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Originally Published: September 24, 2013

“Grab Bags” of loosely defined funds invite corruption

Citizens Union today released “Spending in the Shadows: Discretionary Funding in the NYS Budget,” a report revealing a staggering number of loosely defined and poorly disclosed discretionary funds. Alarmingly, this money includes over $3 billion in state funding authorized this year through re-appropriated “lump sums” – pots of funds that allow spending decisions to be made by our elected officials after budget bills are passed.  State funds like these are what Senator Malcolm Smith is accused of trying to use to curry favor in his attempt to win political support for his bid for mayor.

“Taxpayers across the state will be startled to learn that Albany this year has a $3.3 billion grab bag of state funds to spend in the shadows as it sees fit,” said Dick Dadey, Executive Director of Citizens Union. “That we don’t know how and where this money is spent is wrong.  These lump sum pots, along with other poorly disclosed funds of vague intent lack needed specificity and many are decided with little if any public scrutiny. This practice runs against the spirit of transparency and accountability that many elected officials and New Yorkers have sought to instill in our state government, and creates the opportunity for the kind of corruption for which Albany is far too often known.”

Budget bills provide little detail of the intended purposes of many of these 71 pots of lump sum funds, using broad language such as the following items listed for the Local Assistance Account: “For  additional grants in aid to certain school districts, public libraries, and not-for-profit institutions,” for “various Senate Majority labor initiatives” and for “various Assembly Majority labor initiatives.”  Other grants provide a purpose for the use of funds, but still leave discretion over specific projects to be funded, for example for the Regional Aviation Fund: “For payment of the costs of capital projects as set forth in  a memorandum of understanding among the governor, the majority leader of the senate, and the speaker of the assembly.” It should be noted, however, that certain funds are to be provided through competitive formulas, for example the “SUNY 2020 Challenge Grant Program,” though certain discretion is provided to elected officials for a portion of the funds, why it included in Citizens Union’s tally.

There are also an additional 45 unallocated pots of funds in the Community Projects Fund,  which contains $343 million in re-appropriated funds that have not yet been itemized, which use the following broad language: “For services and expenses or for contracts with certain municipalities, corporations and/or not-for-profit agencies.”

Despite reforms made in 2007 to improve the budget process, the presence of large amounts of discretionary funds – items which elected leaders have direct control over and are often used to fund local non-profits organizations, school districts, local governments, or for other capital projects throughout the state – raises serious questions about whether the state’s budget process is serving the broader public interest and has sufficient public oversight. A host of recent corruption scandals, including those involving former Senators Malcolm Smith and Shirley Huntley, and former Assembly Member Vito Lopez, have demonstrated the need for greater transparency and accountability of how these funds are spent.

In light of these instances of public corruption, Citizens Union examined two categories of discretionary funds in the FY 2013 – 2014 state budget to determine their scope (links to original data provided below):

  1. lump sum” pots of funds that are not sufficiently itemized when the budget is adopted; and
  2. remaining member items funded through the Community Projects Fund.

The vast majority of this funding is distributed through Memorandums of Understanding (MoUs) and other agreements that are determined by our elected leaders behind closed doors and in the shadows after the state budget is passed, which are not made easily accessible for the public. These totaled the following:

  1. “Lump Sum” Funds – $3.3 billion in reappropriations set aside to be spent this year through re-appropriations without being itemized in the FY 2013-14 budget bills, out a of total of $9 billion that has been authorized over the lifetime of these funds; and
  2. Community Projects Fund (Member Items) – $378 million in funding authorized through re-appropriations for FY 2013-14, $343 million of which was not itemized in the state budget bills.

Rachael Fauss, Policy and Research Manager and author of the report, says, “In order to improve transparency and accountability of lump sum funds and limit the chance for corruption, there should be increased disclosure online to the public and detailed itemization of lump-sum spending and remaining Community Projects Fund items, including which elected officials requested the funds.”

In light of these findings, Citizens Union calls upon the Moreland Commission to follow the money as it investigates lump sum appropriations, member items, and other discretionary aspects of the state budget. Citizens Union has shared its findings with the Moreland Commission, and urges it to recommend policy changes regarding the approval of budget items and, if necessary, referrals to prosecutors of possible wrongdoing by lawmakers.

Specifically, Citizens Union makes the following recommendations:

  • Lump-sum appropriations should disclose in the state budget the detailed purposes and criteria set forth for their distribution;
  • Additional, more specific information about lump-sum appropriations should be made available online in user-friendly formats, including the following:
  • all MoU’s, plans, resolutions and other agreements specifying their distribution;
  • any remaining funds;
  • funds distributed and their recipients; and
  • There should be a time limit for the reappropriation of lump-sums in order to decrease slush funds and the use of such funds as “one-shot” budget gap fillers. This is consistent with Governor’s Cuomo’s decision to veto many of these items in this year’s state budget;
  • Legislators’ names should be listed with the itemized member items and any other projects they sponsor in budget appropriation bills before they are passed, as well as in other itemized listings in MoUs, plans or other documents detailing the distribution of lump sum appropriations; and
  • Resolutions passed providing details related to expenditures of lump sum appropriations in the budget should be required to age three days before being voted on, and be made easily available online.


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