Archive for February 2011

Retiree health is LI’s next tax time bomb – By George J. Marlin

February 24, 2011

The following appears in the February 25 – March 3, 2011 issue of the Long Island Business News:

For years, the best-kept secret in New York has been the future cost of the unfunded retiree health care liabilities of the state and its local governments. However, thanks to new government accounting standards, the Empire Center for New York State Policy, a fiscal-issues think tank located in Albany, has estimated the total liabilities to be an astounding $205 billion.

Most municipalities pay 100 percent of retiree health premiums and when a 65-year-old enrolls in Medicare, the former government employer generally reimburses those premiums. At present, these “Other Post Employment Benefits,” or OPEB as they are described in audited reports, are more than 30 percent of the annual employee health costs and are expected to consume a greater share of municipal budgets every year. Because municipalities are solely responsible for these retiree benefits, which are paid annually out of operating budgets, many local governments, agencies and special districts may be forced to curtail services to meet these skyrocketing obligations.

The “pay-as-you-go” method of funding these benefits has been characterized by many analysts as an unjust burden on future taxpayers. Here’s what the respected Federal Reserve board of Boston said about the issue:

“Because this accounting method provided no incentive to set aside current funds to meet the growing demands of these benefits, it quietly shifted the true burden of payment to future generations. This burden would rest not only with future employees, who might see reduced benefits, but also with communities, which could see services cut or taxes increased to cover growing benefit payments. Allowing tomorrow’s citizens to pay for the retirement of today’s workers is inconsistent with the concept of interperiod, or intergenerational, equity.”

The Empire Center report reveals that the counties with the largest OPEB burdens, in both absolute and per-capita terms, are Nassau and Suffolk, with unfunded obligations of about $3.5 billion and $4.2 billion, respectively. And among the state’s most populous towns, Long Island’s have the highest per-capita liabilities.

Unlike public employee pensions, however, public sector retiree health benefits are not guaranteed by New York’s state constitution. Hence, Albany has the power to lighten the regulatory and tax burden on local governments by implementing statutory changes. Local governments also have the ability to negotiate reasonable sharing by new and existing retirees of this surging expense. The Empire Center recommends these OPEB reforms: Repeal the 2009 state law restricting the ability of school districts to alter retiree health benefits. Require all active and retired public employees in New York to contribute at least 10 percent to individual coverage and 25 percent to family coverage premiums (the same level as state workers), as recommended in 2008 by the state Commission on Local Government Efficiency and Competitiveness. Amend the Taylor Law to flatly prohibit future collective bargaining of retiree health benefits in New York’s public sector.

Such reasonable reforms are needed now if municipalities are to avoid the ultimate catastrophe: much higher taxes coupled with fewer or compromised public services.

Unfunded Liability
$ Per
Babylon $119,684 541             
Brookhaven $256,700 523             
Hempstead $810,403 1,059             
Huntington $188,943 934             
Islip $159,642 473             
North Hempstead $117,768 519             
Oyster Bay $314,470 1,039             
Smithtown $133,900 1,099             

Local Leviathans and Subsidiarity – By George J. Marlin

February 23, 2011

This article I wrote appears on The Catholic Thing web site on February 23, 2011.

The Kessel NYPA Watch, February 20, 2011 – By George J. Marlin

February 20, 2011

Street Corner has filed a request under New York State Freedom of Information Law with the FOIL officer of the New York Power Authority requesting certain public records of NYPA relating to various activities and policies of the C.E.O. of NYPA, Richie Kessel.

Street Corner Conservative will keep its readers informed of NYPA’s response to the FOIL request.

The following is the text of the letter sent today to NYPA’s FOIL officer:

New York Power Authority
Office of the Secretary
123 Main Street, 15-M
White Plains, NY 10601

Ladies and Gentlemen:

I am a taxpayer and resident of the State of New York and pursuant to New York Public Officer Law and the provisions of the regulations of the New York Power Authority (NYPA) adopted pursuant to the Public Officer Law (21 NYCRR Part 453), I demand access to the following records by email to me if possible:

1. Information and records as to contributions, grants, donations, sponsorships, payments and purchase of tickets (collectively, “Expenditures of NYPA Public Money”) to or from not-for-profit entities, colleges, universities and research centers (collectively, “Recipients of NYPA Public Money”) from NYPA or any subsidiary or affiliate for the period July 1, 2010 through and including December 31, 2010;

