce expected state tax revenue for next fiscal year, which showed a roughly $4 billion to $7 billion drop from the $88 billion previously forecasted. What does it mean? Listen in.

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
     

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Max & Murphy Podcast: Coronavirus' Impact on State Finances, with Comptroller Tom DiNapoli Wed, 18 Mar 2020 04:00:00 +0000
‘Possibility of a Prolonged Recession’: Coronavirus Could Wreak Havoc on City, State Budgets https://www.gothamgazette.com/state/9219-possibility-prolonged-recession-coronavirus-wreak-havoc-new-york-city-state-budgets https://www.gothamgazette.com/state/9219-possibility-prolonged-recession-coronavirus-wreak-havoc-new-york-city-state-budgets de Blasio Cuomo budget coronavirus

Major challenges now & ahead for Mayor & Governor (photo: Rob Bennett/Mayor's Office)


New York has weathered financial storms before, including after the 2008 recession and the September terror attacks in 2001. But the COVID-19 pandemic threatens to eclipse the scope of both those emergencies. The fiscal impact on the economy is impossible to predict with any certainty but suffice it to say, it will put a major dent in the city’s and state’s budgets for the coming fiscal year.

In January, Governor Andrew Cuomo proposed a $178 billion executive budget for the 2021 fiscal year that begins April 1, which includes $105.8 billion in state operational spending (the rest comes from federal funds). In New York City, Mayor Bill de Blasio’s own preliminary budget proposal was for $95.3 billion for the fiscal year that starts July 1.

But state and city resources are expected to be taxed to their limits as officials mobilize to combat the spread of the coronavirus, while tax revenues to all levels of government plummet. Bars and restaurants have closed. Hotels are empty. Broadway is shuttered. Tourism is at a standstill. The cumulative impact on city and state tax receipts is expected to be in the billions, particularly as the pandemic could also trigger an economic recession that experts had already been expecting in some form.

New York State Comptroller Thomas DiNapoli released an estimate of the fiscal impact on state revenues on Tuesday, at the request of Governor Cuomo. He predicted that “the most optimistic revenue scenario” would be that tax receipts to the state are $4 billion lower than executive budget projections (of roughly $88 billion) and, if the stock market continues to decline and a recession sets in, that figure could be $7 billion. “Definitive estimates of the COVID-19 impact on the economy and State revenues are not possible, in part because the ultimate health and social impacts of the virus are currently unknowable,” the comptroller wrote.

DiNapoli noted that it would be tough to quantify mitigating actions by the federal government that could have a positive effect such as increasing unemployment insurance or assuming a greater share of state Medicaid costs.

“[O]ur budget as we prepared it is possibly overly optimistic,” Cuomo said in response to the comptroller’s projections on Tuesday, at his daily briefing on the coronavirus. State budget director Robert Mujica also noted that the comptroller’s estimate was done before a major stock market sell off on Monday and that the state will also have to wait to see whether the federal government decides to extend the date for filing personal income taxes, which make up the major share of state revenue.

“It really goes back to, essentially, the federal government will have to step in here to deal with this because we will have our own liquidity issues if we don’t get some relief,” Mujica said.

He said any state budget adopted during the pandemic would need to be adaptable. “We don’t know how long this is going to last...so we need a budget that’s in place that gives us the flexibility to hold payments back, modulate things, move payments ahead of time for health care.”

Cuomo said that if revenues continue to slow as he expects, “we have to have a built-in mechanism to adjust the expenditures.” (The governor has in the recent past pushed through measures to give himself more budget flexibility.)

The projections are dire, particularly as the state budget season already began with an expected budget gap of $6.1 billion, mostly from rising Medicaid costs that the governor hoped to close through another overhaul of the state Medicaid program. The state’s reserves are also a paltry $2.5 billion (which includes $428 million that is planned to be added by the end of the current fiscal year).

In the city, Comptroller Scott Stringer estimated that, conservatively, the coronavirus would lead to a $3.2 billion loss in city revenue over the next six months based on declining sales in restaurants, retail, and real estate, and falling occupancy rates at hotels.

Stringer called on the mayor to aggressively take steps to cut $1.4 billion in spending across city agencies, with lower savings mandates for social services agencies and exemptions for the Department of Health and Mental Hygiene and NYC Health + Hospitals, which are obviously on the frontlines of fighting the virus and its medical aftermath. He also urged measures to protect small businesses and the non-profit human service providers that the city contracts with for many vital programs.

“As we brace for the economic fallout of the COVID-19 pandemic, we must protect our children, our seniors, our small businesses, and the arts and cultural organizations that are core to our economy and our identity as a city,” Stringer said in a statement. “We’re facing the possibility of a prolonged recession — we need to save now, before it’s too late, if we’re going to weather the downturn ahead.”

The city does have a fairly robust well of reserve funding – nearly $6 billion – but Stringer and other watchdogs like the nonprofit Citizens Budget Commission have warned the de Blasio administration for years that those funds would be insufficient to survive a prolonged recession, which seems more likely by the day.

Across the entire state, a confluence of factors may wreak havoc on jobs and income. The economy gets a large portion of revenue from Wall Street, which has been roiled by the effects of the coronavirus on global markets. Out-of-work employees not only won’t be paying taxes, but there’s already been a surge of applications for unemployment benefits that will itself tap state resources in a significant way. And the largest growing employment sector has been health care, which accounted for 40% of job growth in New York City in 2019. Within that, home health services accounted for 78% of health care jobs added and is one segment where providers and clients will be particularly vulnerable to the virus itself.

For fiscal watchdogs who have raised red flags about increasing state and city spending for years and warned about stormy weather on the horizon, the rainy day they expected is here albeit in a form than they imagined.

E.J. McMahon, founder and research director of the Empire Center for Public Policy, urged in a blog post on Tuesday that the state should swiftly pass a budget that gives the governor the flexibility to which Cuomo alluded. McMahon pointed out that, as currently written, the law limits how the governor can adjust spending once a budget is adopted. He can either cut from agency spending, which makes up one-fifth of the budget or cut local assistance funding by 1% of state operating funds, which would amount to just over $1 billion.

