The following appears in the October 11-17, 2013 issue of the Long Island Business News:

When Gov. Andrew Cuomo phoned George Pataki on Oct. 2 to ask him to serve as co-chairman of a Tax Relief Commission, the former governor thought at first it was a wrong number.

That reaction is what the Irish literary giant James Joyce called an “epiphany” – a sudden and important manifestation or realization of the essential nature of a situation.

Pataki’s epiphany: He grasped that he’s an unlikely candidate to lead such a commission.

Why? For most of his three terms in office, Pataki was an unengaged lifestyle governor who governed by press release and gave away the store to keep the perks of office.

Granted, Pataki – who knocked out liberal icon Mario Cuomo in November 1994 – got off to a good start. Thanks to the skills and efforts of its brilliant budget director, Patricia Woodworth, the fledging administration struck a tax-cutting deal with Speaker Shelly Silver: The top income tax rate, which stood at 7.875 percent, was reduced to 7.59375 percent in 1995, 7.125 percent in 1996 and 6.85 in 1997. (The rate did go up to 7.7 percent in Pataki’s third term and Andrew Cuomo has since taken it up to 8.82 percent.)

After that 1995 victory, however, everything went downhill. Pataki abandoned his pledges to curb Medicare costs, unfunded state mandates, one-shot fiscal gimmicks, back-door borrowing and tax-and-fee increases.

While inflation during the Pataki years was up 39 percent, state spending increased 85 percent, from $62 billion to $115 billion. State-funded debt, meanwhile, grew from $28 billion to $51 billion, an 82 percent jump.

As a result of Pataki’s insouciant leadership, when he left office in 2006, New York had the highest state taxes per capita and the worst business-tax climate in the land, and the state was rated worst in the nation in the U.S. Index of Economic Freedom.

The New York Observer summed up the Pataki years as “a legacy of laziness, mediocrity and pervasive neglect of the public interest, while creating a culture in which ethical corruption has become an acceptable way of life.”

Even the Republicans who jockeyed to succeed Pataki in 2006 were critical. William Weld, the former governor of Massachusetts, contended that “New York spends excessively, borrows excessively and, of course, taxes excessively.” Randy Daniels, who served as Pataki’s secretary of state, reminded voters that New York has “the highest combined state and local taxes in the country, the second-highest utility costs after Hawaii, some of the highest insurance rates and an out-of-control Worker’s Compensation System.”

John Faso, a former minority leader of the New York Assembly and the eventual 2006 GOP gubernatorial nominee, told The Wall Street Journal that Pataki “lost his way on taxes and spending.”

So why does Cuomo turn to a predecessor who pandered to special interests and increased spending, taxes and pork?

It gives him cover and makes him look open-minded and bipartisan. Also, the appointment neutralizes Pataki as a Cuomo critic.

Pataki’s acceptance, meanwhile, may increase government-related business for his low-profile environmental consulting firm, The Pataki-Cahill Group.

As a condition of sitting on the Tax Relief Commission, Cuomo’s Moreland Commission on Public Corruption should demand that Pataki disclose if the Pataki-Cahill Group has ever been retained by any state agencies – such as LIPA and the New York Power Authority – or agency vendors.

But don’t hold your breath waiting for that epiphany.

Statement by

George J. Marlin

Director

Nassau Interim Finance Authority

Wednesday, October 9, 2013

on

“The Proposed Multi-Year Financial Plan”

2014-2017

Nassau County’s proposed multi-year financial plan for fiscal 2014-2017, in my professional judgment, is seriously flawed.

In 2011 after NIFA declared a Control Period—upheld by the Courts after the County sued, and instituted a wage freeze, notably requested by the County—Nassau County prepared its 2012-2015 Financial Plan. That Plan, approved by NIFA (which I reluctantly supported) was to be a transitional plan—and included as the report notes on page 12, certain conditions including $150 million in labor saving that would recur and a GAAP balanced budget in 2015. In exchange for these two conditions, NIFA agreed to approve borrowings for Certs and judgments and settlements at an agreed upon level.

The County has failed both conditions. Blatantly and without remorse or explanation.

