ALBANY – Gov. Andrew M. Cuomo has a good problem on his hands: How to spend a windfall of $420 million.
For the last four and a half years it seems to be a recurring scenario for the state, which has reaped more than $11 billion as a result of monetary settlements from financial institutions.
A vast majority of the revenue has been invested in capital expenses and economic development initiatives, including nearly $2 billion for the new Mario Cuomo bridge over the Hudson River. But more than $2 billion has also been used to close holes in the state budget, according to an analysis by the state comptroller’s office.
“Funds from extraordinary monetary settlements are primarily being used to support capital investments, such as infrastructure projects that are creating jobs and positioning every region of the state for further economic growth,” state Division of Budget spokesman Morris Peters said.
Prior to the drastic uptick of settlement funds in 2014, he noted that this type of revenue was simply funneled into a miscellaneous pool of funds.
With the latest settlement, the DOB calculates that $831 million will be available to spend heading into the new fiscal year. More than $3 billion in settlement money hasn’t been spent, but it’s already been earmarked for the next five years.
Cuomo, who will present his state budget in January, hasn’t signaled how he will spend the unallocated settlement funds.
Based on the $402 million budget shortfall the state is projecting for the upcoming fiscal year, it’s possible at least some of the money will be used to bridge the gap, as $383 million was used this year to balance the books and $461 million was utilized the year before.
Economists generally agree that the funds should be invested into one-time costs that will pay dividends in the future, such as housing, infrastructure projects or paying down debt. They blanch at the repeated push from advocacy groups to use the money to fund recurring costs, such as education aid.
There is also an appetite among fiscal conservatives to stow some of the money in reserve for a dire financial challenge, like another recession.
Ron Deutch, executive director of the liberal Fiscal Policy Institute, faulted Cuomo and the state Legislature for prioritizing economic development initiatives with more than $2 billion in settlement money. The same critique came on the other end of the ideological spectrum from E.J. McMahon, research director for the Empire Center for Public Policy.
“It’s been a blown opportunity basically,” McMahon said.
He also had concerns about $850 million the state put aside to settle a dispute with the federal government over Medicaid payouts, and suggested using more of the money for core infrastructure costs to hold down growing debt costs.
McMahon was particularly troubled by the use of settlement funds to cover annual operating costs, saying, “That’s not something they should do under any circumstances. … The question is whether they will do it again next year.”
The DOB defended the practice, noting that it’s relying on a smaller percentage of the settlement funds for operating costs than previous administrations.
It’s not new for New York’s coffers to swell with revenue from fines and settlements, but the scale of the money spiked in 2014, when the state collected $4.9 billion. Less than 10 percent of that amount was raked in a year earlier, and the average collection between 2005 and 2013 was about $179 million per year.
The big pay days were the result of a crackdown on bad financial actors by the federal government, Manhattan district attorney and state Department of Financial Services, according to McMahon.
“We are in a unique position to reap a windfall because these firms have their American charters in New York,” he said. “Cuomo could have never anticipated this when he took office in 2011.”
Still, revenue from settlements has been trending downward in recent years, and McMahon said it seems like the gravy train has run its course.
“They will continue to get a few hundred million here and there,” he said. “You get the sense that they’re scraping the bottom of the barrel.”
© 2018 Times Union
You may also like
"...the Empire Center is the think tank that spent months trying to pry Covid data out of Mr. Cuomo's government, which offered a series of unbelievable excuses for its refusal to disclose...five months after it (the Empire Center) sued, Team Cuomo finally started coughing up some of the records." -Wall Street Journal, February 19, 2021
SIGN UP TO READ ABOUT THE ISSUES IMPACTING NEW YORKERS.