Cuomo leaves the wrong door open

by E.J. McMahon |  | NY Torch

NYC OTBFor a second time, Governor Cuomo has vetoed a bill that would require the state to reimburse New York City for retiree health benefits paid to former employees of the bankrupt New York City Off-Track Betting Corp. (OTB).  That’s good.  Unfortunately, once again, he has left the door open to signing the bill in the future.  And that’s troubling.

The pledge of state resources to back up the OTB retiree health plan is a dangerous precedent with massive fiscal implications at a time when unfunded retiree health insurance obligations at every level of government in New York currently total $250 billion — and when many local government entities are in serious fiscal distress.

Cuomo, however, seems oblivious to the risk.  Instead, he’s been blocking the OTB retiree health reimbursement solely on fiscally technical grounds. When he first vetoed the measure in September 2011, he said he couldn’t sign it because it did not include an appropriation.

The Legislature responded this year by passing the bill again, this time with an appropriation of $7 million. This week, Cuomo vetoed the measure yet again — but effectively invited the Legislature to revisit the issue as part of the 2012-13 budget process.  From his veto message:

The bill does not identify a source of funds to finance this proposal and fails to take into account the State’s financial plan. The budget process begins in the next few weeks. The expenditure of money to serve this worthy goal should be considered as part of that process and should not be added outside the State’s fiscal plan. [emphasis added]

Huh?  ”Worthy goal”? The thinking behind the legislation sends a clear signal to government employees throughout New York — including workers in economically vulnerable municipalities now being crushed by retiree obligations: your benefits will be guaranteed by the state no matter what. This would take away the incentive for any union anywhere to negotiate retiree healthcare concessions, even with an employer that’s on the verge of insolvency.

Yes, it’s tough on the workers that they were left stranded after the chronically money-losing OTB went belly up.  But they will still receive their government pensions.  And, after all, the risk of losing benefits when an employer goes out of business is the same risk faced by employees throughout the private sector — most of whom never have any retiree health benefits in the first place.

Is anyone in the Cuomo administration giving any thought to the broader implications of this?

By the way, the measure passed the Assembly 93-42 and the Senate by a 56-4 margin.



- E.J. McMahon is the Research Director at the Empire Center for Public Policy.