“Even assuming the governor squeezes 10 percent out of agency operations, the further cuts allowed by the discretionary provision would fall $1 billion short of DiNapoli’s best-case revenue scenario, and $4 billion short of the worst case,” McMahon wrote. He said the longer it takes to resolve the budget, the worse the problem will be and it will fall squarely at the governor’s feet regardless.

DiNapoli is also pointing out that if the federal government takes what appears to be a likely step of allowing people to file their taxes at a new deadline past the typical April 15 date, that could impact the state’s receipts, even temporarily, and cause cash flow issues.

New York City, with its reliance on property taxes, may be more steady over the next few months than New York State. Maria Doulis, vice president of Citizens Budget Commission, said it’s unclear “whether this is sort of a blip and then economic activity rebounds or whether it is going to punch us into a more prolonged recession.” She pointed out that in previous recessions, the city lost between $15-20 billion in revenue over three years compared to projections. “What the city has available to deal with that is just a fraction of that amount,” she said.

Doulis said it was surprising that the mayor has not already announced a Program to Eliminate the Gap, which would mandate savings and efficiency targets at city agencies. Unlike the state, the city’s budget is required by law to be balanced so that expenditures match revenues. “While the response [to the coronavirus] is going to necessitate greater spending on certain areas, it's all the more important to tighten the belt in the other areas of the budget,” Doulis said.

“This is something that's affecting all state and local governments and it's not clear that New York will be disproportionately favored in any federal government response,” she said.

Nicole Gelinas, senior fellow at the Manhattan Institute, believes the city may be hit harder than what the comptroller has estimated. She noted that taxes dropped by nearly $3 billion “almost overnight” after the 2008 recession, about an 8% reduction. “If we were to lose 8% of tax revenues this time, looking at next year's budget, we'd be looking at a $5 billion tax revenue drop,” she said.

Gelinas noted that the coronavirus pandemic is also unlike the effects that the recession or the September 11, 2001 terror attacks had on the city’s economy. The attacks did not lead to an extended virtual shutdown of the city and most businesses outside of ground zero that did close were soon back up and running. After the recession, the tourism industry helped the city rebound faster than other municipalities.

“This is a very different case. I mean, we have huge swaths of the economy just shut down,” Gelinas said.

The emergency might require drastic budget measures, she said, noting that spending has gone up by $20 billion under de Blasio. “We didn't enter this from a very good condition but the fact of the matter is now it's a pretty big emergency. So I don't think we're gonna get out of this just by cutting back the workers that de Blasio added to the payroll, which in itself is a difficult thing to do,” she said of the mayor’s massive expansion of the city workforce.

The city may also have to take unpopular steps to contend with the crisis, including by potentially instituting a wage freeze for municipal employees who have received raises through union contracts. “This is certainly going to rival the 1970s fiscal crisis in terms of the immediate cash crunch that it gives us,” she said.

Gelinas also worries that the property tax base would be hit by restaurants, retailers, and commercial tenants seeking moratoriums on their rent.

James Parrott, an economist at the New School, told the Wall Street Journal that the city could lose as many as 500,000 jobs by the end of the month, while Gelinas believes that number is also an understatement. She noted that the leisure and hospitality industries employ 450,000 New Yorkers and nearly 60% of those are likely facing temporary layoffs. Retail has another 340,000, which won’t be as badly affected, but will probably see “double digit percentage declines” nonetheless. And the financial industry will probably also see layoffs with markets cratering.

And though the city budget may not be affected by it, Gelinas also noted that the MTA will “run out of cash very quickly” as New Yorkers stop using mass transit during the pandemic (transit authority leadership asked the federal government for a $4 billion bailout on Tuesday).

Ronnie Lowenstein, executive director of the city’s Independent Budget Office, echoed Gelinas on the unique aspects of this current fiscal emergency. She noted that the city was already heading into a downturn when the September 11, 2001 attacks happened, and while the federal government pumped aid to the city, the state relaxed financial rules for the budget. “And the city fought its way back,” Lowenstein said.

The 2008 recession, on the other hand, was precipitated by the subprime mortgage crisis, which had less impact on a city that’s mostly home to renters than some might assume, and again the federal government soon intervened to bail out some Wall Street banks. Jobs contracted but at a far lower rate than previous recessions and even far lower than the national average.

“It's hard to see how New York could be so lucky a third time in a row,” Lowenstein said.

Assuming the state does not suspend the requirements that the city balance its budget, Lowenstein said there are three options, which may all leave the city at the mercy of the state and federal government: “Tap into other levels of government for aid or find ways to raise revenues either permanently or temporarily, almost all of which, except for the rate on the property tax, has to go to Albany.”

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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‘Possibility of a Prolonged Recession’: Coronavirus Could Wreak Havoc on City, State Budgets Tue, 17 Mar 2020 04:00:00 +0000
New York City Economy Continues Setting Records, But Slower Growth Expected https://www.gothamgazette.com/state/9113-new-york-city-economy-continues-setting-records-but-significantly-slower-growth-expected https://www.gothamgazette.com/state/9113-new-york-city-economy-continues-setting-records-but-significantly-slower-growth-expected comp dinapoli growth

(photo: Michael Appleton/Mayoral Photography Office)


New York City has experienced a remarkable and extended economic recovery since the devastation wrought by the global recession, with job growth continuing at levels higher than the state and the entire country, according to the latest report from State Comptroller Thomas DiNapoli. But the New York City Independent Budget Office, a fiscal watchdog agency, predicts that job growth in the city will sharply decline over the next two years across all private sector industries as the national economy begins to slow its pace of growth.  

“New York City is benefiting from the longest and largest job expansion since the end of World War II,” reads the new comptroller’s report, released Wednesday. Between 2009-2019, the city added 907,600 jobs, a 24.3% growth rate, compared to the state’s job growth of 14.5% and the country’s rate of 15.3%.

