nyc ballot proposals: question 4

 

 

QUESTION 4: Balanced Budget and Other City Fiscal Requirements

(summary prepared by the Campaign Finance Board)

Currently, a New York State law called the New York State Financial Emergency Act for the City of New York (the “FEA”) regulates certain aspects of the City’s finances. The FEA was enacted in response to the City’s 1975 fiscal crisis, which was precipitated by the City’s issuance of a large amount of short-term debt to cover budget shortfalls, as well as the City’s inadequate financial reporting and accounting practices. The FEA mandated that the City follow certain financial management practices, including a year-end balanced budget and a detailed four-year financial planning process. The FEA also created the Financial Control Board (the “FCB”), a financial monitor composed of both City and State members, to oversee the City’s finances and enforce the financial management provisions of the Act. Currently, if the FCB determines that the City has failed to satisfy the Act, it has the power to impose a “control period” over the City, during which period the City loses a large measure of fiscal autonomy, and must submit all financial plans and borrowings, as well as certain contracts, to the FCB for approval.

 

Parts of the FEA will expire on July 1, 2008, and remaining parts will expire at a later date if certain City debt has been paid or discharged. The proposed amendment to the City Charter seeks to preserve many of the financial management provisions of the FEA by including these provisions in the Charter, and thus codifying them permanently as City law. The following elements of the FEA would be added, after some modification, to the City Charter:

  • Balanced Budget/No Deficit. Currently, the FEA requires the City to plan and maintain a balanced budget, and incur a deficit of no more than $100 million at year-end; failure to keep the year-end deficit under $100 million may result in the imposition of a “control period” over the City by the FCB. The proposal requires the City to prepare an annual budget balanced in accordance with generally accepted accounting principles (GAAP), and end each fiscal year without any deficit. However, the proposal does not impose a sanction equivalent to the “control period” if the City fails to balance the budget. Instead, the proposal requires the Mayor to take all actions necessary, in accordance with law, to ensure that the City does not end its fiscal year with a deficit.

  • Financial Plan. The Charter currently requires a four-year financial plan, but lacks the specificity of the FEA. The proposal requires the Mayor to develop a four-year financial plan for the City each year, based on reasonable projections of revenues and expenditures, and meeting the requirements set forth in the FEA, including: (i) the City’s expense budget must be balanced; (ii) the City may not issue debt inconsistent with its financial plan; (iii) the City must maintain a reserve of at least $100 million for each fiscal year; and (iv) the City must pay down any deficit accrued in one fiscal year in the subsequent fiscal year. The proposal also requires that the City’s four-year financial plan be updated at least quarterly.

  • Short-Term Debt. Currently, the City may issue short-term debt to fund a projected deficit or when the City anticipates receiving funds in the future that will cover the short-term debt. The proposal limits the amount of short-term debt that the City can issue so that it is not based upon unrealistic future revenue projections. For example, the amount of short-term debt issued in anticipation of taxes and revenues would be limited to ninety percent, respectively, of the real estate taxes and the revenues available to repay that debt. The proposal also limits the duration of the short-term debt, requiring that short-term debt issued in anticipation of taxes and revenues mature by the end of the fiscal year in which it was issued, and that short-term debt issued in anticipation of bond proceeds mature within six months of issuance. The City may renew the short-term debt issued in anticipation of revenues for a limited time if the Mayor certifies that the revenue against which the debt was issued has been properly reflected in the financial plan.

  • Annual Audit. The Charter currently requires the City’s accounts to be audited annually, but lacks the detailed standards for this audit contained in the FEA. The proposal incorporates into the Charter some of the FEA’s standards for the annual audit, including that the audit be performed in accordance with generally accepted auditing standards, and that the City make available to the auditors sufficient City financial records and resources to permit the auditors to complete the audit and issue their report within four months of the end of the fiscal year.

