From the Right: End New York’s backdoor borrowing

From the Right: End New York’s backdoor borrowing


In New York today there are 1,178 state and local public authorities.

That’s a staggering number.

Of the total, 294 are state agencies, 876 are county, city or township agencies, and eight are interstate (i.e.: the Port Authority of New York and New Jersey).

What is frightening: the combined debt of these agencies is $329 billion.

According to a report released by New York Comptroller Thomas DiNapoli in December, the total debt of the agencies has increased by $61.5 billion since 2017. That’s a jump of 23%—way above the rate of inflation.

The report also revealed that 97% of all state-funded debt has been issued by public authorities.

This “backdoor borrowing” was created back in the days when Nelson Rockefeller was governor (1959-1973) to skirt these 65 words found in Article 7, Section 11 of the state constitution:

“… no debt shall be hereafter contracted by or in behalf of the state, unless such debt shall be authorized by law, for some single work or purpose, to be distinctly specified therein. No such law shall take effect until it shall, at a general election, have been submitted to the people, and have received a majority of all the votes cast for and against it….”

By borrowing through public authorities, the comptroller noted, “the state bypasses the voter approval process and diminishes transparency, accountability and oversight.”

Governors have used the agencies to fund state spending and to cover up operating deficits. “These transfers make it easier to present a balanced budget picture and avoid potentially difficult decisions on spending and or revenue.”

One of the most notorious backdoor borrowing schemes was hatched during Mario Cuomo’s tenure as the state’s chief executive officer. To help balance his budget, Cuomo sold Attica Prison to the Urban Development Corporation (now known as the Empire State Development Corporation) for $200 million, raised via bonded debt.

To allow the UDC to meet the principal and interest payments on that debt, the state leased the facility and paid rent to the agency.

In effect, Cuomo saddled taxpayers with more than $560 million in principal and interest payments on bonded debt over 30 years to get $200 million in one-shot revenues.

Ironically, the debt was still being paid off when Cuomo’s son, Andrew, was sworn in as governor in 2011.

Every governor since Rockefeller has utilized this fiscal abuse, including Governor Kathy Hochul.

In this year’s state budget, the New York Dormitory Authority, Power Authority, Mortgage Authority, Energy Research and Development Authority and the Housing Finance Authority transferred over $90 million to the state’s general fund.

And another $68 million, from proceeds of bonded debt issued by the Dormitory Authority, funded 276 pork barrel projects approved by Hochul to reward friendly legislators.

These grants, I can assure you, were not related to the original mission of the Dormitory Authority. A typical project was $500,000 for improvements to the Ice Arena bathrooms and locker rooms in the City of Long Beach.

Other little-known facts about the state and local authorities: they employ over 166,000 people whose total compensation is over $13 billion.

Approximately 33% of Authority employees earned $100,000 or more last year. By comparison, DiNapoli reported, “less than a quarter or 21.6% of New York residents earned as much.”

In addition, the vast majority of New Yorkers do not have the lucrative pension and health care benefits Authority employees receive in retirement.

The authorities also awarded 32,103 contracts worth $11.8 billion. Of these 16% were awarded noncompetitively. Do you suppose any of those non-competitive contracts were handed out to political cronies?

The abuse of public authorities by elected officials to balance budgets and to reward political insiders is egregious.

To fix this mess and to improve accountability, DiNapoli wisely calls on lawmakers “to discontinue its reliance on backdoor borrowing and the use of fiscal gimmicks, eliminate the use of lump-sum appropriations, and impose transparency and fiscal discipline.”

But don’t hold your breath waiting for Albany to act on those recommendations.

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