The massive addition of jobs – including as many as 87,200 in 2019 – came despite broad expectations that job growth would slow last year, as experts and watchdogs say the current economic expansion is inevitably slated to end. In 2019, the city had 4.6 million jobs, a record high, with unemployment at a historic low of 4.1% (down from 9.3% in 2009). The trend beats the previous record period of job growth between 1992 and 2000, according to the report. 

Following the recession, the city’s workforce and employment landscape has also diversified, with greater addition of jobs outside the financial and banking sector on which the city has been so dependent for employment and tax revenue. About 35,300, or 40%, of the jobs added in 2019 were in the health care sector (which, along with the state’s new $15 minimum wage, has ironically been one of the factors contributing to a $4 billion budget gap in Medicaid spending that the state faces). Business services (accountants, lawyers, programmers) and social assistance jobs came in second and third after health care in 2019 city job growth.

There were a few sectors of the economy that saw slower growth – for instance, construction – and even some that experienced moderate job losses, including full-service restaurants in the leisure and hospitality sector, and the securities industry in the financial sector. But the comptroller’s report predicts that jobs will continue to solidly grow in 2020.

The Independent Budget Office, however, predicts that job growth will slow significantly in 2020 and 2021. “Ours is forward looking, and that's retrospective,” said IBO Director Ronnie Lowenstein, of the two reports, in a phone interview, acknowledging that job growth has been “spectacular” in the last few years. “But we're anticipating that it's going to fall sharply.”

IBO’s forecast is based on the Federal Reserve’s larger national analysis, which sees growth falling to roughly 1.9% in 2020 compared to 2.3% for 2019, Lowenstein noted. “So the first thing that’s feeding into our more pessimistic forecast here is the fact that we’re expecting U.S. growth to slow, which is very much the mainstream forecast,” she said. It is remarkable to some that not only is the country, and the city, ten years into the recovery with sustained growth, but that the forward-looking discussion is about slower growth, not recession.

Specifically referring to the boom in health care jobs and business services, Lowenstein said that IBO’s outlook was a bit more wary. “Certainly we're not anticipating that they're going to be shedding jobs, but we firmly expect the rate of growth in these positions to kind of slow,” she said. “We're anticipating that we're going to stop adding so many of these jobs and that's going to really show up as a major dent in the numbers we’ve been enjoying.”

If these jobs contract, however, it may not have a significant impact on the city’s revenue, she said. New York City relies heavily on property taxes for revenue, and jobs in these sectors tend to be either part-time or lower pay than other industries. “All jobs are good but not each job contributes equally to the local economy,” she said, citing, for instance, jobs in the tech sector that carry much higher pay and therefore have a larger footprint on personal income tax revenue.

There are few signs of worry, Lowenstein said, as IBO projects that revenues will continue to be “reasonably robust” and will exceed projected city expenditure. Though the city budget has grown enormously under his tenure, Mayor Bill de Blasio has been cautious in increasing spending in his $95.3 billion preliminary budget proposal this year. “As part of the Administration’s strong fiscal management we make cautious tax revenue estimates, remain focused on savings, and maintain substantial budget reserves,” said mayoral spokesperson Laura Feyer, in an email. “Slowing job creation, noted by both the IBO and Comptroller, is factored into our current tax revenue forecasts.”

But, Lowenstein did note that IBO’s revenue forecast this year is “nearly identical” to the city’s Office of Management and Budget’s numbers, “which doesn’t happen very often.” OMB has, in the past, been more conservative in its revenue predictions, allowing more mayoral administration flexibility if more spending is required down the line.

“It's interesting that we're not seeing a lot of new revenues for the current fiscal year at this point,” she said. “Is that a warning flag? Yeah, I guess so. Either that or we’re really accurate this time around.”

***
by Samar Khurshid, senior reporter, Gotham Gazette
     

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Note - This article has been updated.

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New York City Economy Continues Setting Records, But Slower Growth Expected Wed, 05 Feb 2020 05:00:00 +0000
Final Signature Allows Implementation of Cuomo-DiNapoli Agreement to Restore Certain Contract Oversight Powers https://www.gothamgazette.com/state/9056-cuomo-dinapoli-state-entities-finalize-reestablished-comptroller-oversight-powers https://www.gothamgazette.com/state/9056-cuomo-dinapoli-state-entities-finalize-reestablished-comptroller-oversight-powers goccuomo con di

Cuomo & DiNapoli (photo: Governor's Office)


A resolution has finally been reached around how to deal with a thorny issue involving Governor Andrew Cuomo, contracting oversight, and the corruption that plagued some of the governor’s biggest economic development initiatives.

As of December 31, all relevant parties have agreed to comply with an August agreement between Cuomo and state Comptroller Thomas DiNapoli restoring the comptroller’s oversight of some large contracts entered into by SUNY and CUNY and their affiliates, and by the Office of General Services. The agreement is now expected to become operational in February, according to a spokesperson for the comptroller.

The memorandum of understanding was partially signed in August, but as recently as mid-December DiNapoli said SUNY Research Foundation, one of the entities coming under the comptroller’s purview, had not given the go-ahead to bring it from a “conceptual agreement,” as DiNapoli put it, to an actualized program. As of December 31, however, all parties had approved the new system, the spokesperson told Gotham Gazette.

“We have an agreement with the Executive, and we will start reviewing contracts in February 2020. All parties have acted (OGS/SUNY/CUNY/SUNY Construction/CUNY Construction/SUNY RF/SUNY Fuller Road & Fort Schuyler) and agreed to allow OSC to review their contracts,” the spokesperson wrote in a statement.

While representatives for several of the parties signed the memorandum in August, it still required approval by the boards of CUNY and SUNY affiliates, and for their policies to be updated in compliance. CUNY’s approval came on October 28, and two other SUNY-affiliated entities agreed on December 18. SUNY Research Foundation approved the agreement on December 31, just before the January deadline. No part of the deal could go into effect until all the parties had all agreed, DiNapoli said on the Capitol Pressroom in mid-December, calling the Research Foundation approval “the biggest sticking point.”

“As expected, all parties have signed the MOU and will be ready to enforce it this February,” wrote Jason Conwall, a spokesperson for the governor, in an email this week.

