This Op-ed piece I wrote appeared in the NY Daily News on May 9, 2012.

The following appears in the May 4-10, 2012 issue of the Long Island Business News:

In “Modern New York: The Life and Economics of a City” (Palgrave Macmillan, $28), author Greg David traces the longtime war between pro-welfare state pols and pro-economic growth ones.

David’s story begins in the 1960s when most potentates embraced Mayor Robert F. Wagner’s proclamation that he “would not propose to permit our fiscal problems to set the limits of our commitments to meet the essential needs of the people of the city.”

That philosophy was taken to its extreme by Mayor John Vliet Lindsay. To cure perceived social ills, during his tenure (1966-1973), he went on a spending and hiring spree that put the city on the road to perdition.

To fund budgets that ballooned from $3.87 billion in 1966 to $11 billion in 1973, Lindsay raised every existing business tax and invented new ones. He imposed a progressive city income tax on residents and a flat one on commuters. He also successfully pursued the extension of World War II’s “temporary” rent control laws.

As a result of Lindsay’s tax-and-spend policies, the end of Wall Street’s bull market in 1969 and rent control laws that caused landlords to abandon 13,000 apartment buildings and “cost the city $500 million a year in property taxes,” the city fell into the fiscal abyss.

New Yorkwas saved thanks to two people, Gov. Hugh Carey and Mayor Ed Koch. Carey created the state oversight and control agencies – the Emergency Control Board and the Municipal Assistance Corp. – needed to avoid bankruptcy and to institute an orderly process for placing the city on a sound financial footing. Koch made the tough decisions needed to balance the budget four years in a row and to get state controls lifted.

David reports that Koch not only “moved to curtail many of the social programs the city financed,” but also held that spurring economic development “was the key to reviving the city.” Koch boasted, “Past administrations did not talk about jobs and profits but how to getNew York Cityto be the No. 1 welfare city inAmerica. The whole business of our city is how to get people to stay here, how you get people to come here, how you get business to thrive.”

During Koch’s three terms as mayor,New Yorkregained “two-thirds of the jobs lost in the downturn of 1969-1977.” Employment growth in banking and securities, business services, culture and tourism, and various professional fields more than made up for the loss of 259,000 factory jobs.

New York’s immigrant population, who earlier labored in factories, now occupied jobs in the thriving tourism industry. They have revitalized many of the city’s most depressed neighborhoods.

With the exception of Mayor David Dinkins’ administration (1990-1993), the Koch approach has prevailed. Despite the tragedy of 9/11, severe recessions and reckless spending by Mayors Giuliani and Bloomberg, the city has endured.

It hasn’t been perfect. David states that when the city’s investment banking jobs peaked at 190,000 in October 2007, “the sector accounted for 28 percent of all the wages in the city.” Hence the city, and for that matter the state, have been too dependent on a cyclical industry that paid 20 percent of state and 13 percent of city tax revenues.

The potential impediment to future prosperity: the election of a new mayor who will be beholden to municipal employee unions and the Working Families Party. An administration dedicated to reviving Lindsay’s spendthrift ideological approach to governing could stifle economic growth and drive out the city’s most mobile citizens, the 40,000 households that pay 51 percent of taxes and make investments that create jobs. Taking such a course, David rightfully concludes, could cause “another economic and fiscal cataclysm.”

The following appears in the April 20-26, 2012 issue of the Long Island Business News:

Last December New York State Senate Majority Leader Dean Skelos and his merry band of downstate suburban Republican senators enthusiastically embraced Gov. Andrew Cuomo’s so-called tax-reform legislation. The reality, however, is that the enacted law, which projects $2 billion in additional tax revenue, actually raises taxes on many overburdened suburban taxpayers.

The downstate senators apparently did not grasp the consequences of their actions. By yielding to the temptation of political expediency (an apt motto for the group is Oscar Wilde’s epigram, “I can resist everything but temptation”) they are hurting the very constituents who elected them to office. Not only will higher taxes drive more of suburbia’s wealthiest to lower-tax states, those left behind will forfeit more of their income to Albany and will get in return proportionally less in state-funded aid.

