DiNapoli Says He Has Reformed
Comptroller's Office; Seeks Cap
On Borrowing by Authorities
By Henry J. Stern
January 11, 2008
This morning State Comptroller Thomas P. DiNapoli spoke to the Citizens Budget Commission. He reported on his first eleven months on the job, and spoke frankly about the impending state budget deficit, which he estimated at $4.3 billion.
Among DiNapoli's first acts after the legislature selected him on February 7 to fill the vacancy caused by Alan Hevesi's forced resignation on December 22 was the appointment a 12-member task force to make recommendations on management changes in the office, ethical standards and conflicts of interests, appointment of an inspector general and restructuring. The pro bono group was chaired by Mayor Koch and Frank Zarb. Koch was present at today's breakfast meeting, at which DiNapoli thanked the panel for its suggestions, which he said he had adopted.
There is no longer any question that the Comptroller's Office under Alan G. Hevesi was not optimally managed as far as ethics are concerned. How is that for understatement? The fact that Hevesi's campaign manager, Hank Morris, received millions of dollars in fees and commissions, representing businesses who sought funding from the Comptroller, who unilaterally controlled the state pension funds. This was an enormous disappointment to those of us who thought we knew Hevesi well, admired his high intelligence and verbal skills, and excused him from his indiscretions regarding his use of a state employee to drive and assist his invalid wife.
DiNapoli should let the public know what he told us: exactly what he has changed to prevent such misuse of the Comptroller's office in the future. It is tempting for anyone to be the sole trustee of a fund that now far exceeds one hundred fifty billion dollars, but I am not certain that more trustees would be helpful. It could simply mean additional people, who could have interests and friends of their own who were eager to dip, or to facilitate dipping by others.
At the meeting, the Comptroller presented his program to put a cap on the state debt. Legislation purporting to do that was adopted in 2000 by the Senate and the Assembly. The law, however, turned out to be useless since it exempted state authorities (e.g., the MTA, the Thruway Authority and Dormitory Authority), which are major borrowers. In the seven years since that law was adopted, the state borrowed 17.8 billion dollars under the cap, but authorities borrowed 34 billion dollars which were exempt from the cap. The state is ultimately responsible for debts incurred by the authorities.
DiNapoli now suggests a higher cap (5% of personal incomes in the State), to be phased in over nine years (until 2017) with authority debt included within the cap. Even if this law passes, which is not likely at this point because it would limit the legislature's power to appropriate anything they like and borrow without limit, it is likely the canny lawyers who rule Albany will find a way around it, as they did in 2000. Are we skeptical? Of course we are. Is there any reason not to be in view of past history on this issue?
The Comptroller's grasp of the state's financial situation impressed his audience. He appeared to be aware of financial realities. The CBC members present seemed to share his views.
What he can do about excess spending is another matter. He was elected by the Legislature, with a combination of Assembly Democrats and Senate Republicans providing the votes. DiNapoli had served a relatively placid twenty years (ten terms) in the Assembly, representing the Great Neck area in Nassau County.
When the Assemblyman was selected by his peers, Governor Spitzer called him "thoroughly and totally unqualifed" to be State Comptroller. But that was last February, early in the Year of Rage, and 2008 is intended to be the Year of Conciliation.
Several months ago, we asked the Comptroller whether the Governor had ever apologized to him, or retracted his harsh evaluation. He said that although the Governor had not done that in so many words, they were working together on various issues, and he thought the Governor was satisfied with his performance. We did not ask the Comptroller how he thought the Governor was doing.
The 800-pound gorilla in state finance is that, in almost every year, the state spends more than it receives. The real-estate and stock market boom of the last few years has helped the state and city fisc enormously, but the "Days of Wine and Roses," as Governor Carey described them in 1975, appear to be over, at least for a while. DiNapoli said today that current state borrowing was akin to "taking out a mortgage to pay for groceries," in other words incurring long term debt, on which billions of dollars of interest must be paid, in order to pay operating expenses. You don't have to be a Felix Rohatyn to know that you can't keep spending more than you take in.
Charles Dickens put it very well in Chapter 12 of David Copperfield, where he quoted Mr. Micawber's advice to young David. Micawber had recently been imprisoned for debt. He tells David the rule of happiness in life, a rule he himself has failed to follow.
"Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness.
"Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
For the State of New York in 2008, if we extrapolate, annual expenditure is projected to be closer to twenty-one pounds than twenty pounds, ought (shillings) and six (pence). New Yorkers are no longer imprisoned for debt (except for deadbeat dads), but that law is highly unlikely to be broadened, since the Legislature would have to do it, and they are addicted to borrowing, in part because they cannot say no to interest groups..
The stage is set for a confrontation between a relatively balanced budget and an increase in debt involving the sale of future lottery revenues. We will learn what role the new Comptroller will play in sounding the alarm and awakening the public and the editorial boards to the crisis. We will learn (but probably not be surprised) at what the three men in a room (who are not the best of buds) are going to do about it.
At some point Comptroller DiNapoli will either stand up to the man who made him Comptroller, or settle back and become part of the problem. There is a difference between expressing personal gratitude, and spending billions of dollars of the taxpayer's money in order to demonstrate political loyalty.
On the other hand, we know that cutting the budget means laying off people and closing facilities. There are bound to be some service reductions, although good management could minimize public distress. There is also waste, duplication and medicaid fraud in the budget. It is the task of intelligent, non-political managers to sort out state priorities, and do the most effective job in providing services and reducing costs.
The budget for fiscal 2008-09 will be presented by Governor Spitzer on or shortly after January 22. State law requires it to be adopted by the legislature by March 31. In the last twenty-three years, that deadline has not been met twenty times. Last year, the budget was on time (only a day late).
2008 is intended to be the Year of Reconciliation. We will watch to see how the Governor, Comptroller, Senate and Assembly reconcile the budget.
#438 1.11.08 1230wds
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