The agreement gives the state comptroller the authority to conduct “pre-audit” reviews of contracts procured by SUNY and CUNY and their affiliated construction funds, when they exceed $250,000. It also extends that authority over Office of General Services (OGS) centralized contracts over $85,000.

The memorandum also provides for the comptroller to send all executed contracts of $250,000 or more, with the exception of Common Retirement Fund contracts, to the state inspector general responsible for investigating fraud, corruption, and conflicts of interest in the executive branch and affiliated entities.

The new powers allow the comptroller to review contracts before they are executed to affirm that they are ethically and economically sound. During contract reviews, the comptroller’s office typically conducts due diligence to prevent fraud and waste, and promote competition. It looks at whether vendors have been found to engage in previous wrongdoing, prices for comparable goods and services elsewhere, and whether there are contract provisions that could increase an  agency’s liability.

The comptroller once had those powers for SUNY, CUNY, and OGS centralized contracts, but they were stripped with little public attention during budget negotiations in 2011, Governor Andrew Cuomo’s first year, as he sought to expand and expedite economic development.

In the mid-2010s when the Buffalo Billion scandal, in which bribes were exchanged for plum state construction contracts, implicated some of Cuomo’s closest allies and donors, good government advocates and DiNapoli himself called for the authority to be restored. Cuomo resisted. Lawmakers threatened legislative action, but nothing moved.

Then, during his 2019 State of the State speech, Cuomo surprised many by announcing that he and DiNapoli had agreed to pursue an agreement.

“Comptroller review may have prevented the $1 billion bid-rigging scandal involving upstate development projects resulting in the convictions of high-ranking state officials and major real estate and construction executives,” said John Kaehny, executive director of the good government group Reinvent Albany, in a statement commending the initial agreement in August.

The memorandum of understanding stipulates that SUNY will work with its Research Foundation to give the comptroller pre-audit review of contracts of $1 million or more. The Research Foundation includes SUNY-affiliated nonprofits Fort Schuyler and Fuller Road Management Corporation, which put out the rigged requests for proposals to build SolarCity, the $750 million solar panel plant at the center of the Buffalo Billion controversy and a key element in Cuomo’s signature upstate economic development agenda.

On the Capitol Pressroom in December, DiNapoli said, “I think the biggest piece that still has to be resolved is the SUNY Research Foundation has not taken the action to sign on...but I am very hopeful that once we get that SUNY piece closed down that we will actually be able to implement that more robust oversight that many people have called for and I think is overdue for us to have back.”

With the Research Foundation agreeing to the memorandum of understanding on December 31, it is now set to go into effect in February. While Ft. Schuyler and Fuller Road have been mired in controversy, the entity recently created to subsume and replace them, NY CREATES, is also covered under the agreement, according to DiNapoli’s office.

Unlike other powers that were restored in the deal, the state comptroller has never had pre-audit review authority over SUNY Research Foundation, the spokesperson said.

Cuomo has previously said that part of the reason for not restoring the comptroller’s power is the potential for delays in adding new bureaucratic hoops to jump through. The new agreement sets a time limit of 30 days for the comptroller’s pre-audit review, after which they become “valid and enforceable.” A report released by DiNapoli’s office last May, showed that the average contract review took between six and seven days.

In response to the Buffalo Billion scandal, state lawmakers introduced the Procurement Integrity Act to restore most of the comptroller’s pre-2011 authority, among other things. Year after year, it failed to gain enough traction to pass, but amid an ongoing drumbeat of criticism, especially after the convictions on corruption charges of two of his top former aides, Cuomo made the 2019 State the State announcement.

The agreement is voluntary and contains language stating it can be terminated within ten days by either the governor or comptroller. Good government advocates still want to see it codified into law.

“We hope momentum from completing this voluntary agreement continues and the Governor and Comptroller work together to pass a law in the 2020 session making the agreement permanent,” wrote Kaehny.

Neither codifying the agreement nor passing the Procurement Integrity Act were part of Cuomo’s very limited State of the State government ethics agenda, announced last week.

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by Ethan Geringer-Sameth, reporter, Gotham Gazette
     

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Final Signature Allows Implementation of Cuomo-DiNapoli Agreement to Restore Certain Contract Oversight Powers Thu, 16 Jan 2020 05:00:00 +0000
'It's What I Was Elected To Do': State and City Leaders Take Different Approaches to Pension Fund Divestment from Fossil Fuel Companies https://www.gothamgazette.com/state/8735-new-york-pension-fund-divestment-fossil-fuel-companies-different-city-state https://www.gothamgazette.com/state/8735-new-york-pension-fund-divestment-fossil-fuel-companies-different-city-state pension divestment stringer de blasio

Mayor de Blasio & Comptroller Stringer (photo: Benjamin Kanter/Mayor's Office)


Amid the larger discussion about addressing climate change before it’s too late, debate is raging in New York over whether government-run and -affiliated pension funds worth hundreds of billions of dollars and responsible for payments that support hundreds of thousands of retirees should divest from fossil fuel company stock.

Advocates, elected officials, and others have been pushing at the city and state levels for full divestment so that the pension funds are not supporting or tied to companies that are leading contributors to greenhouse gas emissions, a warming planet, and the negative consequences of climate change.

But some officials have warned, and practiced, caution, putting forth arguments that the primary priority of pension fund investment must be return for current and future retirees, and that it is important not to overly politicize investment decisions, especially given how uncertain the future is and that some of the leading fossil fuel companies are at the front lines of figuring out the renewable energy future.

There’s also the argument, often made by State Comptroller Thomas DiNapoli, that by remaining invested with fossil fuel (and other) companies, it is possible as activist investors to help shift their behavior. And while New York City Comptroller Scott Stringer often espouses and practices that philosophy, when it comes to fossil fuel company divestment, Stringer has worked with Mayor Bill de Blasio, labor union leaders, and others to move city pension funds toward dropping stake in those companies.

The New York City and State pension fund pictures are significantly different, with responsibility at the state level much more concentrated in DiNapoli’s office than the city’s in Stringer’s. But the different approaches being taken by the two Democratic comptrollers, who are the popularly-elected chief fiscal officers of their respective jurisdictions, show divergent paths in this particularly fraught political, financial, environmental, and existential moment.