 

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WHAT YOU WILL SEE ON THE BALLOT

 

QUESTION 4. Balanced Budget and Other City Fiscal Requirements

These changes to the City Charter, as proposed by the New York City Charter Revision Commission, would establish as Charter requirements the following fiscal mandates that, in general, now apply to the City through a State law enacted in response to the City’s 1975 fiscal crisis. The changes would add these mandates to the City Charter so that they would continue to apply after the State law expires. The changes would:

 

  • Require that the City annually prepare a budget balanced in accordance with generally accepted accounting principles (GAAP), and end each year not showing a deficit in accordance with those principles;
  • Require that the Mayor annually prepare a four-year City financial plan, to be based on reasonable assumptions and modified on at least a quarterly basis, and that the plan provide for payment of the City’s debts and a general reserve of at least $100 million to cover shortfalls;
  • Impose additional conditions on the Charter’s current restrictions on short-term debt (which may be issued by the City to fund a projected deficit or in anticipation of the receipt of funds from taxes, revenues, and bonds). These conditions generally limit the duration and amount of the short-term debt; and
  • Impose additional conditions on the annual audit of the City’s accounts that is currently required by the Charter. These conditions relate to application of generally accepted auditing standards and access by auditors to records so that the audit may be issued within four months after the close of the City fiscal year.

 

Shall the proposed changes be adopted?

 

NOTE: QUESTIONS MAY BE NUMBERED DIFFERENTLY ON THE BALLOT

 

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Pro and Con Arguments(prepared by the Campaign Finance Board)

QUESTION 4: Balanced Budget and Other City Fiscal Requirements

Reasons to Vote YES

  • The Financial Emergency Act (the “FEA”), which this Charter proposal seeks to preserve, has served the City well since its enactment in 1975. Since the FEA has been in effect, the City has had 23 consecutive years of balanced budgets. The FEA has been recognized by many governmental actors and non-profit entities as key to the City’s fiscal stability.
  • The FEA sets forth many sensible financial management practices, including a year-end balanced budget requirement, a mandate that the City develop a four-year financial plan and update it quarterly, and a yearly audit of the City’s finances in accordance with generally accepted accounting principles (GAAP). This proposal seeks to incorporate these non-controversial financial management provisions into the Charter.
  • Although the FEA will not expire until at least 2008, it is prudent to put into the Charter now the FEA provisions that are good financial planning and management tools. Later, there can be a State-level discussion about whether to continue State oversight of the City’s finances by keeping the Financial Control Board (the“FCB”) and the “control period.”
  • Because the FCB is created by state law, the Charter Revision Commission cannot, as a matter of law, preserve the FCB or create an equivalent monitoring board with State members. Similarly, creation of a “Rainy Day Fund” requires amendment of the FEA, which can only be done by the State legislature, and is therefore not appropriate for Charter revision.
  • Although the proposal directs the Mayor to take all actions in accordance with the law ensure a balanced budget, it does not grant the Mayor any new powers to do this. The proposal therefore does not affect the balance of power between the Mayor and the City Council.

Reasons to Vote NO

  • The proposal seeks to put only part of the FEA in the Charter, and is not a comprehensive solution to the expiration of the FEA. If approval of the proposal preempts a broader study of the preservation of the FEA, including the continuation of the FCB, it might do more harm than good to the City’s financial practices.
  • The success of the FEA has depended on the oversight powers of the FCB and its authority to impose a “control period” over the City if the City fails to satisfy the law’s requirements. This proposal does not address the FCB, nor does it attempt to create an equivalent control against future failures of City fiscal policy. The proposal therefore creates a fiscal management system with “no teeth.”
  • The FEA gave the FCB full authority to obtain any financial information it deemed relevant to its oversight function from the Office of Management and Budget, and the City Administration. Because this proposal does not preserve the FCB or create an equivalent information distribution system, financial monitors, such as the Independent Budget Office or the City Comptroller, may not be able to get the financial data they need to provide meaningful oversight over the City’s finances.
  • The preservation of certain restrictions of the FEA may actually prevent good financial management and restrict the flexibility of the City’s fiscal planning. For example, this proposal would add a hurdle to the creation of a “Rainy Day Fund,” which would allow the City Council to “save” surplus revenue from one fiscal year to be used for revenue shortfalls or other fiscal emergencies in later years.
  • The proposal would require the Mayor to take all legal actions to balance the City’s budget to meet the new requirements of the Charter. This provision may empower the Mayor at the expense of the City Council or other City institutions, disrupting the balance of power.