2. Information and records as to whether each Expenditure of NYPA Public Money to each Recipient of NYPA Public Money from NYPA or any subsidiary or affiliate for the period January 1, 2009 through and including December 31, 2010 was processed in full compliance with NYPA board or entity policy and procedure for Expenditure of Public Money;

3. For each Expenditure of NYPA Public Money which involved purchase of tickets for an event held outside a NYPA facility, provide the names and relationship to NYPA of each person who used the ticket purchased or acquired by or through the Expenditure of NYPA Public Money;

4. Information and records as to health insurance coverage or benefits or indemnification against health insurance liability or reimbursement of expenses of any such health insurance coverage provided now or at any time in the past to any present or former NYPA Board member;

5. The names, titles and salaries of each person hired by NYPA since September 30, 2008, excluding union members covered under a collective bargaining agreement with NYPA. Provide in addition to name, title and salary for each such hire whether

          a. the hire was to fill an existing vacant position/title as specifically reflected in the annual budget approved by the NYPA Board;

          b.  the vacancy was posted internally and/or externally; and

          c.  the position was newly created and did not exist prior to the hiring of such person;

6. The names, titles and salaries of each person who has been promoted to vice president or above by NYPA since September 30, 2008 and the three year salary history of each such person, excluding union members covered under a collective bargaining agreement with NYPA. Indicate whether each such promotion was considered by or approved by the NYPA Board; and

7. The names, titles and amount of increase in salary of each vice president or higher who has received a raise in his or her salary since September 30, 2008, excluding union members covered under a collective bargaining agreement with NYPA.

If all of the records I have requested cannot be e-mailed to me, please inform me by e-mail of the portions that can be e-mailed and advise me of the cost for reproducing the remainder of the records requested.

If the requested records cannot be e-mailed to me due to the volume of records identified as responsive to my request, please advise me of the actual cost of copying such records onto a CD-ROM, if that is possible.

Please advise me of the cost of providing paper copies of the requested records.

If my request is deemed to be too broad or not to reasonably describe the requested records, please contact me via e-mail so that I may clarify my request and, when appropriate, please advise me as to how NYPA records are filed, retrieved, or generated.

If for any reason any portion of my request is denied, please inform me of the reasons for the denial in writing and provide the name, mailing address, and e-mail address of the person to whom an appeal should be directed. Thank you for your expected cooperation.

Very truly yours,

George J. Marlin

The Kessel NYPA Watch, February 13, 2011 – By George J. Marlin

February 13, 2011

Fool Me Once, Shame on You; Fool Me Twice, Shame on Me

When Kevin Law was appointed as CEO of the Long Island Power Authority following Governor Spitzer’s decision to fire Richie Kessel in 2007, one of the first and wisest things he did in surveying the damage and destruction wrought by Kessel was to request an opinion from then-Attorney General Andrew Cuomo about various questionable actions undertaken by Kessel.

Among the actions AG Cuomo was asked to address was whether Kessel’s use of public monies at LIPA to fund various Long Island and other not-for-profits was proper.  As Newsday learned after persevering in its FOIL requests (sounds familiar) Kessel gave away well over $1 million of LIPA public money over the course of his term.

In October 2007, in response to Kevin Law’s request, AG Cuomo wrote that many of Kessel’s contributions were improper.  In a formal written opinion, the Attorney General wrote:

In the event, however, that a financial contribution does not directly relate to one of LIPA’s powers, duties, or purposes, then we believe it would fall outside LIPA’s authority to give. As a creature of statute, LIPA lacks powers not granted to it by express or necessarily implicated legislative delegation. While we recognize that the LIPA Act is to be liberally construed to effect its purposes, Public Authorities Law § 1020-gg, its purposes must in fact be served in order for LIPA’s acts to be authorized.

With respect to the charitable giving program, we find nothing in the powers, duties, or purposes of LIPA that renders improving community goodwill or the well-being of the community unrelated to the provision of electrical service as part of LIPA’s mission. Moreover, while LIPA has “all the powers necessary or convenient to carry out the purposes and provisions” of the LIPA Act, Public Authorities Law § 1020-f, we believe that increased goodwill is neither necessary nor convenient for complying with the provisions of or achieving the purposes of the LIPA Act. “Indeed, the beneficial corporate public relations generated by the largesse made in the name of public utilities essentially advances predominately the private interests of the utility corporations…and are too peripheral to the service interests of the ratepayers.” Furthermore, the charitable contribution program appears to conflict with the “sine qua non objective” of the LIPA Act, “to give LIPA the authority to save ratepayers money by controlling and reducing utility costs.” For these reasons, we are of the opinion that the charitable contribution program is not authorized.