Every year New York’s Department of Taxation and Finance collects approximately $80 billion in fees and taxes on personal income, corporate profits and sales. The bulk of those dollars are then distributed to fund various local programs and services throughout the state. Services include education, transportation, public safety and health care.

A recent study commissioned by the Citizens Budget Commission and performed by the Nelson A. Rockefeller Institute of Government at SUNY Albany confirmed what most Long Islanders have long suspected: “New York City and the downstate suburbs give far more to Albany in revenues that they get in state-funded expenditures.”

Downstate suburbia contributes about 27 percent of the total tax dollars that go into the state coffers but receives about 17 percent of state aid. In other words, for every dollar paid in taxes, only 72 cents returns in the form of state aid.

Upstate residents benefit the most. For every $1 they send to Albany they receive back $1.69. That explains why upstate Republican legislators – who hypocritically swear allegiance to the principles of fiscal conservatism – happily vote for higher state taxes. They know their regions will benefit the most and will be required to spend the least. That’s because most of the wealthiest in the state live in New York City or its suburban bedroom communities.

When it comes to state aid to public schools, downstate suburban counties are also shortchanged. In fiscal year 2009-2010, for example, Nassau County received $935 million in school aid or $692 per capita, and Suffolk County received $1.795 billion or $1,183 per capita. Western New York’s Erie County, however, received $1.213 billion, which translates into $1,382 per capita.

Get the picture? Long Islanders are paying more to get less from Albany.  And thanks to income tax increases that go into effect this year, they will be contributing even more to state coffers.

Skelos and his suburban confreres were rolled last December. Instead of taking deep bows they should be hanging their heads in shame.

 The following appears in the April 6-12, 2012 issue of the Long Island Business News:

The first-ever state corruption risk investigation performed by the Center for Public Integrity has been released, and the findings are depressing.

After examining state government anticorruption programs and policies, and accountability and transparency standards utilizing 330 integrity indicators, the center concluded that not a single state deserved an A grade. Five states were awarded a B, 19 a C, 18 a D and eight states received an F.

The primary reason for the poor grades: Ethic laws, disclosure procedures, open records and enforcement policies lack the bite needed to effectively combat the culture of corruption that has infested the inner sanctums of many state governments.

The most surprising grade was New Jersey’s B+.  Jersey, which has been the mecca of corruption, investigations and indictments, did well because in recent years it has enacted “some of the toughest anticorruption laws in the nation.” It boasts a transparent pension fund, a powerful and aggressive ethics enforcement agency, detailed financial disclosure requirements for the governor and other state officials, and genuine anti-pay-to-play laws for contractors.

Sadly, New York came in 36th place with an overall grade of D.

This poor grade should not be a surprise to New York taxpayers who have watched the membership of Albany’s Gallery of Rogues grow by leaps and bounds in recent years. Seventeen state legislators have left office to confront corruption charges or to check into prisons during the last 11 years.

The latest gallery nominee, former state Sen. Pedro Espada Jr., is on trial in federal court answering charges of six counts of embezzlement and theft totaling millions of dollars. If convicted, he will become New York’s poster boy for corruption.

One count of the indictment accuses Espada of stealing more than $200,000 from Soundview, a government-supported charity, between 2005 and 2009. This indictment alleges that the money was used to pay for lavish dinners, Broadway show tickets and a down payment on a Bentley. He’s even accused of pressuring a videographer, who filmed his grandson’s birthday party, to bill the Community Expansion Development Corp., a cleaning company controlled by Espada, and to call the party a “Children’s Community Outreach” event.

While Albany’s wrongdoings get most of the media attention, New York’s local municipal employees and officials are not immune from criminality. Just this past week a former assistant commissioner in New York City’s Department of Housing Preservation and Development pleaded guilty to accepting $600,000 in bribes and kickbacks.

A University of Illinois Institute of Government Affairs report, released in February, named New York the most corrupt state in the nation. Department of Justice public corruption convictions compiled by the Institute revealed that between 1976 and 2010, 2,522 public employees were found guilty of crimes. Runners-up were California and Illinois, which had 2,345 and 1,828 convictions, respectively.