 

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STATEMENTS FROM THE PUBLIC

BALANCED BUDGET AND OTHER CITY FISCAL REQUIREMENTS — PRO

 

LIST OF SUBMITTERS

Dr. Ester R. Fuchs (Charter Revision Commission, Chair)

Robert Abrams (Charter Revision Commissionm, Member; former Attorney General of New York)

Michael R. Bloomberg (Mayor of New York City)

Citizens Budget Commission

Citizens Union

Mario Cuomo (former Governor of New York State)

David Dinkins (former Mayor of New York City)

Stephen J. Fiala (Charter Revision Commission, Secretary; County Clerk and Commissioner of Jurors of Richmond County)

Dall Forsythe (Charter Revision Commission, Vice-Chair)

League of Women Voters (Adrienne Kivelson, Election Specialist)

Helen Marshall (Queens Borough President)

 

 

Dr. Ester R. Fuchs (Charter Revision Commission, Chair)

The proposals that the 2005 Charter Revision Commission have placed before voters, following a year of careful study and extensive outreach to all communities, will strengthen the integrity of both the City’s administrative justice system (Question #3) and the process of planning and implementing the City’s $50 billion budget (Question #4).

 

During the 1970s fiscal crisis, the State began requiring the City to balance its budget in accordance with generally accepted accounting principles; prepare a four year financial plan; conduct an annual audit; and restrict its short-term debt.

 

These requirements have promoted responsible budgeting and fiscal practices, but they are expected to expire during the next mayor’s term. New Yorkers can’t afford to let that happen.

 

By voting “YES” on Question #4, voters can make these requirements part of the City Charter. The proposal has won strong support from civic leaders, elected officials, and government watchdogs on all sides of the political spectrum. The same is true for Question #3, which would lead to the creation of a uniform code of ethics – currently, none exists – governing the City’s administrative judges.

 

Voting “YES” on Questions #3 and #4 will help ensure that New York City’s future will have a strong, stable municipal finance system and a transparent and ethical government.

 

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Robert Abrams (Charter Revision Commission, Member; former Attorney General of New York)

In the mid 1970s, New York’s Governor Hugh Carey along with leaders from organized labor and Wall Street saved New York City from bankruptcy, by taking bold steps to bring the City’s finances under control. In 1975, Governor Cary signed into law the Financial Emergency Act (FEA), which established essential budgetary requirements that restrained irresponsible borrowing and spending which helped New York to get back on its feet. These safeguards have remained in place and have helped to strengthen New York’s fiscal health and stability over the last 30 years. However, these important fiscal reforms are scheduled to expire. We simply cannot afford to let that happen. Ballot Question #4, by placing the FEA’s core requirements into the City Charter, offers voters a chance to secure a more stable economic future for our great city.

 

Ballot Question #3, which would require a uniform ethics code for administrative judges, offers the opportunity to strengthen and improve the accountability of the city’s tribunals.

 

Both of these proposed additions to the New York City Charter would strengthen municipal government in a nonpartisan fashion, and both deserve the support of all New Yorkers.

 

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Michael R. Bloomberg (Mayor of New York City)

Last year, I appointed a Charter Revision Commission to examine ways to improve city government, and I am pleased that the Commission has produced two proposals that have won broad bi-partisan support from New Yorkers: requiring a new ethics code for the City’s administrative judges, and making permanent the fiscal safeguards that have served our City well since the 1970’s.

 

Not only did these safeguards help New York avoid bankruptcy during the 1970s, they helped us climb out of the severe fiscal crisis that followed 9/11. By adopting balanced budgets under these rules for the last 25 years, we’ve restored public confidence in New York City’s financial integrity.

