Citizens Union’s “State Spending in the Shadows” Report Finds $2.4 Billion In Opaque Funds In Nearly 80 Lump Sum Pots In State Budget

Originally published: February 29, 2016

Legislature expected to add its own discretionary pots as it did last year when it added 30 pots totalling $300 million

Major reforms needed to publicly unmask hidden funds and limit corruption; otherwise public should expect convictions similar to Silver’s

Citizens Union today released the fourth iteration of its watchdog report on discretionary state spending, Spending in the Shadows: Discretionary Funding in the NYS Executive Budget – FY 2017.  The report finds the proposed executive FY 2017 state budget contains $2.4 billion in opaque “lump sum funds” which allow spending decisions to be made in the shadows by our elected officials after budget bills are passed. Although this is down from the FY 2016 state enacted budget by $200 million, this year’s proposed executive budget contains 12 more ambiguous pots of state funds than proposed last year by the governor, and the legislature has yet to add its own discretionary pots.

The continued presence of these pots presents a risk for corruption that must be reformed as state ethics negotiations are underway.  The report again updates Citizens Union’s previous report on the topic from 2013 and issued twice in 2015 for both the executive and enacted budgets.

Spending in the Shadows major findings include:

  1. The proposed FY 2017 Executive Budget contains $2.4 billion in lump sum funds, through 78 separate pots.
  2. The governor, Assembly and Senate each have considerable amounts of lump sum funds proposed for their use in the FY 2017 Executive Budget: as much as $2.2 billion is proposed to be influenced by the governor; $815 million by the Senate; and $686 million by the Assembly. This is slightly less than last year’s Executive Budget, but does not yet account for any pots to be added by the legislature, of which there was 30 pots totaling $300 million.
  3. No proposals for greater accountability or transparency of these funds have been included in the governor’s budget legislation.  The governor included reform language in his 30-day amendments to last year’s FY 2016 Capital Budget, but that language did not end up in the final bills, and has not been included this year.  Given that former Assembly Speaker Sheldon Silver has been convicted of corruption due to his access to and misuse of a lump sum pot, it is disappointing that the governor did not propose any specific reforms this year.
  4. Other Lump Sum pots appear to exist that are not publicly identified as being associated with an elected official, but are used in a similar fashion.  Citizens Union’s analysis is based on the conservative measure of only tracking items that explicitly authorize elected officials to distribute funds. It is clear, however, that there is a larger universe of funds to which elected officials have access. This present an equally problematic risk of corruption, including the Transformative Investment Fund ($400 million) and the State and Municipal Facilities Program ($1.1 billion).  These funds do not identify a role for elected officials in the budget language that creates them – the press and watchdogs discovered this role.

While the state budget provides important funding for needed public services, it has also provided an unfortunate opportunity for risk of corruption.  Former Speaker Sheldon Silver’s case is the most recent example when he was charged with personally directing $500,000 in grants from a lump sum fund to a prominent doctor, who began referring his patients to a law firm that, in turn, paid referral fees to Silver.  Former Senate Majority Leader Malcolm Smith was also convicted in February 2015 of conspiracy in a scheme to funnel $500,000 from lump sum funds known as “multi-modal” transportation funds to a developer who, in turn, would provide funds to bribe Republican officials.  

“With former Speaker Silver convicted in part because of his access to and illegal use of a healthcare-related lump sum pot, we need no greater reason to reform this form of budgeting.  We need a whole new set of rules and level of transparency to ensure that taxpayer dollars are not used to personally enrich elected officials or used in unseemly pay to play schemes,” said Dick Dadey, executive director of Citizens Union.

“As our research clearly illustrates, greater transparency and accountability is needed in the state budgeting process,” said Rachael Fauss, Director of Public Policy and author of the report. “To increase public confidence in our state’s spending decisions we must see the legislature and governor enact legislation that requires comprehensive, online disclosure of all lump sums, their recipients, detailed purposes, and elected officials sponsoring the items.”

Citizens Union, in releasing the report, calls on state lawmakers in working with the Governor to enact reforms that ensure full disclosure and accountability of discretionary funding, including lump sum appropriations through the state budget, including:

  1. All Lump Sum Pots, Both Those Identified With an Elected Official and Those That Are Not.
  2. Ensure Proper Public Use and Eliminate Conflicts of Interest With Lawmakers Disclosing Any Relationships to Entities Being Funded and Affirming Nothing Violates the Public Officers Law.
  3. Require after Lump Sum Decisions Are Made, Accompanying Legislative Resolutions List The Name of Sponsoring Elected Official And Age Three Days on the Calendar.
  4. Require Comprehensive, Online Disclosure of All Lump Sums Grants and Contracts
  5. Apply Reforms to All Lump Sums in the Budget, Including the Governor’s

A detailed listing of our recommendations is available in Section VIII of the report (hyperlink).

Spending in the Shadow’s: Discretionary Funding in the NYS Executive BudgetReport Links:

Spending in the Shadows: FY 2013Monday, February 29th News Conference on Spending in Shadows Presentation found here.

Back To Top