While he’s one of a number of key decision-makers, Stringer is pushing full speed ahead toward fossil fuel divestment by the city pension funds. DiNapoli, meanwhile, has cautioned against that approach, even criticizing it as overly political and reactionary, while taking his own steps to diversify investments, experiment with a carbon-free energy stock portfolio, and push fossil fuel companies toward new policies. 

Advocacy groups like Fossil Free New York and New York Communities for Change are pushing for the $210-billion state pension fund, known as the Common Retirement Fund (CRF), to divest from fossil fuel companies completely. The CRF has about $13 billion in fossil fuel-related investments, according to Fossil Free New York.

In April 2018, as the Democratic primary in his bid for a third term was heating up, Governor Andrew Cuomo declared the state’s pension fund should divest from fossil fuels. But in New York the Governor does not control the pension fund; the State Comptroller is the sole fiduciary of the CRF and, as such, has final say over when investments are made and retracted.

Cuomo DiNapoliWhile he took that stance, Cuomo has not made divestment a major focus, applying minimal pressure to DiNapoli to take more aggressive action. His office recently told Gotham Gazette that the governor is working with the DiNapoli on a path toward divestment, in large part through an advisory group they established together.

Advocates did celebrate in March of this year when Cuomo took a significant new step, calling on state agencies and authorities such as the Metropolitan Transportation Authority (MTA) to examine divesting whatever funds they have in fossil fuel companies.

“As part of the Green New Deal, Governor Cuomo directed State authorities, public benefit corporations, and the State Insurance Fund, which collectively hold approximately $40 billion in investments, to study divesting from fossil fuels. They are reviewing and evaluating the feasibility and appropriateness of such a measure,” Jordan Levine, a spokesperson for Cuomo, said in a statement to Gotham Gazette.

The governor’s office was unable to identify at this time how much of that $40 billion is currently invested in fossil fuel companies.

Back in early 2017, DiNapoli and Stringer both argued that engaging with major fossil fuel producers like ExxonMobil as shareholders would yield better results than immediate divestments.

However, in 2017, Stringer and the five municipal pension funds initiated an analysis of their investments’ carbon footprint in 2017. Then, in January 2018, after the study concluded, Stringer changed his stance. He, Mayor de Blasio, and other pension fund board members announced their plan for three of the five pension funds (the police and firefighter pension funds are not currently part of the plan and account for less than a third of total pension assets). The city’s five funds have about $5 billion invested in fossil fuel producers out of almost $211 billion in pension fund investments. 

In a celebratory announcement that month alongside de Blasio and others, Stringer asserted that he and other city pension fund trustees “would be shirking our fiduciary duty if we were not exploring all options to address climate risk.”

An involved divestment process is underway, at least at three of the funds -- the Comptroller and the Mayor have seats on the boards of all five pension funds but cannot make unilateral or even bilateral decisions about their investments.

State Response - DiNapoli and His Critics
Under considerable pressure to divest state pension funds from fossil fuel companies, in April 2018, Governor Cuomo and Comptroller DiNapoli convened the Decarbonization Advisory Panel to study the issue. In April of this year, the panel released its report, which made several recommendations and put forward “examples” of what the comptroller could do to mitigate the fund’s carbon footprint. However, the report was criticized by climate activists like 350.org’s Richard Brooks for not including a timeline or benchmarks to achieve divestment.

But even before the panel was assembled, DiNapoli had been taking steps around the question of divestment, creating a $10 billion portfolio of investments into green companies. “We’ve done a lot already to allocate money to climate solutions,” DiNapoli said during a May interview on The Capitol Pressroom with host Susan Arbetter, “they’d like to see us do even more there.”

But the comptroller’s stance has caught the ire of local climate activists, who are the ones who want him to “do even more,” as the comptroller put it. Pete Sikora, the climate and inequality campaigns director at New York Communities for Change, said the comptroller “continues to finance the climate crisis.”

“Not to be too sarcastic, but if you’re going to finance evil stuff that destroys our future, you'd hope the state would at least make - not lose - money off it,” Sikora said, noting that the energy sector “continues to trend down over a decade...of industry under-performance.”

“It’s simply insane to not divest, and losing money on the proposition makes it even more absurd,” said Sikora.

Despite growing pressure from activists and lawmakers on the issue, DiNapoli has maintained that his more moderate approach is what is in the best interest of the CRF and its members. He believes that implementing standards such as the ones suggested in the panel’s report will naturally lead to fossil fuel investments being phased out over time and would avoid the negative impacts of wholesale divestment.

In a June 2019 interview with WAMC’s Capitol Connection, DiNapoli said “when we make judgements about where to put the pension fund, we put it in the best interests of the state.” He went on to defend his approach in significantly more harsh terms than the mild-mannered and reserved DiNapoli typically uses.

Some state lawmakers disagree with the comptroller’s assessment and want to force the his hand on the issue.

The Fossil Fuel Divestment Act would require the CRF to withdraw all investments in the 200 largest fossil fuel companies. The FFDA sets a five-year deadline for this to happen and would allow the comptroller to stop or reverse divestment if it can be demonstrated that it would significantly hurt the CRF’s value.

Senator Liz Krueger, a Manhattan Democrat and the FFDA’s prime sponsor in the state Senate, said in a statement that while the proposal did not pass during this year’s legislative session, she “continue[s] to have conversations with my colleagues about the importance of” the bill. She also added that she is “working on amending the bill based on testimony we heard, both to make it stronger and to address various concerns that were raised.”

“With all due respect to the Legislature, for the Legislature to start micromanaging the pension fund is a recipe for disaster long-term,” DiNapoli said on WAMC, adding that “it may be climate change today, but what will it be tomorrow?”

DiNapoli has previously divested the pension fund from gun companies following the 2012 Sandy Hook Elementary School shooting and from the private prison industry over concerns about the treatment of immigrants and people of color in 2018. Both are cited by critics who want the comptroller to act more decisively on fossil fuel companies.