 

This year, the City’s bonds earned their highest-ever rating – an A+, which means lower borrowing costs and real savings to taxpayers. Over a 30-year period, we will save $200 million for each year of new borrowing.

 

The state law mandating these safeguards, however, will soon expire. By adopting them into the City Charter now, we can help secure New York’s future for the next generation.

 

On election day, I hope you will join me – and a broad, bi-partisan coalition of New Yorkers from every borough – in voting “YES” on Questions #3 and #4.

 

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Citizens Budget Commission

The Citizens Budget Commission endorses Ballot Question 4, which would incorporate features of the New York State Financial Emergency Act (FEA) into the City Charter. The FEA was passed in 1975 and may expire in 2008. The Charter revision would:

  • Require the City to end the fiscal year with a balanced budget according to Generally Accepted Accounting Principles (GAAP). Under the FEA, the City has balanced its budget for 25 straight fiscal years. The FEA’s end-year balance requirement has been crucial to the City’s fiscal health and ought to be continued in the charter.
  • Mandate Four-Year Financial Plans with Quarterly Modifications. Four-year planning forces budget makers to anticipate fiscal difficulties and to address the structural conditions that lead to projected deficits. The discipline of four-year planning and the transparency from quarterly modifications should be required by the charter.
  • Strictly Limit Short-Term Borrowing. The City’s reliance on short-term debt was a cause of the 1970’s fiscal crisis. Continuing the FEA limitations on short-term debt will prevent repeating mistakes of the past.
  • Require the City to conduct an annual audit in accordance with GAAP. A timely and thorough audit is a key element of a disciplined budget process and ought to be a continued requirement.

 

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Citizens Union

CITIZENS UNION, a citywide good government organization founded in 1897, supports the charter proposal that enshrines the provisions of the soon to expire state law, the Financial Emergency Act, into the City Charter. The FEA which is scheduled to expire in 2008 was created in response to the fiscal crisis of the early 1970’s when the city was spending much more than it took in and began issuing short-term debt to fill the budget gaps. The FEA was created to ensure a greater level of fiscal responsibility and to restore confidence in the city’s finances, specifically in the city’s ability to repay its debt. Citizens Union believes many of the provisions of the FEA have served the city well over the years in providing needed fiscal discipline. It is prudent to permanently institute many of these necessary controls – a) requiring a GAAP balanced budget at the end of each fiscal year, b) preparation of four-year financial plan documents, c) making available to the public the financial plan statements with regularly updated information, d) requiring the City to conduct and annual audit, and e) requiring the City to continue strict limits on short-term indebtedness - into the City Charter. Citizens Union urges voters to VOTE YES.

 

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Mario Cuomo (former Governor of New York State)

Those of us who were on the scene in 1975, and have stayed in touch with it since then, know that one of the most significant political achievements of the last three decades has been the establishent of the Fiscai Control Boaxd and MAC by Governor Hugh Carey. Without those devices the City might have been officially bankrupted and its credit rating permanently impaired. All the Governors and new York City Mayors since then have recognized the value of the disciplines enforced by the Board and the opportunities provided the City by MAC. The two Charter change recommendations in question seek to secure those advantages by adding them to the City Charter. I commend the Commission and support those recomendations. They will preserve what have become useful constraints without losing anything of value.

 

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David Dinkins (former Mayor of New York City)

The fiscal reforms that the State imposed on the City in the mid-1970s have provided important support to both Democratic and Republican mayors over the last three decades. In addition to mandating a balanced budget, an annual audit, and limits on short-term debt, the State required the City to follow Generally Accepted Accounting Principles, which diminish opportunities for budgetary sleights of hand.

 

These reforms have helped mayors keep the books in order – and in the black. Today, in part because no mayor has been able to engage in dangerous budget gimmickry or irresponsible borrowing, the City’s fiscal health is stronger than ever.

