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:

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.

Payer Amount
millions of dollars
BNP Paribas 3,591
Commerzbank 610
Credit Suisse AG 715
Bank of Tokyo Mitsubishi 315
Bank of America 300
Standard Chartered Bank 300
Bank Leumi 130
Ocwen Financial 100
Citigroup 92
MetLife Parties 50
American Internationl Group 35
PricewaterhouseCoopers 25
AXA Equitable Life Insurance Co. 20
Chase 11
Other settlements (TBD) 7

About the Author

Tim Hoefer

Tim Hoefer is president & CEO of the Empire Center for Public Policy.

Read more by Tim Hoefer

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