News	Beware Adult Supervision by John McMahon

The Erie County Fiscal Stability Authority, better known as the Erie County Control Board, drew unwanted attention recently when it was revealed that its Finance Committee had met without notifying the public in an apparent violation of its own code of conduct.

One person that had been tipped off about the meeting was Peter A. Reese. Reese showed up at the meeting and voiced his displeasure at what he deemed to be a flagrant violation of New York State’s Open Meeting laws, which led to a confrontation with the Finance Committee Chairman Joseph Goodell. Goodell claimed that Reese had threatened him with a lawsuit. According to Reese, Goodell asked that Reese be banned from attending meetings of the Control Board in the future.

This apparently added fuel to a fire that was about to explode on to the front page of the Buffalo News. Goodell and his fellow Finance Committee members had failed to notify the News about their meeting and as a result the News was not about to defend their position. The News reported the incident and noted that the Control Board had held the meeting without notifying the public in a possible violation of New York State’s Open Meetings law. In addition, the News divulged the fact that the board had been deliberating on contracts via private email—another apparent violation of law.

Perhaps not since the Enron scandal has so much drama surrounded what amounts to the most mundane of subjects: accounting. What’s it all about?

Peter Reese says he represents the average citizen in this situation, but he is not exactly your average citizen. Reese describes himself as “a senior citizen with a bad heart on Social Se+curity,” and is now practicing law in his retirement from government employment. In the wake of the Erie County budget crisis of 2004, Reese decided to devote himself to reforming county government. Former Erie County Legislator Al DeBenedetti appointed Reese to the Erie County Charter Revision Committee and Reese began championing the idea of performance-based budgeting.

Performance-based budgeting is a manner of accounting that seeks to better evaluate program costs and “performance” through the identification of unit costs. For example, a performance-based budget analysis might attempt to determine the cost of plowing one mile of county highway. If it came out that one contractor was charging three times that unit cost, a red flag would presumably be raised. This may seem like a simple concept, but currently county leaders simply don’t have a precise handle on unit costs for county programs. Performance-based budgeting has been implemented at the federal level, but not at all state and municipal levels.

The Charter Revision Committee completed its work last year and, after much debate, negotiation and compromise, a new county charter was passed by the county legislature, the county executive and, finally, by voter referendum. Performance-based budget is mandated by the charter and the charter went into effect on January 1, 2007.

So what is Reese complaining about?

“The County Control Board has done absolutely nothing to facilitate implementing performance-based budgeting,” Reese said. He pointed out that while it is the responsibility of the county executive to begin performance-based budgeting, the Control Board is not helping by rejecting grants to fund the implementation.

Goodell appeared to confirm that notion. When asked about a timetable for implementation, he said that changing the county standards takes a long time. When asked for specific time frame, Goodell responded, “I have no idea. I know it’s not four or five months. I agree that it’s very worthwhile to have that program but it’s very difficult to get from here to there.”

During a full meeting of the board, Goodell cited personal failures in switching accounting systems as an experience to learn from and urged that the board proceed with caution in okaying anything to do with new standards.

While the Control Board rejected the hiring of a consultant to help implementation, they favored sending budget personnel on travel junkets to help them learn about performance-based budgeting. The Control Board’s executive director, Kenneth Vetter, said, “There are some things a consultant is very valuable for, but at times you’ve got to see it, feel it, taste it. We’re not talking about huge trips all over the country. There are ways that this can be done very inexpensively.”

Vetter also confirmed that a performance-based budget for 2008 was highly unlikely: “I believe it’s extremely difficult if not impossible to have a massive system in time for ’08 anyway. Because the budget process for ’08…it starts in June. There isn’t even a consultant on board to do this. What we’re saying in our discussions is coming up with a half million dollars [for an efficiency grant] when there are so many questions and it’s so nebulous at this point, that that’s not a good use of public dollars right now.”

The Control Board was established in June 2005, in part as a reaction to the infamous red budget/green budget crisis of 2004. Former State Comptroller Alan Hevesi famously said that Erie County elected officials needed “adult supervision.”

The Control Board was charged with disbursing $18 million in efficiency grants. To date, only $1 million of that money has been spent. Annually, the Control Board costs $1.5 million to $2 million to operate. This year the Control Board voted to become “hard,” meaning that every county contract in excess of $50,000 must have their approval. This decision was made despite the fact that the county is nowhere near its taxing limit, which is ordinarily the trigger for “hard” control boards.

