Governor Cuomo (left) and Comptroller DiNapoli (center) (photo: Governor's Office/Flickr)
State Comptroller Thomas DiNapoli and Governor Andrew Cuomo have been airing public disagreement in the news media over the past several months. It is the latest chapter in a long story here in New York -- the Governor and the Comptroller sometimes agreeing but often challenging each other.
Calling out Cuomo's fiscal policies
DiNapoli's analysis of the recently-enacted State 2017-2018 budget (crafted by Cuomo and enacted through his negotiations with the Legislature) warns of fiscal risks ahead with uncertainty about the federal budget and $10.5 billion in new state bonded indebtedness. The budget, which also included a number of public policy changes, was enacted with little time for public review, DiNapoli’s report says. It also raised additional concerns about "transparency, accountability and oversight."
Early in May, the Comptroller issued an audit of the State Economic Development Corporation, the governor's economic development agency, citing it for lax reporting on key projects, particularly those that create tax-free economic development zones to encourage business development. “Too often Empire State Development Corporation is either late or not reporting on the results of economic development programs,” DiNapoli said. “We need better reporting to ensure transparency in economic development spending and to promote an informed analysis on the return of the investments state taxpayers make in these programs.” A spokesperson for the Economic Development Corporation said the Comptroller's audit "cherry-picks information" and "profoundly misrepresents our efforts."
Cuomo has called the Comptroller’s audits “opinion” and sought to undermine DiNapoli’s oversight at several turns.
DiNapoli's office signed off on the state Senate Republican majority's list of stipend payments for committee chairs, where in some cases vice chairs have received payments that typically only go to chairs. Democrats and the media have questioned some of these payments. Cuomo used the issue as an opportunity to criticize DiNapoli. "If it was not legal, the Comptroller shouldn't have done it," Cuomo said. "If it's not legal, the Comptroller should call up and say, 'Whoops, I made a mistake, I need the money back.'" A spokesperson for the Comptroller's office responded that "the comptroller's office is not a court of law" and the issue "needs to be decided by the Senate itself, or the legal system."
DiNapoli has often been critical of the Governor's spending plans. Four years ago, in 2013, he issued a report that New York's debt, counting bonds issued by public benefit corporations, amounted to $63.3 billion — about $3,253 per state resident. "We spend billions each year to repay existing debt, so fewer resources are available for more pressing needs," he said. Much of the debt has been developed by public authorities. "Taxpayers have little or no say in how much the state borrows, but they're the ones who have to foot the bill," DiNapoli continued.
The Comptroller responded to an alleged bid-rigging scandal within Cuomo’s economic development programs -- for which nine Cuomo associates and donors have been charged by federal authorities, with a trial set for October -- by proposing more oversight through his office. Cuomo has made his own proposal in response to the scandal, which does not include restoring contract approval by the Comptroller for certain types of programs.
A history of tension and balance
Established in 1797 as an appointed position, the Comptroller's position has been constitutionally based and elective since 1846. The state constitutional convention that year, recognizing the need for an independent Comptroller, made it an independent position, elected by the voters. Until the early 20th century, the position rivaled the Governor's in power, including compiling the state budget, receiving taxes, monitoring banks, and preparing financial reports. That power diminished with the reorganization and consolidation of state government, including the creation of the Division of the Budget, carried out by Governor Al Smith in the 1920s.
But the Comptroller remains the state's chief financial officer, controls payment of state funds, borrows and invests for the state, manages the state retirement fund, reports on the state's fiscal conditions, and audits both state agencies and local governments. The Comptroller's website notes that the Comptroller "is the State’s chief fiscal officer who ensures that State and local governments use taxpayer money effectively and efficiently to promote the common good."
Governors and Comptrollers usually have good working relationships. But there is a potential inherent tension in a relationship between the state's chief executive, who uses public tax dollars to initiate and administer state programs, and the state's chief fiscal watchdog, who makes sure that the state stays fiscally solvent and strong and that those tax dollars are used well.
Comptrollers have challenged Governors many times during the course of state history.
For instance, Arthur Levitt (1955-1978), the longest serving Comptroller in the state's history, criticized borrowing practices that bypassed state constitutional referendum requirements for incurring state debt. Levitt, a Democrat, was a frequent critic of Republican Governor Nelson Rockefeller (1959-1973), whose administration expanded state government and constructed the Empire State Plaza governmental complex in Albany, often relying on bonds.
