Some solid ideas from DiNapoli

by E.J. McMahon |  | NY Torch

dinapoliComptroller Thomas DiNapoli just issued a set of fiscal reform proposals designed to address the continuing lack of accountability and transparency in key areas of New York’s budget. While by no means representing a fiscal panacea, they are solid ideas, deserving of broad public and legislative support.

Among other things, DiNapoli appropriately singles out the $1.5 billion State and Municipal Facilities Program as an example of “murky” lump-sum state budget appropriations.

Echoing the Empire Center’s repeated criticisms of what has become the state’s biggest and fastest growing capital pork slush fund, DiNapoli’s report points out that lump sum appropriations for the SAM program, as he calls it, “include little or no detail regarding the process for allocating funds, or the purposes for which such funds are to be used, and the agency or authority that will ultimately administer the funds is not identified.”

More from the comptroller’s report:

SAM does not have any clearly defined statutory process through which proposed projects are objectively assessed. To date, some such funds have flowed through the Dormitory Authority of the State of New York (DASNY), using an opaque process that includes the designation of a project “sponsor,” which is either the Governor or a member of the Legislature. Details on expenditures – purposes, recipients and other key factors – remain largely outside the State accounting system.

SAM is just one example of several that reflect a process wherein billions of State budget dollars have been moved into less transparent and accountable spending mechanisms, which provide minimal disclosure of the decision making process or other information on the expenditure of public funds. As a result, it is difficult for the public to be assured that the funds are being put to good use in a cost-efficient and effective manner.

In addition, there are no comprehensive or standardized mechanisms to track the spending of these dollars in detail. Furthermore, Budget provisions often include authorization to transfer, interchange, or suballocate funds among agencies and to public authorities, clouding the picture of how such funds are used. When spending is shifted to public authorities, the oversight and the checks and balances that would apply to State agency spending are also eliminated.

Yes, indeed. DiNapoli’s recommended remedy for this problem is to expand a 2007 law that prohibited such lump sums only when added by the Legislature.  That law should also apply to the Executive Budget and to budget bills resubmitted by the governor, DiNapoli says.  The comptroller would also amend the law to require the governor’s Division of the Budget (DOB) to “report information about each unallocated appropriation in the budget, the process by which such funds were subsequently allocated, the scoring of each project based on objective criteria, and the amounts spent by project.”

On a related issue, the comptroller recommends banning “backdoor spending” through public authorities. He would require passage of appropriations for all authority spending on the state’s behalf, subject (naturally) to pre-audit review by the comptroller’s office.  Two particularly good ideas:

Public authorities would be prohibited from receiving any State-appropriated funds until projects were identified, scored, and ranked using clear, measurable and objective criteria, unless such appropriations provide an allocation either by statutory formula or to a specific recipient.

Authorities would be required to publicly report quarterly on the expenditure of such funds, including identifying the amount allocated by project, the selection process and each funded project score, as well as the overall scoring and ranking of projects evaluated.

Although DiNapoli’s report doesn’t even contain the phrase “economic development,” his proposed reforms also would address the lack of transparency and accountability surrounding Gov. Andrew Cuomo’s wildly hyped and hyper-funded “upstate revitalization” initiatives, including the Buffalo Billion. With little or no oversight from the comptroller, Cuomo has relied heavily on non-profit State University of New York (SUNY) subsidiaries as conduits for funding and steering upstate mega-projects such as the $750 million SolarCity factory in Buffalo.  That approach has given rise to questionable contracting and consulting arrangements that have attracted the attention of federal investigators and the state attorney general’s office.

The report also highlights the need for better state debt management, a more detailed capital plan, and larger budgetary reserve requirements.  The state’s legally restricted “rainy day” reserves, which amount to 2.5 percent of general fund spending, are smaller than those of other major states. That is an especially risky situation for New York, given its heavy dependence on the volatile financial sector.

Now, if only the comptroller would improve the financial transparency and accounting practices of the New York State and Local Retirement System, of which he’s the sole trustee, we’d have the makings of a truly comprehensive fiscal reform for New York’s state government.

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- E.J. McMahon is the Research Director at the Empire Center for Public Policy.