 

This year, by voting “Yes” on Question Four, New Yorkers can adopt these good-government reforms into the City Charter before the state law mandating them expires. In addition, Question Three offers voters an opportunity to create a universal ethics code for administrative judges, who hear a wide range of cases, from parking tickets to consumer complaints.

 

Both questions present voters with sensible and needed reforms that will strengthen the integrity of City government, and both deserve your support on Election Day.

 

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Stephen J. Fiala (Charter Revision Commission, Secretary; County Clerk and Commissioner of Jurors of Richmond County)

As a former member of the City Council, and as one who appreciates and understands the complex nature and central role City government plays in the daily lives of its eight million residents, I strongly support the responsible measures proposed by the Charter Revision Commission.

 

The first measure (Question Three on the Ballot), if adopted, will finally establish a uniform code of conduct for the City’s Administrative Law Judges and Hearing Officers. This measure will enhance accountability among the more than 500 officials presiding over the tens of thousand of cases handled annually; and provide a more efficient and consistent system for resolving disputes fairly. Justice requires nothing less.

 

The second proposal (Question Four) seeks to ensure that the City continues to employ fiscally responsible practices beyond 2008, when the 1975 State Fiscal Emergency Act expires. Among the measures we propose importing in the Charter are:

  • The requirement that the City end each fiscal year with a balanced budget in accordance with GAAP.
  • The continuation of the four-year financial plan and quarterly modifications.
  • Requiring annual audits in accordance with generally accepted auditing practices.
  • Stricter limits on short-term debt.

I urge you to vote "yes" on both questions. New Yorkers, like all Americans, deserve an accountable and responsible government. Both these measures achieve those goals.

 

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Dall Forsythe (Charter Revision Commission, Vice-Chair)

I am writing in support of the proposals to revise the City Charter. I fully support both of these propositions, but my comments will focus on the proposals to strengthen the financial management provisions of the Charter.

 

As budget officer of the New York City public schools and later as New York State budget director, I came to admire the discipline with which New York City manages its finances. To date, the framework for that careful stewardship has been established in state law. This proposition incorporates many of the key provisions of that state law directly into the City Charter. By supporting this proposal, City voters will signal that they want their local government to maintain strong financial discipline, and are willing to take responsibility to achieve that important goal.

 

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League of Women Voters (Adrienne Kivelson, Election Specialist)

As adjudication of violations of city laws and regulations has increasingly moved from civil and criminal courts to administrative tribunals, New Yorkers have had to comply more often with decisions of administrative law judges and hearing officers. While these ALJs have a quasi judicial role they are not governed by judicial codes of conduct or the charter’s conflicts of interest provisions. We believe that requiring the promulgation of an ethics code for administrative law judges will benefit all New Yorkers who are affected by their decisions.

 

Since the city’s financial crisis of the 1970’s all major charter revision efforts have been directed at making government more open and less vulnerable to the conditions which precipitated that crisis. Foremost among these changes have been financial reporting requirements. However, some of the most consequential financial requirements are contained in the state-enacted Financial Emergency Act of 1975 and not in the city charter. FEA mandates that require the city to have a balanced budget, in compliance with generally accepted accounting privileges, restrictions on short-term debt and specifications for four-year financial plans have been so successful in maintaining the financial integrity of the city that they should become permanent provisions of our city charter.

 

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Helen Marshall (Queens Borough President)

The Charter Revision Commission has placed two straightforward, good-government issues on the ballot. On Election Day, all voters should ask themselves two basic questions:

 

Do you believe that the city’s administrative judges should be bound by a standard code of ethics, rather than the haphazard rules that currently exist at some tribunals?

 

Do you believe the city should continue to be required to balance its budget and adhere to sound budgeting and financial planning practices?

 

If the answer to these questions is an emphatic “YES,” as it is for me, vote “YES” on Proposals #3 and #4.

 

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STATEMENTS FROM THE PUBLIC

BALANCED BUDGET AND OTHER CITY FISCAL REQUIREMENTS — CON

 

To date no “CON” statements were received by the CFB for this ballot proposal.

 

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