Krueger said she “strongly believe[s] that [DiNapoli] is wrong on divestment” when it comes to fossil fuels, while noting that they “have talked about divestment extensively” and the comptroller has “been a long-time champion of the environment and climate action.” Despite their talks, “neither of us have managed to convince the other,” she said.

Krueger criticized DiNapoli’s “strategy of engagement with major fossil fuel producers like ExxonMobil” for not “providing any consequences when they repeatedly brush him off. It’s time for some consequences.”

“New York should begin the process now or our retirees will be left holding the bag,” Krueger concluded.

“Does anybody think if we sell the stock tomorrow that’ll make the air cleaner? No,” DiNapoli said during the WAMC interview.

“Since it's become clear that Comptroller DiNapoli currently lacks the moral and fiduciary courage to stand up to the fossil fuel industry and Wall Street, this legislation is necessary,” said Sikora, referring to the Fossil Fuel Divestment Act, in an interview with Gotham Gazette.

“It’s clear we have our work cut out for ourselves in both houses,” said Sikora, assessing the bill’s likelihood of passage next session, which begins in January. During the last session, the FFDA had 28 sponsors in the 63-seat Senate and 37 in the 150-seat Assembly.

DiNapoli plans to follow the advisory panel’s recommendations. According to the DAP’s report called the Climate Action Plan, “rather than making a narrow recommendation to divest from specific stocks, the panel supports the concept of minimum standards to guide the fund in its decisions to sell securities and/or avoid investment managers whose operations and strategies are not sustainable.”

The report argues that divestment from unsustainable companies is “baked in” to this plan of action and that the fund will only invest in sustainable assets by 2030.

The panel’s report says that the CRF should have a minimum standard for where its funds are invested. The panel recommends that the criteria for these minimum standards be set through contracts, but only gave “examples” of what the standards could be, such as requiring “an appropriate corporate governance system for the management of climate-related issues” and “a lobbying policy actively supporting government actions to address climate change.”

The report also suggests examples of actions and timeline that the comptroller’s office could pursue, including “excluding all companies that derive more than 10% of revenue from mining thermal coal or account for more than 1% of global production” by 2020 and “if less than 5% decreased in [greenhouse gas] emissions year on year after” several engagements then “consider a shareholder resolution.”

When DiNapoli released the climate action plan, Fossil Free New York called it “a weak plan at a time when we need bold and transformative action,” and said it is “lip service and incrementalism.” The advocacy group further said “the plan includes no benchmarks, no firm delivery deadlines, no parameters to measure companies’ actions, and doesn’t even commit to divest from thermal coal companies, including ones on the edge of bankruptcy.” FFNY supports the Fossil Fuel Divestment Act.

On WCNY’s The Capitol Pressroom in May, DiNapoli said his opposition to divestment stemmed from his responsibility as fiduciary of the state’s pension fund, saying “this is my job, it’s what I was elected to do.”

He also brought up his 2018 reelection, in which he received more votes than he did in 2014, while Mark Dunlea, the Green Party candidate who campaigned almost exclusively on pension divestment from fossil fuel companies, did worse than the previous Green Party nominee when DiNapoli sought reelection in 2010.

“I actually feel that those in the broader public who’ve looked at this issue are more on our side,” the comptroller said. DiNapli’s Republican opponent in the race, Jonathan Trichter, criticized the comptroller from the right, saying he was playing politics by making the moves he had to explore divestment and create the Sustainable Investment Program, in which $10 billion of pension assets are invested in low-emissions or green companies.

Ceres, a sustainability nonprofit, praises Comptroller DiNapoli as “a global leader in the fight against climate change, addressing material risks and pursuing opportunities for the Fund’s investments.” Ceres supports the “active” investor strategy that DiNapoli has claimed is a better path forward than divestment.

During a debate last fall, Dunlea claimed “if we divested a decade ago, we’d have about $22 billion in the state pension fund,” referring to a 2018 assement from Corporate Knights. A competing unions-funded study said the opposite.

While there are competing studies, Bloomberg News reported recently that some private investment funds are beginning to divest themselves from fossil fuel producers, based solely on the financial risks involved.

DiNapoli regularly notes that while he is the sole fiduciary, he does not make his decisions alone by a long shot, with a chief investment officer, a board of advisors, and others who help determine all aspects of pension fund management. On The Capitol Pressroom, DiNapoli said he was unfairly being singled out by activists and other critics, while also noting that New York City was still in the study phase and that two of the five city pension funds had not agreed to divest.

“So the pressure on me is that we guarantee retirement security for the 1.1 million members of the pension plan, which is a lot of pressure,” DiNapoli said.

New York City Divestment
City Comptroller Scott Stringer has changed course from his previous stance and is now leading an initiative to divest the city’s pension funds from fossil fuel companies, although he is encountering his own challenges in doing so.

“New York City is planting the seed for a clean, green, and thriving economy that can truly support future generations,” Stringer said in a statement to Gotham Gazette. The city has “taken this first-in-the-nation step toward divestment to protect both the retirement security of our city’s workers and the future of our planet,” the comptroller added.

The plan announced by Stringer and Mayor de Blasio in January 2018 set a goal of total divestment within five years. As of July 2019, the city is still in the planning stages, having sent out a request for proposals (RFP) for financial advisors to come up with a divestment strategy last December. The comptroller will select a plan to move forward by December 1 of this yea. But, a key wrinkle in the process is that two of the city’s five municipal pension funds are not on board with divestment as of now.

Unlike the state pension fund, New York City’s public employee pensions are not unified under one system. Instead, there are five separate funds, each with their own boards. In total, the pension funds account for over $195 billion in assets. The largest is the New York City Employees Retirement System (NYCERS), which handles the pensions for most municipal employees.

There were two pension funds for the city’s education-related employees, the Board of Education Retirement System (BERS) covers most non-teacher civil service employees of the city’s school district, while the Teachers’ Retirement System (TRS) is for educators employed by the Department of Education, CUNY, or charter schools in the city. The NYPD and FDNY each have their own pension funds, the Police Pension Fund (PPF) and Fire Department Pension Fund (FDPF), respectively.