Until New York creates a truly independent public ethics commission and really tough and transparent disclosure, accountability and campaign finance laws, all of which keep political foxes out of Albany’s henhouse, expect the state to continue receiving poor and failing grades on the Corruption Risk Report Card.

Statement by
George J. Marlin
Director
Nassau Interim Finance Authority

March 22, 2012

At NIFA’s December 8, 2011 meeting, I agreed to support the County’s multi-year plan to achieve a GAAP balanced budget contingent on the County cutting $150 million in spending from its 2012 operating budget.  In my statement that day I said:

And let me remind the County that approval of a plan is not approval of all the parts.  NIFA will base the approval of each part of the plan that comes before us in the coming months on whether the County carried out its responsibilities.

To date, the County has achieved, at best, only 60 percent of those cuts.  And the County is two months past its budget imposed deadline.

Today I voted for 60 percent of the County’s Capital spending request.  If the County does not quickly meet $150 million in cuts, I expect to vote No on future requests.

Some other comments:

1. I am concerned that the Memos of Understanding with the police and detective unions announced this week may wipe out some, most or all of the police precinct closings projected savings.  I await back-up documentation from the County. 
2. As promised at our last meeting, I sent a letter to the New York State Comptroller’s office outlining my concerns regarding Nassau County’s contracting procedures and its interaction with regulations and state and local laws.  In that letter I said:

The County, in 2011, may have violated regulations, procedures and laws related to contracts over $25 thousand on numerous occasions.  There appears to be a pattern of vendors being hired to perform non-emergency services without prior legislative or NIFA approval.  Time and again the County has submitted contracts to NIFA where work had been already completed or substantially underway.  There have also been complaints from charities that provide essential social services for the poor and disabled that the County has delayed, in many cases for months, forwarding their federally- and state-funded contracts to NIFA for approval.

In my judgment, the County’s actions make a mockery of the statutory responsibility delegated to NIFA to approve or disapprove contracts and effectively nullifies the clear legislative intent of the NIFA law, one enacted pursuant to a unanimous vote of the County Legislature in a home rule message, a vote that included that of then County Legislator Mangano.

I am pleased to report that I received a reply from the State Comptroller’s Examiner-in-Charge of the audit, Mr. Ira McCracken.  He has assured me that he will investigate the issues I raised.

      3.    The County has a habit of announcing deals before it has a deal.

The County announced it had a coliseum deal with Wang before it had a deal and subsequently were taken to the cleaners.  Fortunately the voters had the good sense to reject the plan.

Then there was the Mitchell Field borrowing.  The County announced it had a deal before it had a deal and the County was taken to the cleaners.  I voted against that borrowing.

Then the County announced it had a bus privatization deal before it had one—and the County was once again taken to the cleaners.  I reluctantly voted for that contract in late December because County residents needed bus service on January 1, 2012.  However, I predicted the bus contract would prove to be a disaster for commuters—and sadly that is coming to pass.

This week the County announced the makings of a new borrowing scheme—without a deal in hand.  If it becomes a reality it will be the biggest one-shot revenue fiscal abuse in the County’s history.  It will replace Governor Mario Cuomo’s sale of Attica Prison to the Urban Development Corporation as the poster child of one-shots.  (Just in case the County has forgotten, let me remind the County that any net revenue after Nassau sewer bonds are defeased would, under GAPP, have to be amortized over the life of the lease contract.)

As always, the devil will be in the details.  But I find it hard to believe that the County will negotiate a deal with a for-profit corporation that will not result in significant increases in sewer charges (a/k/a Toilet Flushing Tax) for Nassau’s over-taxed residents.

It appears to me that the sole motivation for leasing the Sewer Systems is to get one-shot revenue that at the end of the day will not fix the County’s structural operating deficit.  Whether or not it is good public policy does not appear to be part of the equation.

Personally, I agree with Governor Andrew Cuomo’s position, that government “has used a variety of financial gimmicks and one-shot revenues that hide the fact that spending is growing at an unsustainable rate.”

“One shots” do not eliminate structural deficits and excessive reliance on them is frowned upon by rating agencies and financial analysts.