At the Finance Committee’s so-called “secret meeting,” four efficiency grants were discussed, including one that would pay for a consultant to help implement performance-based budgeting. At the official meeting a week later these same proposals were discussed and all were rejected. After the meeting Mr. Goodell was asked about the Control Board’s reluctance to approve any efficiency grants.

“We’re not dragging our feet,” Goodell said. “We’re trying to get the county individuals in the habit of defining what the program is—the costs and the returns. That’s why we keep sending stuff back, because really that’s a new way of looking at things for them.”

While criticism of elected officials is par for the course in county politics, many people are unaware of the fact that Control Board members are not elected. The majority of the seats were appointed by Governor Pataki. In announcing the formation of the Control Board, when Alan Hevesi was asked if he was concerned that the control board would take away power from elected officials, he smiled and replied, “Vote for a Democrat for governor.”

While Erie County voters did just that last fall, the earliest scheduled appointment for the new governor to make is in 2009. Spitzer will, however, be able to name a replacement for William Joyce, who recently resigned from the board.

The Control Board held an official Finance Committee meeting followed by a meeting of the entire board on March 2. After a scolding editorial in the Buffalo News, no fireworks ensued. Reese showed up accompanied by his attorney but no attempt to remove him from the proceedings was made. Reese noted that while the News claimed that Robert Freeman of the State’s Committee on Open Government had told the paper the secret meeting of the Finance Committee was not in violation of the open meetings law, Freeman had not issued a written opinion.

Artvoice has requested a written opinion from Freeman, but responses typically take a few weeks. In addition, Artvoice has requested that Freeman clarify the process of making an ethics complaint against the Control Board. Special legislation has made the Control Board a unique state entity and it is not clear whether they are bound by the State Ethics Commission. In effect, we are trying to establish who supervises the “adult supervision.”

“They didn’t even bother to change the order of the items on the agenda,” Reese said of the Finance Committee’s official meeting, “It was an exact replay of the secret meeting. If they run into one another in a bar and start talking about the Sabres, that’s one thing. But it seems clear to me that they violated the Open Meetings law. The replay today just confirms that to me.”

We asked Vetter about the controversy and he referred to the News editorial as exoneration for the controversial meeting. However, he pointed out that the Control Board was taking the matter seriously and would take pains to be more open in the future, especially on the subject of private email exchanges.

“Moving forward there aren’t going to be any email exchanges,” Vetter said in acknowledgment of the breach of conduct. “Every contract goes through a public board meeting.”

The initial reason given for the Control Board’s private email exchanges was that certain contracts require prompt up or down decisions. Vetter indicated that this procedure would no longer be followed.

“We’ll call a board meeting right away,” Vetter said in the event of a need for an emergency decision such as the October storm of last year.

While the smoke may have cleared over the secret meeting and private email exchanges, observers are keeping a close eye on whether or not the Control Board will borrow money. This is important because, as a state authority, the Control Board has the ability to make itself a permanent feature of the political landscape. After the Control Board meeting Erie County Comptroller Mark Poloncarz explained: “If they borrow on behalf of the County or they decide they want to borrow, then they have to exist for the life of the bonds because they cannot go out of existence while the bonds exist.”

Poloncarz went on to say that it would not make sense for the Control Board to borrow on behalf of the county since the difference between the bond ratings of the county and the Control Board are negligible. He said that any short-term savings would be overwhelmed by the cost of maintaining the Control Board on a semi-permanent basis.

Authorities in New York State do tend to take on a life of their own. It’s estimated that 90 percent of all state debt is generated by authorities. Despite the fact that the cost of building the Triborough Bridge was paid for by the late 1930s, the authority that borrowed to build the bridge continued to exist, showering board members with big salaries and even a yacht with which they could entertain guests. That authority still exists to this day.

It’s somewhat ironic, then, that the one individual in state government that made it his platform to reform New York’s public authorities was the same person who created the Erie County Fiscal Stability Authority. Hevesi’s credentials as a reformer are now permanently tarnished by the “Chauffeurgate” scandal. He was removed from office for using state funds to pay for his wife’s chauffeur, and his replacement, Thomas DiNapoli, has stirred up a great deal of controversy of his own. But that’s another story.

Whether the Control Board morphs into a modern day, upstate version of the Triborough Bridge and Tunnel Authority is anybody’s guess, but one thing is certain: if they make themselves a permanent control board, voters won’t be able to do anything about it.

The moral of the story may be beware of “adult supervision.” Adults, after all, can do some pretty crazy things.