Also unlike the state pension fund, each of the five funds has its own board and the city comptroller is not the sole fiduciary of the funds. Each board has its own composition requirements. The Mayor or a mayoral appointee sits on all five boards, as does the city comptroller. The Public Advocate sits on the NYCERS board. Also, relevant city officials sit on some of the boards, such as the Police Commissioner on the PPF board and the schools chancellor on the BERS board.

The NYCERS board includes a mayoral appointee, the comptroller, the Public Advocate, and the five borough presidents, along with representatives from labor unions including AFSCME, the Teamsters, and the Transport Workers Union, which are the three unions with the most members in the fund.

Primarily, pension fund board members are representatives of pension-eligible employees. Eight of the twelve board members for the both the PPF and the FDPF are either union leaders or elected representatives of pension fund members.

In 2017, all five pension funds initiated a study of climate change’s effects on their funds, which was led by the comptroller’s office. However, a year later, the police and firefighter pension funds did not join the other three funds in announcing plans to divest from fossil fuels.

The PPF and FDPF’s bylaws both require a seven-twelfths majority of the board to take action on anything, such as a divestment proposal. The comptroller and mayoral appointees on both boards fall far short of having the votes to divest without buy-in from at least some of the union leaders or employees. 

In a statement, Sikora praised the comptroller, along with Mayor de Blaiso and other trustees, for “taking real action to fight the climate crisis and we look forward to complete divestment.” Sikora also said that New York Communities for Change is “satisfied with the progress to date” of the city’s divestment plan.

The Patrolmen’s Benevolent Association and the Uniformed Firefighters Association did not respond to repeated requests for comment regarding their positions on the city divestment plan.

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by Andrew Millman, Gotham Gazette
   

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Ben Max contributed to this article.

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'It's What I Was Elected To Do': State and City Leaders Take Different Approaches to Pension Fund Divestment from Fossil Fuel Companies Mon, 12 Aug 2019 04:00:00 +0000
Report Shows Nation-Leading Extent of New York's Nonprofit Sector https://www.gothamgazette.com/state/8691-report-shows-nation-leading-extent-of-new-york-s-nonprofit-sector https://www.gothamgazette.com/state/8691-report-shows-nation-leading-extent-of-new-york-s-nonprofit-sector council member eric ulrich food

(photo: William Alatriste/New York City Council)


New York has the largest nonprofit sector in the country, according to a new report from state Comptroller Thomas DiNapoli.

In 2017, New York nonprofits boasted over 1.4 million jobs and $78 billion in employee wages, both top marks across the United States, according to DiNapoli’s report released Tuesday. Between 2007 and 2017, the state added 175,000 jobs in the nonprofit sector, an increase of 14 percent. Nonprofit employment consisted of 17.8 percent of all of New York’s private sector employment in 2017. Nonprofit employment sits at about 10 percent nationwide.

“Nonprofits play an important role in every region of New York, delivering vital services to New Yorkers, from hospital care and education to legal services and environmental protection,” DiNapoli said in a statement.

In New York City, there were 662,025 nonprofit employees in 2017, also 17.8 percent of the private sector. Nonprofit employees in the city earned an average of $63,056, the highest in the state, compared to $55,572 statewide.

Yet New York City has the greatest disparity in average annual pay between nonprofit employees and the rest of the private sector, with nonprofit wages more than $36,000 below the average for other private employers. Though New York City’s high-wage finance and insurance sectors inflate the average private sector wages, nonprofit wages still fell behind by an average of $11,200 when those sectors are excluded, DiNapoli’s report says.

Since 2013, nonprofit employment has grown at a faster pace than broader private sector employment in every one of the state’s 10 regions except New York City, the report shows.

Problems with Nonprofit Contracting in New York City
This trend could be due to the rapid employment growth in New York CIty’s other sectors over the last several, but there are also problems in the city’s nonprofit sector as it deals with a dysfunctional city government procurement process. Many nonprofits fill vital city services and are paid largely through contracts with city government, but there are significant challenges in how those contracts are awarded and paid.

After a nonprofit is awarded a city contract, it is often expected to begin delivering services before the contract reaches the city comptroller’s office for approval. While the comptroller must act to approve or disapprove a contract within 30 days of receiving it, there are no such time constraints on other parts of the process, whereby city agencies often delay moving the contract toward payment.

As a result of the commonplace lack of urgency in nonprofit contracting, in Fiscal Year (FY) 2018, 80 percent of all new and renewal contracts arrived at the Comptroller’s Office after their start day had passed, according to data from Comptroller Scott Stringer’s office. 89 percent of all human services contracts, many of which are given to nonprofits, arrived late in the same period.

According to the same data, 13 percent of contracts, and nearly 20% of human services contracts, arrived at the comptroller’s office over a year after their start date.

Of the 6,440 new or renewal contracts the city comptroller’s office registered in FY2018, 80 percent were retroactive; with 40 percent more than 180 days retroactive. Some agencies, including the Department of Homeless Services and the Department of Education, submitted over 99 percent of their contracts late.

One study assessed the cost of lateness to New York City nonprofits at $774 million in 2018, up from $675 million in 2017. The financial strain of delayed payments to nonprofit workers can disproportionately affect women, who make up 85 percent of human service workers, and people of color, who make up 75 percent. The numbers are additionally troubling when combined with the state comptroller’s report showing just how large the city’s nonprofit sector is.

City Council Members Helen Rosenthal and Ben Kallos recently introduced legislation that would set time limits within which agencies would be required to complete each step of the procurement process, meant to expedite the process by which the city pays out its nonprofit contracts.

Comptroller Stringer has suggested that agencies with an oversight role in New York City’s contract review process “should be assigned a strict timeframe to complete their work, similar to the Comptroller’s 30-day time limit for contract registration.” Stringer encouraged the creation of “a public-facing tracking system that allows vendors to monitor the progress of the contract through each stage of the review process.”

