Corruption at shadow agencies undercutting taxpayers’ trust in NYS

By SHERRY HALBROOK
With the deadline for filing state and federal taxes just a few weeks away, taxpayers can take some comfort in the knowledge their hard-earned dollars will be put to good use in supporting the public services they depend on every day. Or can they?

“We all want to believe the state works hard to get the maximum value for our tax dollars,” said PEF President Roger Benson, “and when it comes to the services provided directly by state employees that is generally true. In fact, the state sometimes try to stretch those dollars too far.

“But a large part of our tax dollars are funnelled to public authorities, public-benefit corporations and private contractors, and that’s a very different story. “The difference is accountability. We have laws and a system of checks and balances to keep the powerful light of public scrutiny on government and make it accountable to us.

“But when government hands off its responsibilities and billions of tax dollars to entities outside the range of public scrutiny and oversight, accountability gets lost in the shadows,” Benson said.

For instance, the heads of some state agencies, such as the state Health Department, also head the agencies’ shadow counterparts and draw large salaries from both.

“It’s a perfect environment for wasteful spending, poor service, sweetheart deals, nepotism, corruption and who knows what else,” Benson said, “so it’s hardly surprising when scandals erupt in the news.”

The state has become so scandal ridden, that a public-opinion poll conducted by Quinnipiac University in November found 72 percent of New Yorkers believe their state government is corrupt. 

The public’s perception may not be far from the mark. Based on annual U.S. Justice Department reports on federal prosecutions, New York state ranks 10th in the nation in terms of public corruption convictions (divided by 2002 population) for the period from 1993-2002, according to an analysis by the Corporate Crime Reporter.

Giving NY a bad name
In just the last 12 months, public scandals have rocked: the Long Island Power Authority (LIPA); the NYS Racing Association; the state University of New York Construction Fund; the Metropolitan Transit Authority; the state Institute for Entrepreneurship; the Port Authority of New York and New Jersey; the state Dormitory Authority; and the School Construction Authority, among others.

For example, an investigation by the Office of the State Comptroller revealed LIPA inappropriately spent $45,000 on political polling.

Another example involved the executive director of the NYS Bridge Authority who abruptly resigned last May during an investigation into his travel expenses by the state Inspector General. The IG’s report questioned billings to the state for trips throughout the United States and as far away as Japan. 

In December, officials at the Metropolitan Transit Authority were arrested on racketeering charges. The indictment listed 116 counts, including charges against the MTA’s building manager, former director of facility operations and former facilities manager. They were accused of helping a plumbing contractor bilk the MTA out of $10 million in public funds.

Only The Shadow knows
Beyond the concerns about corruption, state legislators are finally starting to listen to PEF’s warnings that allowing a kind of parallel universe of shadow government to evolve means that supposed state budget “facts and figures” are inadequate because they reflect only part of the picture.

How are your tax dollars being spent?
Only the shadow knows!

“The increasingly popular practice of shifting state work, state workers and state revenues into shadow agencies can create a false impression of efficiency and economy,” Benson said. 

In fact, no one seems to know exactly how big shadow government is in New York state, how many tax dollars are flowing into it, how many employees it supports or how honestly and effectively it serves the public trust. 

For instance, when PEF asked the chief fiscal and chief personnel officers of the state Department of Environmental Conservation how many non-DEC people worked at that agency, they said they didn’t know.

When PEF took a close look at a flow chart of staff at the DEC Bureau of Program Resources and Flood Protection, the union found 27 of the 37 employees actually work for shadow agencies — RACNE (Regional Applications Center for the Northeast) and NEIWPCC (New England Interstate Water Pollution Control Commission).

So many non-DEC employees work in the department, that RACNE recently hired a personnel manager of its own. That means DEC is now paying for its own personnel department and RACNE’s.

“This isn’t just shadow government, but parallel government,” Benson said, “and it’s all subsidized by tax dollars. When DEC can’t fill a vacant position because of the state hiring freeze, it asks RACNE or NEIWPCC to do it.”

Growing like weeds
Shadow agencies are supposed to exist only to supplement and support the work of government agencies. But, now, the shadow counterparts are actually growing faster and bigger than the agencies that foster them.

Health Research Inc. (HRI) now employs approximately 1,800 people, an increase of 41 percent since 1994. Meanwhile, the state Health Department’s workforce shrank. Since 2000, HRI’s workforce has grown 17 percent, while DOH has shed 4 percent of its employees.

The same holds true for dollars. While the state earmarked 16 percent more from its general fund for DOH in 2004 ($165 million) than in 1999 ($143 million), program expenses for HRI jumped 62 percent in the same time period, from $216 million to $351 million.

It hasn’t been easy to get the facts about HRI’s budget or operations. 

HRI refused a 1995 request for full financial disclosure from the state comptroller. And the shadow agency stonewalled PEF’s requests under the state Freedom of Information Law (FOIL), until PEF took its case to court.

“That’s when HRI finally released some information,” Benson said, “along with its legal opinion that it’s exempt from the FOIL.”

Most of the information PEF has unearthed about HRI comes from its federal tax filings that claim tax-free, not-for-profit status.

But the shroud of shadows extends well beyond these “not-for-profits.” Most of the money they spend comes from state and federal taxes and it flows right on through their fingers to the pockets of private contractors. 

HRI, for example, funnelled $83 million to the private sector last year, spending $12 million on consultants, $68 million on subcontracts and $3 million on technical services. And the shadow agency spent half a million dollars on public relations.

“Who knows how responsible these expenditures were?” Benson said. “How can anyone know, so long as they’re allowed to hide in the shadows?”

Communicator Homepage March 04

Inside This Issue
Features
PEF tells lawmakers to keep
Court rules grievance denial
Battle for Middletown Psych Center
PEF rejects state’s contract offer
Take the contract pledge
Saving Camp McGregor
Shadow agencies undercutting trust
Parole rule changes spark concerns

Departments
President's Message
Member's Mailbag
PS&T Contract Update
Nurses' Station
Member Mobilization
Health Notes
Retirees In Action
Back Cover Ad
PEF Membership Benefits &Travel

Union Matters
PEF victory allows Downstate nurses
State lagging to help its 9/11 ‘heroes’
Struggle to save members at OCFS
WTC recovery worker still sick, hurting
PEF political volunteers get out the vote
Nurses set Lobby Day for May 4
Mobilizer conference, workshops
Vacant PEF Board seat filled
Attention Veterans

Save these dates:
April 21-25
Somos El Futuro!
The annual weekend conference in Albany of the Caucus of NYS Hispanic and Puerto Rican Legislators
For more information, to volunteer, or make reservations for the reception, call Helen Brooks at the PEF Legislative Office, 1-800-724-4997.

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