In a February 1964 speech, Levitt assailed Rockefeller as a "pseudo pay-as-you-go governor" who through the "subterfuge" of selling authority bonds had imposed on the people of the state "a staggering burden of debt without their consent." Rockefeller responded that Levitt "is a partisan, organization Democrat, not an independent, nonpartisan, nonpolitical watchdog of the public treasury, as he likes to be projected." Levitt's motive was "to discredit the fiscal integrity and soundly solvent fiscal policies of this administration."
Levitt had a number of run-ins with Rockefeller, including lawsuits to require more detailed budget information and to open up the books of the Metropolitan Transportation Authority. Summarizing his years of working with Rockefeller, Levitt concluded, "I haven't been soft on him at all."
"As the people's auditor, I have reported factually to the people in accordance with my constitutional mandate," Levitt said. He made the office a high-profile watchdog and force for fiscal restraint and probity.
Many years earlier, in the 1830s, the state was spending money lavishly on enlarging the Erie Canal, building additional canals and providing loans and other aid to railroads, mostly by issuing state bonds.
Democratic Comptroller Azariah Flagg (1833-1839 and 1842-1847) published an alarming report in 1838, warning that the state had reached "the utmost verge of prudence" and should curtail borrowing.
But Governor William Seward, a Whig (the Whig Party was then one of New York's two most important parties, along with the Democrats), told the Legislature in 1839 that "history furnishes no parallel to the financial achievements of this state." He added that "taxation for the purposes of internal improvement is happily unnecessary," since future canal user fees would provide funds to pay off the bonds.
Seward in 1840 called for spending $4 million more each year for 10 years for canals and railroads. The Whig majority in the state Legislature kept pushing up the debt.
Comptroller Flagg's warning turned out to be warranted.
The state entered a downward fiscal spiral. Recession sparked by the Panic of 1837 cut into state revenues. Canal construction costs rose. Even Seward admitted "severe shock" at learning that canal expansion would cost twice what he had estimated. The Erie Railroad fell behind on its repayment of state loans. Selling state bonds became more difficult as nervous creditors began to worry about New York's solvency. State debt rose to $27 million in 1842, a huge sum in those days.
Comptroller Flagg warned that New York was at "the very brink of dishonor and bankruptcy" and "it is a question of solvency or insolvency."
The voters heeded Flagg's warning. They gave fiscally conservative Democrats a majority in the next Legislature. They curtailed or suspended canal work and railroad aid. With Seward's reluctant concurrence, they enacted a special tax to keep the state solvent. The debt began to decline. Creditors' confidence returned, and state securities regained the status of good investments.
The lure of higher office
Some Comptrollers have had political ambitions and used the position as a stepping-stone to higher office, occasionally another source of tension with Governors.
William L. Marcy, Comptroller 1823-1829, went on to serve as Governor, 1833-1838. Silas Wright served as Comptroller from 1829 to 1833 and Governor, 1845-1856 (in those days, governors were elected every two years). Washington Hunt, Comptroller 1849-1850, went on to become governor, 1851-1852. Lucius Robinson, Comptroller 1862 to 1865, went on to become Governor, 1877-1879.
Martin Glynn, Comptroller 1907-1908, was nominated and elected Lieutenant Governor in 1910 and became Governor when William Sulzer was impeached and removed from office in 1913. But Glynn was defeated when he ran for Governor in his own right in 1914.
Nathan L. Miller, Comptroller 1901-1903, defeated Al Smith in his campaign for reelection as Governor in 1920, running on a platform of fiscal restraint and criticizing Smith's administration for overspending. But Smith returned to oust Miller in 1922.
Millard Fillmore served in the House of Representatives before being elected Comptroller in 1847 (the first person elected rather than appointed to the office). He was nominated for Vice President in 1848, elected along with presidential nominee Zachary Taylor, and became President upon Taylor's death in 1850. He ran for President in 1852 but was defeated.
Cuomo and DiNapoli both playing appropriate roles
Comptroller DiNapoli is playing an appropriate role, in line with many of his most impressive and judicious predecessors such as Arthur Levitt and Azariah Flagg. His reports are clear and readable, his warnings measured and documented, and his custody of the state retirement fund reassuring.
