Cuomo gave MTA chump change from State’s $9.9 billion windfall in settlements with Wall Street Badguys

The State of New York received nearly $9.9 billion between 2014 and 2017 in legal settlements from 33 different financial institutions related to pre-recession wrongdoing.The money was a spectacular windfall for the State.

Governor Cuomo first began proposing uses for the funds in the 2015-16 budget, modifying the proposals over time and as new money arrived. The State used the money for budget relief, to seed new economic development initiatives, help hospitals, and pay cash for infrastructure rather than borrow money, saving taxpayers years of interest costs. It also helped the State from constraining its capital program because of debt restrictions in State laws.

Less than 5% of the $9.6 billion designated so far, only $415 million, has been given to the MTA. Most of those funds were for a Metro-North East Bronx connection to Penn Station – a project that cannot be completed for at least a decade because the MTA has to finish the Long Island Railroad connection to Grand Central Station beforehand(East Side Access Project). As of the adopted 2017-18 budget, only $278 million was left undesignated of the windfall.

The biggest single use of the windfall was for the new Tappan Zee bridge- which got $1.985 billion out of the @$4 billion cost. Since interest on any funds borrowed to pay for the new bridge would get reflected in rises in Thruway Authority tolls, using cash to build the bridge would partially solve the political unpopularity for Governor Cuomo of big toll hikes, especially for nearby drivers from Rockland,Orange,and Westchester counties.

Upstate New York received major assistance. Projects included a $1.67 billion Upstate economic development initiative, $500 million for broadband upgrades,$370 million for upstate hospitals,$250 million for downtown revitalizations in economically declining communities, $400 million for Phase II of the Buffalo Billion Project, $220 million for an Albany Life Sciences Project, and other miscellaneous projects. No one disputes the need to help upstate New York, although Comptroller DiNapoli pointed out recently that the Empire State Development Corporation(the State’s economic development agency) keeps neglecting to comply with legally required reports on the effectiveness of their expenditures.

About $850 million was set aside to cover a refund to the Federal government over disputes on Medicaid charges, and $700 million was provided for budget relief. A Javits Center expansion is slated for $1 billion, and $640 million is allocated for the homeless and affordable housing, most of which would likely be spent in New York City. It does seem reasonable to think the subway and bus riders at least ought to get priority over Javits Center Convention-goers. The booming hotel industry and the booming Hudson Yards real estate developments seem like a ready source to tap to pay for the Convention Center, rather than utterly shortchange the beleaguered transit system.

Overall the money was welcome- notwithstanding the fact that the size of the State’s capital budget is immense- $13.8 billion this year and $67 billion planned over the next five years. Big public authorities like the MTA don’t even tap the State’s capital budget for the overwhelming proportion of their own capital budget. Their main source of funds is money borrowed secured by their own revenues, or Federal grants.

In 2016, after a 17-month delay in the statutory approval process, where Governor Cuomo called the MTA 5-year Capital Plan bloated and forced a reduction from $32 billion to $29.5 billion, the Governor and the Legislature finally ok’d a new capital plan. The State provides $8.3 billion- a $1 billion borrowing by the State on behalf of the MTA, and $250 million for the MetroNorth-Bronx-Penn Station connector from the windfall. The remaining $7 billion is just an IOU written in State law that the State will provide the funds after the MTA has exhausted all its other resources, an event unlike to occur until after 2020. There is no identified source for this $7 billion.

 

Sources: NY State Comptroller Enacted Budget Reports:2015-17

:NY State Division of the Budget Enacted Budget 2017-18

 

 

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