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by Noah Berman, Gotham Gazette

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Report Shows Nation-Leading Extent of New York's Nonprofit Sector Tue, 23 Jul 2019 04:00:00 +0000
After Major Tax Revenue Drop, a ‘Positive Note’ & Much Uncertainty for State Fiscal Picture https://www.gothamgazette.com/state/8457-after-major-tax-revenue-drop-a-positive-note-much-uncertainty-for-state-fiscal-picture https://www.gothamgazette.com/state/8457-after-major-tax-revenue-drop-a-positive-note-much-uncertainty-for-state-fiscal-picture govandcuomo albany

Budget Director Mujica, Gov. Cuomo, Comptroller DiNapoli (photo: governor's office)


New York’s tax revenue fell by $3.7 billion, a 4.7% decline, in the 2019 fiscal year that ended March 31, according to the cash report released Friday by State Comptroller Tom DiNapoli. A drop was expected in projections made last year, but not to the degree it occured, setting off alarm bells earlier this year as the state started to see apparent effects of New York taxpayer behavior resulting from the new federal tax code. The state's latest projections from February did, however, more accurately account for the decrease in revenue as the fiscal year came to an end.

The drop in revenue largely stemmed from lower personal income tax receipts, though the comptroller said the year ended on “a positive note” because revenues came in higher than expected in March. Part of the decline was also related to the MTA payroll tax, which brought in $1.4 billion last year, being shifted out of the budget as a revenue source, and the new federal tax law led to many filers and employers moving their payments to the 2018 fiscal year, creating the appearance of a  drop in payments that doesn't reflect the larger economy, according to the state Division of Budget. But fiscal watchdogs are nonetheless concerned that the state could quickly face a cash crunch if revenue is lower than expected in April, the month that not only starts the new state fiscal year but is also home to the tax filing deadline.

The drop in personal income tax was first evident in data from December and January, raising a red flag for the state economy and creating uncertainty about future spending as Governor Andrew Cuomo and the state Legislature negotiated the budget for the 2020 fiscal year. In a February news conference called to discuss the startling numbers, Cuomo and DiNapoli pointed to the 2017 federal tax overhaul as the culprit, chiefly a provision that capped the deductibility of State and Local Taxes (SALT) at $10,000 and how New Yorkers may be responding to it. They said much more would become clear in the following months.

The governor and Legislature had to take that uncertainty into consideration when making revenue projections for the new fiscal year and that if those projections are significantly off they may need to restructure the state budget. 

The comptroller’s latest report noted that personal income tax revenue by the end of the fiscal year declined by $3.4 billion in total, or about 6.6% from the previous year, though other forms of tax revenue increased, including consumption tax, business tax, and miscellaneous revenue that included massive monetary settlements with financial and other corporations. March was a good month, with taxes coming in about $812 million higher than the state Division of Budget had projected in February.

“After months of concern over lower-than-expected tax collections, the state ended the fiscal year on a positive note,” DiNapoli said in a Friday statement. “The sharp revenue declines in December and January, however, remind us to take nothing for granted. With expectations of a slowing economy and ongoing concerns regarding federal fiscal policies, a strong commitment to building robust reserves in preparation for the next economic slump is essential.”

After a recent allocation of $250 million, the state’s current rainy day reserves stand at $2 billion, and are expected to increase to $2.5 billion by the end of the 2020 fiscal year. This sum pales in comparison to the recently-adopted $175.5 billion state budget for the fiscal year 2020.

The crucial period lies ahead as the state begins to take stock of tax returns that New Yorkers file in April. In February, the governor and state DOB projected that April would show an additional $1.4 billion in personal income taxes, and total collections of about $8.2 billion. In comparison, the state averaged between $5 and $7 billion in April tax revenues between 2016-2018. It’s not totally clear why the projection is so optimistic.

“When they made that adjustment in February, they said, we came in really low for January, but some of that money we think is gonna come in in April. And we don’t know if it’s going to or not,” said Dave Friedfel, director of state studies at Citizens Budget Commission, a nonprofit watchdog. “If it doesn’t, if they made a mistake in making that assumption, then suddenly the fiscal year 2020 budget could be in trouble only one month into the fiscal year.”

Should revenues come in below projections, the state could be in for tough times ahead.

“Depending on how that number comes in, if it’s significantly short, the state may need to tighten its belt a little bit further,” Friedfel said, noting that at minimum it would put a damper on conversations around increasing capital spending as the rest of the legislative session progresses. Cuomo and legislative leaders passed the new state budget without adding new capital expenditure plans, though many were carried over from prior plans.

E.J. McMahon, research director of the Empire Center for Public Policy, a think tank, agreed that if the April revenue doesn’t meet expectations, it would be “a sign of trouble.”

“However, even if it’s above the forecast, it’s not necessarily solid proof that things are much better because...the real number to watch this year, that has a bigger reflection of the economy, will be the quarterly estimated payments in June and especially September,” he said, pointing out that higher-earning New Yorkers have more complicated tax returns and may be filing for extensions.

The new budget does give the state Department of Budget, which is under the governor, the ability to make mid-year changes to spending in case of a $500 million deficit below projections, in which case the Legislature would have 30 days to respond or the DOB adjustment would take effect.

But a bigger issue is the state’s paltry reserves. CBC’s Friedfel said the state should at bare minimum have 10% of the operating budget in reserves, closer to about $10 billion. “That would be enough to really absorb the shock for one year and even more than that would be beneficial,” he said.

“The state has gotten about $12 billion in monetary settlements over the last six or seven years, certainly during the governor’s tenure, and they’ve put very little of that into reserves,” Friedfel continued. “They’ve actually used some of that for operations which sets up kind of a higher base of spending, which makes it harder to fill those gaps in the future.”

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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Note - This article has been updated to clarify that the state Division of Budget's latest projections did expect revenues to drop as much they did though they did not originally. Additional context was also added about the MTA payroll tax and early filing of payments in the 2018 fiscal year.  

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After Major Tax Revenue Drop, a ‘Positive Note’ & Much Uncertainty for State Fiscal Picture Sun, 21 Apr 2019 04:00:00 +0000
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
   

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Uncertain Future for Secretive State Pork Program Tied to Renegade Democrats Thu, 18 Apr 2019 04:00:00 +0000