On the other hand, Governor Cuomo, like Nelson Rockefeller, Al Smith, William Seward and other bold, expansionist-minded Governors before him, is inclined to use public funds for innovative programs that he sees as investments in New York's future.
The conscientious Comptroller and the proactive Governor are well-suited to their respective positions. Their views, while sometimes at odds with each other, complement each other and offer the public contrasting visions for New York's future. That is useful for public debate and, hopefully, for creation of sound state fiscal policies.
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Dr. Bruce W. Dearstyne's latest book is The Spirit of New York: Defining Events in the Empire State's History, published in 2015 by SUNY Press.
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Street vendors protest the city's cap on permits (photo: @VendorPower)
Independent small businesses -- bodegas, pizza joints, shoe repair shops, fruit vendors -- are the heart and soul of New York City. But they are facing a crisis. Every day there is another story about some beloved neighborhood shop closing due to skyrocketing rents. Landlords then warehouse the vacant spaces in hopes of signing a lease with a bank or big chain. WNYC recently counted 17 vacancies on just two blocks of Christopher Street. And a report by the Manhattan Borough President found almost 200 shuttered storefronts on Broadway alone.
What is Mayor de Blasio doing to fix this problem? Nothing.
When asked about it -- and he frequently is -- the mayor claims the government’s hands are tied because the “free enterprise” system alone controls what landlords do with their space. The mayor had no real comment on a package of reforms unveiled last week by USBnyc, a new citywide coalition of small business owners, most of them immigrant-owned. And a couple months ago, speaking to Tony Danza, actor and owner of a 125-year-old cheese shop in Little Italy, the mayor’s only solution to the problem was to “urge the landlords to be less greedy.” Good luck with that!
But, in fact, the city is not a passive observer - it actively supports large landlords to the detriment of small business owners. For years, the main priority of the city’s Department of Small Business Services has not been to help mom and pops, but to organize and support Business Improvement Districts, the somewhat mysterious, quasi-public organizations that exist across the city, from Montague Street in Brooklyn to Melrose in the Bronx, with more being created each year.
SBS spends more of its yearly budget fostering BIDs (what it calls “neighborhood development”) than it does supporting actual small businesses. Just last month, the city doled out $500,000 for BIDs to create mobile technology apps. And all that is apart from the millions in funding that BIDs receive each year from the City Council.
The BIDS have innocuous-sounding names like the 82nd Street Partnership and the Village Alliance. Their glossy annual reports invariably show smiling shopkeepers and kids frolicking in fountains. Usually they are structured to give some minority of votes to local commercial tenants or residents. But make no mistake: by law, BIDs are controlled by commercial real estate landlords. Their mission is to maximize the cash flow they receive from their valuable investments. If that means kicking out a 50-year-old beauty supply shop to replace it with an artisanal gelato chain, too bad. As Mayor de Blasio would say, that’s capitalism at work.
It’s true that New York neighborhoods are always in flux, and too much nostalgia can be dangerous. But it wasn’t always like this. BIDs have only existed in New York for about 30 years, since the Union Square Partnership was founded in 1984. With the city in financial distress, landlords sought permission to tax themselves to provide basic services, like sanitation and security, where the city was falling short. Who could refuse such an offer? Even as the city rebounded during the Giuliani and Bloomberg eras, the city pushed for BID expansion, boosting their number to 44 in 2002 and 73 today. And the trend continues under Mayor de Blasio, who blessed new BIDs in Springfield Gardens, Queens and New Dorp, on Staten Island.
But BIDs don’t just power-wash sidewalks and post security guards on the corner. They play an active role to advance the interests of real estate owners in shaping public policy. They attend Community Board meetings, hire lobbyists, and nurture relationships with elected officials. With a collective budget in the hundreds of millions, they have a powerful voice. For years, together with the Real Estate Board of New York, they have blocked the Small Business Jobs Survival Act, which would require landlords to sit down and talk with their commercial tenants before doubling or tripling their rent.
And, so far, the BIDs have stalled the Street Vendor Modernization Act. In October, no less than a dozen BID managers personally testified against the vending reform package in City Council chambers, while their lobbyists shook hands with officials in the hallway.