The County projects in their multi-year fiscal plan, on a non-GAAP basis, deficits of $32 million in FY 2015; $48 million in FY 2016; and $51.3 million in FY 2017.

The NIFA staff analysis projects deficits of $157 million in FY 2015, $190 million in 2016 and $255 million in 2017.

Labor has given no concessions. Any labor savings were imposed by the County not given by labor. And here we are in the fall of 2013 and the County’s financial plan as our staff outlines is not anywhere near GAAP balance in 2015. Yet it plans to borrow and expects NIFA to approve this borrowing for operating expenses.

Why? The County simply does not care. A control period and a wage freeze are draconian measures that a locality should wish to avoid and if it occurs to climb out of as quickly as possible. What duly elected official wants a non-elected State board to control? Sensible governments would do anything to get out of controls.

But not Nassau. So what if contracts and borrowings have to be approved. So what if wages remain frozen.

As long as the County does not have to make the tough decisions. As long as the County can blithely go along la dee da, tomorrow is another day.

The leadership of the County was elected to lead and to govern and not to absolve itself of responsibility by blaming NIFA whose controls it brought down on itself and whose controls the County now finds as the easy way to go.

When can NIFA lift controls? Never unless the County wants controls to be lifted and stops borrowing for operating expenses, makes the hard decisions and produces a GAAP balanced budget.

Statement by

George J. Marlin

Director

Nassau Interim Finance Authority

Wednesday, October 9, 2013

on

The Nassau Events Center

I am skeptical of a deal of this proportion when:

• The Party to the agreement is a shell corporation with no assets;

• The agreement is subject to financing that the shell corporation does not possess;

• The agreement is subject to numerous other conditions.

(Frankly, I doubt the conditions of the agreement will ever be met and I expect that in a year to eighteen months the shell corporation will try to renegotiate.)

Nevertheless, I would like to note that although we have decided that the particular structure of the coliseum redevelopment documents does not require our contract approval, we reserve our right to examine and consider any other contracts related or ancillary to the coliseum. We are not giving a blank check. And the decision that the current documents do not need our approval should in no way be construed or expanded to imply that we will hesitate to interject whenever we believe a commitment by the County constitutes a contract requiring our review under our statute which gives broad power to oversee contracts impacting the County’s finances.

The following appears in the September 27-October 3, 2013 issue of the Long Island Business News:

After Gov. George Pataki signed into law legislation creating the Nassau Interim Finance Authority in 2000, he appointed Ronald Stack as an initial member of NIFA’s Board of Directors. Two years later, Pataki named Stack NIFA’s chairman, a post in which he served with distinction under four governors until he stepped down Sept. 17.

Governors relied on Stack to help restore Nassau’s fiscal health because he was uniquely qualified to carry out that task.

In the 1970s and early 1980s, Stack served as Gov. Hugh Carey’s deputy chief of staff. During his tenure, he was present at the creation of the New York City Emergency Financial Control Board, the first of its kind.

In 1975, thanks to budgetary gimmicks, phantom revenues and capitalizing of expenses, NYC expenditures totaled $12.8 billion and revenues $10.9 billion. Fifty-six percent of locally raised taxes were appropriated for debt service, pension and Social Security payments. In addition, short-term debt, which in 1965 was $536 million (10 percent of total debt) ballooned to $4.5 billion (36 percent of total debt). With 1976 short-term debt needs projected at $7 billion, the financial markets closed their doors to New York City.

To keep the city operating and to avoid bankruptcy, Carey, with the help of Stack and other key members of his administration, developed legislation that created the EFCB, which was granted the power to monitor the city’s spending and to impose fiscal constraints.

The control board forced the city to reform itself, and to this day it has produced operating budgets annually balanced under Generally Accepted Accounting Principles.

After Carey left office in 1983, Stack began a new career in the municipal finance industry. He went on to become head of the Public Finance Department of Lehman Brothers and today is the managing director in charge of the Northeast region for Wells Fargo.

Stack has been recognized as one of the nation’s leading experts in his field and has received numerous industry awards. He has served as a financial adviser to NYC and the states of New York, New Jersey, Connecticut, Massachusetts and California, and many of their agencies.

