City Debates Usefulness Of Financial Control Law

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The New York Sun

The state law imposing a financial control board on the city will expire next year, setting the stage for a political debate on whether the panel and its considerable powers should be abolished.

The Financial Emergency Act, passed in 1975 when the city was on the verge of bankruptcy, requires the city to submit a budget balanced under generally accepted accounting principles, four-year financial plans, and grants the Financial Control Board the power to review and, in times of crisis, veto the city’s budget.

The director of the city’s Office of Management and Budget, Mark Page, says that the law should be renewed in full. So does the city’s comptroller, William Thompson Jr., a likely candidate for mayor in 2009. But others, including Council Speaker Christine Quinn, have expressed reservations about certain provisions of the law.

“I think that it is the mayor’s point of view that this institution has been very useful,” Mr. Page said at a panel yesterday hosted by The New School’s Center for New York City Affairs. “And it makes sense to continue it in the form it has been in — that is, with its full powers.”

A former chief of staff for the City Council, John Banks, said he believes the city’s legislators have earned enough credibility to eliminate the need for some of the law’s reins on the budget. “I think the fear inherent in the question, that the legislative body would spend like drunken sailors, is not accurate,” Mr. Banks said. He described the control board as “a vestige of 30 years ago.”

The control board includes the governor, mayor, city and state comptrollers, and three additional public members. It has the authority to declare a “control period” in times of crisis in which they can veto the city’s financial plans, contracts, and borrowing. The control board exercised this power from 1975 until 1986, when it determined the city was capable of managing its own finances. The board has been authorized to continue its existence until 2033, but without further legislative action it will not be able to take control over the city’s budget.

“The comptroller believes that the statute has served this city well and that the FCB is a part of our very strong and exemplary system of fiscal oversight,” a spokesperson for Mr. Thompson, Jeff Simmons, said.

Ms. Quinn, while supportive of the control board, called for additional legislative action. “The Financial Control Board has served the city well,” Ms. Quinn said. She added, “We need new financial protections and transparencies, not designed for the fiscal crisis of the 1970’s, but to take the City forward.” She has proposed creating a rainy day fund, more oversight of independent public entities, and greater transparency in the budget process.

Ms. Quinn’s appeal for a rainy day fund that the city could draw from in tough economic times highlights one contentious provision of the current law. One of the requirements for the city to avoid FCB control over their finances is to maintain a balanced budget under generally accepted accounting principles, which prevents the city from setting aside surpluses for future use in a separate fund. To get around this, extra money must be spent in advance on the next year’s budget to balance spending, creating a “surplus roll.” Mr. Page says that he does not support a rainy day fund because he does not believe there would be a clear, objective criteria for when money should be added or taken out.


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