During the recent uproar over the Thruway Authority’s questionable handling of a proposed Erie Canal land development deal, far too little attention was paid to the more fundamental question of why the Thruway Authority had anything to do with the canal in the first place.

The “sale” of the state-owned canal to the Thruway Authority was nothing more than a fiscal gimmick engineered by Mario Cuomo’s administration to close a budget gap over a dozen years ago. It sadly typified the way governors and legislators routinely misuse public authorities to get around the virtual dead-letter constitutional prohibition on issuing debt without voter approval.

Attorney General Eliot Spitzer has compared authorities to the off-balance-sheet entities used by Enron for hiding money or for making the parent company look good. In fact, this was true of our public authorities long before anyone had ever heard of Enron (or of Spitzer).

To be sure, many of the roughly 700 public authorities in New York exist merely as letterheads. Some are dormant. But each and every one represents an opportunity for potential abuse in the future.

New York’spublic authorities won’t be tamed without addressing the root cause of the problem, which is Albany’s habit of borrowing money for questionable purposes that would never pass muster with voters. The state will never bring public authorities under control unless it is willing to bring borrowing practices under control. In short, real public authority requires real debt reform – and both must be constitutional.

Here are three significant steps that can be taken to improve the situation:

Impose an immediate statutory moratorium on the establishment of any new public authorities or public authority subsidiaries. An exception would be made for any local authority established pursuant to a bonding initiative approved in a voter referendum.

Establish a Public Authorities Sunset Commission to identify authorities that can be eliminated or merged. Part of the commission’s mandate will be to conduct an inventory of public authority assets that can be sold to the private sector or, less preferably, transferred to state government.

Amend the state constitution to limit the number of authorities and stipulate that state and local authorities shall exist for a single purpose and shall issue bonds underwritten by project-specific revenues. This amendment should be accompanied by other constitutional changes banning back-door borrowing and requiring voter approval for all general obligation borrowing.

New York City’seconomic development czar recently was asked why the city was not holding a referendum on the proposed partial public financing for a new Jets stadium. His reply could have spoken for many officials throughout the state: “We don’t do that sort of thing in New York.”

Well, it’s high time we started doing that sort of thing in New York.

Return more control of public indebtedness to the people of the state of New York, through the ballot box, and we will get all the infrastructure projects we need – but only the projects we truly need, truly want, and can truly afford.

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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