As the New York Times reported on Sept. 11, at the insistence of the S.E.C., “New Jersey agreed never again to fraudulently hide its underfunding of the states’ public pension system.” Hide or not, many states (including New York) have invested too little money in public pension funds. This represents a huge hidden liability for both current and future taxpayers.
The underfunding described has a number of root causes. The first, and often most noticed, reflects commitments made without consideration of cost. The second cause is even more insidious. Accounting rules set by the Government Accounting Standards Board offer at best, only the illusion of transparency. This has allowed governments to base budgets on average values and overly optimistic investment returns. Harry Wilson, the Republican candidate for state comptroller, assets that if you do the math using Generally Accepted Accounting Principles, New York State would come up with a $30-$80 deficit, and find itself a lot less solvent.
Needless to say, the pension funding issue has broad ramifications, once again illustrating the absence of business-like practices and policies necessary for efficient government. Addressing this concern will require the use of state–of-art accounting techniques that truly focus on performance rather than intent. I intend to tackle this subject in more detail in a future column.
Beyond public reporting, there is an obvious need to also examine how effectively public agencies deliver services to New Yorkers. Let’s begin by examining the role of Industrial Development Agencies (IDAs) that have been granted legislative power to subsidize business projects through tax exemptions and tax exempt bond financing. In layman’s terms, they have been established to lure industry to locate, remain in the state and create jobs.
IDA reform has long been a hot topic in New York. A major concern is that tax dollars involved could be put to better use. More specifically, tax exemptions bleed money away from education and other important things, and they add up to millions of dollars of lost revenue, which could otherwise be used for any number of underfunded state programs. The involvement of the Town of Hempstead’ IDA with the Avalon Bay project in Rockville Centre, as reported in Herald stories last February, March and April, is a classic example of misdirected economic development activity.
Any legitimate reform agenda must include an examination of the ongoing role of IDA, especially in Nassau County. We need to closely look at IDAs to ensure they use tax dollars in good faith, with due care and with the public interest in mind. I’d like to know if you agree