He also had the distinction of serving as chairman of the Municipal Securities Rule Making Board, which formulates the rules regulating the municipal securities market including taxable and tax-exempt bonds and notes issued by states, local governments, school districts, government agencies and authorities.

I first met Stack when I was executive director of the Port Authority of New York and New Jersey. We worked together in 1996 to develop the plans to finance a new International Arrivals Building at JFK Airport.

At that time, the $1.2 billion deal was the largest public/private partnership in the nation. Working with Stack, I found him to be a true professional with a first-rate mind and impeccable standards.

During the past 3½ years, I have had the privilege to serve with Stack on the NIFA board. Once again, I found him to be a man of honor with sound judgment. Thanks to his municipal expertise, he was a strong and fair guiding hand in tackling Nassau’s fiscal problems.

As NIFA chairman, Stack established collegial unity among board members who came from all walks of political life. The votes to impose a control period on the county and a wage freeze requested by Nassau’s county executive were unanimous due to Stack’s reasoned and measured arguments.

In his work “Politics,” Aristotle described three qualities required of a statesman: an affection for the established rules of order, abilities wholly equal to the business of one’s office and the qualities of virtue and justice.

Ron Stack is the poster boy for Aristotle’s statesman.

The following appears in the September 13-19, 2013 issue of the Long Island Business News:

After 20 months in office, Suffolk County Executive Steve Bellone has learned that the job he craved is not a glamorous or easy one.

It’s not easy because executives who take on a fiscal crisis must actually govern if they are to succeed. And governing means making tough but responsible decisions that, by their very nature, will anger large segments of the population – particularly public service unions.

Bellone has also learned that many of the cost-cutting ideas promoted by his predecessor, Steve Levy, are not as draconian as he portrayed them in the election campaign.

Hence, Bellone’s referendum to merge the county’s Comptroller and Treasury departments, which he vigorously opposed in 2011 and now looks like a prudent plan – one that, if approved by voters in November, will save over $800,000 a year.

Other Levy proposals Bellone has embraced include the closing of the John J. Foley Skilled Nursing Facility and billing the county’s 10 towns for a piece of their out-of-county community college tuitions. These two actions will trim the projected $180 million deficit for 2014 by about $15 million.

Bellone claims the difference between himself and Levy is that he has been able to advance these policies because he has a good relationship with the members of the County Legislature. He will soon learn, however, that such lovefests are short-lived, because legislators, unlike executives, are free to be irresponsible, because they’re not responsible for upholding or administering the many feckless laws and flawed contracts they approve.

A legislator having a cocktail with union leaders or lobbyists after a round of golf can easily agree to honor a request to vote for legislation the unions favor, regardless of its long-term fiscal consequences, because he will not be the person who must live with it. The passed “buck,” as President Harry Truman put it, winds up on the chief executive’s desk and becomes his problem.

To further his education on the mindset of legislators, Bellone should read “Mayor,” the memoir of New York City three-term Mayor Edward Koch. This former legislator admitted he learned what a chump he was in Congress only after he became the city’s magistrate:

“I have publicly stated and referred to myself as “Mayor Culpa” for having voted for programs in the Congress which added to the city spending. I neither knew nor cared at the time how those wonderful programs would be paid for and by whom. Indeed, I have summed up my responsibility by saying that if I had the power I would punish every member of Congress who participated in those days, and perhaps even today, with some of their mandates imposed on cities, by having them serve one year as mayor.”

Finally, Mr. Bellone will have to learn – if he hasn’t already – that there are limits to budget cuts and to tax and fee increases. Severe service cuts and excessive taxes compound fiscal problems by hastening economic decline and the erosion of the tax base.

If Suffolk County is to avoid falling into the fiscal abyss, Bellone will have to convince Gov. Andrew Cuomo, a fellow Democrat, to fulfill his 2010 campaign pledge to help municipalities rein in costs by implementing genuine unfunded mandate relief.

And he must persuade the governor that if ever-rising county employee salary and benefit costs are to be contained, the Triborough Amendment – which provides that the provisions of a public employee contracts must remain in effect after the contract expires – must be repealed or significantly altered to favor elected officials and the taxpayers they represent.