New York State is in the process of collecting
more than $5 $6 billion in fines and penalties from financial institutions accused of violating state or federal laws.*
What should the state do with this unprecedented windfall? That’s one of the biggest questions facing Governor Cuomo and the Legislature in early 2015.
The Empire Center has been out front with an answer: invest in infrastructure, especially highway and bridge reconstruction work, which has become too reliant on borrowed money and is in danger of becoming seriously underfunded.
The case for infrastructure investment is laid out in a series of articles, presented here in reverse chronological order:
- “Cuomo’s fungible windfall,” NYTorch blog post, March 2, 2015
- “There goes the windfall?” NYTorch blog post , Jan. 22, 2015
- “Albany’s ‘windfall’ feeding frenzy,” E.J. McMahon, New York Post, Dec. 2, 2014
- “Invest the windfall in infrastructure,” Richard Brodsky and E.J. McMahon, New York Daily News, July 17, 2014
- “How New York can best spend $3.3 billion,” E.J. McMahon, Newsday, July 11, 2014 (figure relates to then-projected payment by BNP Paribas)
Putting the money into operating expenditures is a bad idea because higher spending could only be sustained with higher future taxes, we have argued. (See, for example, “New York public schools’ state-aid fantasy,” a Nov. 24, 2014, Newsday op-ed.)
By the same token, any tax cut financed with this money could only be temporary unless matched to an ironclad commitment of future spending cuts in the same amount. Since the governor and Legislature already need to cut projected spending trends by billions just to balance the next several budgets, no such commitment is on the horizon.
Bottom line: strategically targeted infrastructure investments would be the best way to use this one-shot injection of cash to produce truly lasting benefits for all New Yorkers.
* The $5.4 billion in windfall funds budgeted for allocation beginning in fiscal 2016 is itemized by source on page 48 of the Mid-Year Update to the state’s FY 2015 Financial Plan. And on March 12, the state disclosed it would be collecting another $610 million in fines from yet another financial institution, Germany’s Commerzbank.
millions of dollars
|Credit Suisse AG||715|
|Bank of Tokyo Mitsubishi||315|
|Bank of America||300|
|Standard Chartered Bank||300|
|American Internationl Group||35|
|AXA Equitable Life Insurance Co.||20|
|Other settlements (TBD)||7|