AG Cuomo’s written opinion is available at this link:

Street Corner has deleted case citations in the quote above for purposes of readability.

Here’s Street Corner Conservative’s question. Newsday reported extensively on the AG’s opinion at the time and Kessel declined to be quoted (a rarity since he lives to have his name in the paper), so Kessel was fully aware of the position of the AG on donations of public money for purposes unrelated to the mission of a State public authority. Therefore, since Kessel had knowledge of the law and then intentionally and recklessly spent hundreds of thousands of public money on sponsorships in no way related to the mission of NYPA, shouldn’t there be consequences, serious ones?

A fiscally responsible governor – By George J. Marlin

February 11, 2011

The following appears in the February 11-17, 2011 issue of the Long Island Business News:

At an executive mansion breakfast hosted by Gov. Andrew Cuomo late last month for Democratic lawmakers, an Assembly member blasted the governor for opposing tax increases to solve the state’s fiscal woes. The Wall Street Journal reported the Assembly member pointed to a portrait of Franklin D. Roosevelt and lectured the 56th governor that the 44th governor “was able to be a progressive governor even in a time of great financial difficulty.”

While it is true that Gov. F.D. Roosevelt during the Great Depression declared “aid must be extended by government … as a matter of social duty” and built on many of Gov. Al Smith’s social reforms, nevertheless, he insisted that the Empire State must be fiscally responsible in pursuing those goals. For instance, when President Herbert Hoover asked U.S. governors to pursue “energetic public works,” Roosevelt demanded prudence and promised that relief programs would be “limited only by the estimated receipts from revenue without increasing taxes.”

Roosevelt, who was elected governor in 1928, was the first chief executive empowered by the Executive Budget Amendment that was added to the state constitution in 1927 with Gov. Smith’s support. And FDR aggressively used that authority to tame big-spending legislators.

Under this new system, the governor dealt from his budgetary deck of cards and the Legislature played the hand dealt to it. The Legislature can “take action,” which means it can accept the governor’s budget as it is, reduce spending, eliminate spending or add to a spending measure. However, the governor can exercise his veto power to reject any of these spending changes.

When the state Legislature defied Roosevelt’s authority and added a $56 million lump sum appropriation (the spending of which would be determined later by legislative leaders) on a budget of approximately $250 million, the governor exercised his veto power. After the Legislature re-passed these appropriations, Roosevelt took the matter into the courts. The Court of Appeals unanimously upheld the governor in 1929 and as a result, New York was able to manage its finances in an efficient and more businesslike manner.

Throughout his tenure, Roosevelt insisted that the budget be based on pay-as-you-go methods. He was critical of deficit spending and denounced President Hoover’s long-term borrowing practices to fund present-day operating expenses. “This merely puts,” he said, “the burden of the unemployment cycle on future generations.” He also complained that the Hoover administration was “the greatest spending administration in peacetime in all our history.” He urged, “Let us have the courage to stop borrowing to meet continuing deficits.”

As for welfare programs, Roosevelt argued they should be a temporary expedient, not a permanent way of life. His guiding philosophy was to give relief only to the deserving poor, “those who could not work because they were sick, crippled or unemployed as a result of circumstances beyond their control.” He preferred “work and wage” programs in which recipients worked for the money they received.

Finally, FDR opposed the formation of public employee unions with collective-bargaining powers and the right to strike. He warned that “a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of government until their demands are satisfied. Such action, looking toward the paralysis of government by those who have sworn to support it, is unthinkable and intolerable.”

No tax increases, no deficit spending, no long-term debt to fund operating budgets, no public employee unions or strikes – sounds pretty good to me. Adopting Gov. Roosevelt’s principles of state governance and finance will serve Cuomo well in his efforts to restore the Empire State’s economic viability. That snarky Assembly member demonstrated the ignorance of state history that is characteristic of Albany. FDR would be shocked by Albany in 2011 and would be a vocal supporter of Gov. Cuomo’s reforms.