Forty-five years ago this month, then-Gov. Hugh L. Carey and the state Legislature passed a landmark law, the Financial Emergency Act, designed to rescue Gotham from imminent bankruptcy.

The law created the state Financial Control Board as a vehicle for restoring solvency. The board would be chaired by the governor, who in turn would appoint three other members of a seven-member panel. Since the end of the Big Apple’s original control period in 1986, the FCB has remained in “sunset” as an external fiscal monitor, fully staffed and meeting at least once a year to confirm the city isn’t violating basic guidelines of fiscal integrity.

Four decades later, with both the city and state now facing a very different kind of crisis, the FCB can again play a critical role in restoring the city government’s stability.

Gotham will need years to ­recover economically from the shutdowns imposed to contain COVID-19. In the meantime, with tax revenues cratering, the pre-pandemic city budget was simply unsustainable — but Mayor de Blasio is floundering

While Hizzoner’s financial plan at least aims for the right goal — carving $1 billion out of labor costs, the biggest chunk of New York’s nearly $90 billion budget — de Blasio himself doesn’t seem to be seriously pursuing it. After weeks of threatening to lay off 22,000 city workers, the mayor now says he will temporarily furlough 9,000 managerial employees to save just $21 million. Worst of all, while continuing to plead for federal aid, he is also demanding the state’s OK to issue up to $5 billion in deficit bonds.

Borrowing to pay operating expenses was what led the city to the brink of insolvency in the 1970s, and de Blasio’s push to bond out a budget deficit is a distress signal. The control board needs to nip this in the bud.

No borrowing bill can be ­approved without the signature of Gov. Cuomo, who should make it clear that he will ask the Legislature to instead authorize a new period of formal FCB control over city finances, subject to conditions including:

  • An immediate freeze of city employee wages, which the board could extend until it is satisfied that unions have agreed to real money-saving concessions.
  • A restoration of the board’s legal standing to intervene on the issue of affordability in any deadlocked collective-bargaining negotiation.
  • Permanent establishment of the board, which otherwise is due to disappear in 2033, and restoration of its pre-2008 power to unilaterally reinstate control periods in the future when the situation demands it.

The board’s membership ­includes the mayor and both the state and city comptrollers — but ultimately will only be as strong and effective as the governor wants it to be.

For the first time in 10 years as governor, Cuomo recently has been showing signs that he takes the board and its mission seriously. In July, he finally got around to naming his first three appointees, including Steven M. Cohen, his former top adviser as both governor and attorney general.

At the FCB’s August meeting, ­Cohen agreed the board should meet again to review the city budget situation after the end of the first fiscal quarter (Sept. 30). This next meeting, presumably in a couple of weeks, will be the FCB’s opportunity to counter de Blasio’s deficit borrowing proposal by formally calling for a new control period.

Experience has shown that the FCB can provide essential discipline by insisting on cuts that local elected officials find it difficult to pull off on their own. Years after leaving office, former Mayor Ed Koch described his relationship with the board as a “good guy-bad guy” routine. In negotiating with labor leaders, he said, his message was: “You better make my life easier than you are making it, [or] I will just let the control board ­decide your increase.”

De Blasio — and whoever succeeds him as mayor, starting in 2022 — would do well to follow Koch’s example.

The late financier Felix Rohatyn, a key private-economy player in the city’s 1970s recovery, once observed that New York’s control board is “only necessary when things are very, very bad.” When a mayor’s primary response to an unprecedented economic collapse is to talk about deficit borrowing, that’s bad enough.

Adapted from a ­report from the Manhattan Institute, where EJ McMahon is an ­adjunct fellow.

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

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