Everyone, of course, has a right to testify. But it’s time to have a public discussion about whether, as some have suggested, BIDs have outlived their usefulness. New Yorkers today are concerned about gentrification, not “white flight.” It’s time for a neutral study of whether BIDs lead to unfair distribution of basic services and the privatization of public space. And time to ask Mayor de Blasio why, if he cares about mom and pop small business owners, his administration continues to tip the scales in favor of the very same real estate companies that are driving them out.
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Sean Basinski is director of the Street Vendor Project at the Urban Justice Center. On Twitter @SeanBasinski.
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the Capitol, via @NYSCapitolVisit
When asked what a state constitutional convention might cost if called by voters in 2017, I said at a State Bar Association panel event that I had applied the Bureau of Labor Statistics CPI inflator to what I then thought was the 1967 convention’s cost and got $47 million. Casey Seiler of the Albany Times Union was there. He did not hear or realize that I had adjusted for inflation, so he used the $47 million figure as the cost of the 1967 convention. This led others to then adjust for inflation based on that number, leading to the proliferation of a faulty projected cost of $350 million, immediately seized upon by convention opponents. (Seiler later published a correction.)
The Public Employees Federation wrote: “Experts estimate a constitutional convention would cost hundreds of millions of dollars.” Senator Majority Leader John Flanagan used it as evidence that a convention would be outrageously expensive, with no “guarantee” of any positive result. The wildly wrong number repeatedly popped up in media outlets all over the state. Even after shown the error of their ways in debates, opponents were loath to give up this ‘alternative fact.’ All of this was chronicled by Bill Mahoney as an urban legend in Politico New York.
Since then a leading convention advocate, Chris Bopst, went back to the state comptroller’s actual spending records. He found that between 1967 and 1971 a total of $7,580,885 was spent on preparing for and conducting the last constitutional convention. Of this, $527,051 ($3,977,673 in 2017 dollars) was for a preparatory commission. We haven’t had one of those this time; the Legislature killed it. This leaves $7,053,834, spent over a total of four years. In 2017 dollars this is $51,448,160, not far off (8.6%) from my original more-or-less shot in the dark of $47 million.
There’s no telling if the cost of the 1967 convention is a good guide for what a convention would cost if held today. After all, 1967 was half a century ago. (It’s the longest time since a constitutional convention was held in New York State history.) Some say that a better estimate is this year’s budget for the Legislature’s larger house, the Assembly. That roughly doubles the number, bringing it to $105.4 million.
One big thing is being missed: a major expense of the convention, the cost for delegates’ pay, would likely be lower in real terms this time around. The reason? Each delegate must be paid the salary of an Assembly member, and legislative compensation has gone up since 1967 far more slowly than the rate of inflation.
In 1967 there were 186 delegates; each was paid $15,000. Total delegate costs were therefore $2,790,000, just short of 40% of the convention’s overall cost. At the next convention, if it is authorized, there will be 204 delegates (three from each Senate district – there are now 63, not 57 – and 15 at large). Unless there is a legislative pay raise, each will earn $79,500. The total payroll for delegates will thus be $16,218,000. This is 29.8% of the current-dollar cost of the 1967 convention, and 15.4% of the 2017 Assembly budget.
At this potential level of cost, is a convention worth it? A comparison, albeit imperfect, suggests itself.
Successful businesses regularly reorganize, merge, or acquire companies to increase profitability by becoming more efficient, managing scale, and consolidating strengths. A close friend on Wall Street estimated the bankers’ costs of a $50 billion acquisition to be somewhere around .50% of enterprise value – lawyers of course are extra! The New York state budget is $153.1 billion. If we use $105 million as the high end constitutional convention cost – we arrive at a “reorganization “ cost that is .001% of the state’s annual budget.
Corporate reorganizations, mergers, and acquisitions are pursued because the benefits are expected to exceed the costs and to accrete over the long term. Not all benefits, of course, can be defined with a financial value. The gains a convention would likely produce in democratic accountability and good government are potentially enormous, but hard to monetize. However, think of this: One 2007 study estimated that a thorough reorganization of New York’s courts, sought for decades and recently said by the State Bar Association to be possible only through a constitutional convention, would save over $500 million ($600 million in 2017 dollars). That’s six times the high end cost of a convention in 2017.
What do these numbers tell us? It’s a no brainer. We cannot afford to not hold a constitutional convention.
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Gerald Benjamin is director of The Benjamin Center at SUNY New Paltz.
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