A few thoughts on the late-breaking Albany deal to pass the so-called Public Authorities Reform Act, now stalled for good reason in the Senate after passing in the Assembly:

Not for the first time, some of New York’s well-meaning good-government advocates are being suckered by a bill title.  Like most legislation trumpeted as “reform” in Albany, this measure’s modest virtues are being grossly exaggerated even as its negatives are being ignored, minimized or overlooked.

The bill stems from the pretense that public authorities are, as Assemblyman Richard Brodsky (D-Harrison) put it, “Soviet-style bureaucracies” that amount to a “secret, shadow government.”

In fact, because they are subject to the discipline of the bond market, the state’s major public authorities are far more transparent than the typical state agency.

Unlike the state Legislature, authorities are regularly subject to independent audits.  If you have an hour or so to spare, go to the “financial information” or “investor relations” tab at the websites of entities such as the Metropolitan Transportation Authority (MTA) or the Thruway Authority, download the Comprehensive Annual Financial report and the latest bond offering statements, and start reading.  When you come up for air, you can review authority board agendas and minutes.  In fact, thanks to former Gov. Eliot Spitzer, the board meetings of major authorities can be viewed in live webcasts — unlike executive agency senior staff meetings, or meetings of state legislative party caucuses. Needless to say, you can go to the payrolls tab at SeeThroughNY and scroll through the names, titles and salaries of employees at every state authority — which were subject to the Freedom of Information Law (FOIL) even before information searches were made easier by the 2005 Public Authority Accountability law.

Public authorities are creations of the state Legislature, which has every tool it needs to oversee their operations.  Brodsky himself has shown how that oversight power can effectively be used to spotlight questionable authority transactions — as when he convened hearings into the Thruway Authority’s questionable disposal of land along the authority-owned Barge Canal.   The Thruway Authority had a say over the Barge Canal because then-Governor Mario Cuomo and the state Legislature agreed in 1992 on a fiscal gimmick forcing the authority to “purchase” the canal from the state government itself.

Even more risible is the frequent suggestion by Brodsky and other bill proponents that the authorities have somehow been contracting massive new debts in secret, outside the control or without the knowledge of elected officials.  In fact, all authority borrowing is subject to state law, and the Legislature for decades has been relentlessly pushing to expand, not restrict it.

Brodsky expressed outrage in September when data from the comptroller’s office showed that total authority debt had risen to $140 billion from $120 billion between 2004 and 2008.   That’s a big number, all right, and it should be a source of concern.  However, roughly one-third of the 16 percent increase in authority debt during that period amounted to backdoor borrowing authorized by the Legislature itself as part of the annual state budget.  And much of the remaining new debt reflects the expanded infrastructure capital expenditures of the MTA and the Thruway Authority.

Every penny of project borrowing by the state Environmental Facilities Corporation, Housing Finance Agency, Medical Care Facilities Finance Agency, Dormitory Authority, Urban Development Corporation (aka Empire State Development Corp)., Job Development Authority, Battery Park City Authority, Project Finance Agency, State of New York Mortgage Agency, Energy Research and Development Authority and Long Island Power Authority is subject to approval from the Public Authorities Control Board (PACB).  The PACB holds monthly public meetings in a room in the heart of the state Capitol, with the lights on.  Its members include the governor’s budget director and designees of state legislative leaders–any one of whom can veto any given project, as Assembly Speaker Sheldon Silver did when he blocked Mayor Bloomberg’s proposed $2.2 billion West Side stadium project back in 2005.  More than half the new debt contracted by public authorities between 2004 and 2008 was approved by the PACB.

The so-called “reform” bill wouldn’t have done a thing to curb the legislatively authorized growth in borrowing by public authorities, or make the borrowing process any more transparent than it already is.  Nor would it necessarily promote significantly improved fiscal restraint in authority operations, aside from expanding the types of contracts subject to review and audit by the state comptroller.  Indeed, the most costly and outrageous instance of waste by any authority in recent years–the recent arbitration giveaway by the MTA to its largest union—could have unfolded in precisely the same fashion even if the law had been in effect a year ago.  That deal, which had the governor’s finger-prints all over it, is still wrapped in mystery, as Nicole has pointed out.

Of course, the last thing the Legislature really wants is to shine a brighter light on deals with labor unions. In fact, the final Brodsky bill features a big new union giveaway, in the form of a prohibition on public authority issuance of any development contract for a hotel or convention center that does not include a five-year labor peace agreement with a hotel employee union. Senate Republicans reportedly are holding up the bill over this provision, and they’re right.

With roughly 3,600 staff members and $225 million budget, the Legislature has all the resources it needs to exercise better oversight of public authorities by beefing up its own committee staffs.  Instead, in the midst of the worst fiscal crisis in decades, it will now delegate that responsibly to an entirely new agency with unprecedented power to investigate authority operations, issue subpoenas and “warn or censure” authority officials who fail to comply with the law.  The Independent Authorities Budget Office (IABO), headed by a Senate-confirmed gubernatorial appointee serving a four-year term, is “Soviet-style” bureaucratic wastefulness on steroids.  For an ambitious and headline-hungry politician, serving as what amounts to state public authorities czar could be the next best thing to occupying the attorney general’s office.

At Wednesday afternoon’s news conference announcing the deal on the reform bill, the hype machine was in overdrive.  Governor Paterson even suggested that the authorities somehow contributed to the state’s massive budget gaps.

“We’re having a deficit problem right now–don’t think this isn’t contributing to it,” Paterson said.

Nonsense.  While New York’s public authorities are far too numerous and their legislatively authorized debt is excessive, they are not contributing to the budget crisis.  In fact, the governor and Legislature have been skimming authorities’ cash reserves for years, compromising the authorities’ financial integrity in the process.  Come to think of it, maybe the first order of business for the IABO should be to determine whether authority board members are exercising their fiduciary duty when they refinance debts merely to generate cash for the state treasury, as the Battery Park City Authority board has been asked to do.

At the end of the day, the best that can be said of New York’s public authorities is that some of them are a necessary evil, and most of them could be consolidated or put out of business.  We could get by with many fewer public authorities, and their financial wings of the remaining authorities could be clipped to the nub.  Like all branches of government, they should be forced to make their day-to-day operational expenditures as well as contracts completely open to the public via to the Internet.

Disbanding many public authorities would make New York’s elected officials far more directly accountable for the public services those authorities now provide and the facilities they operate.  But divesting authorities of their assets would also deprive politicians throughout the state of coveted contracting and patronage opportunities.  Limiting their borrowing power would give voters a veto over billions of dollars in state borrowing ultimately backed up by tax dollars.   And empowering voters is the very last “reform” Albany’s political establishment wants.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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