A legislative Column by Assemblyman Will Barclay

Week of August 11, 2014

Billion Dollar Windfall Should Go to Curb Local
Taxes with Road, Education Investment

The New York State Department of Budget reported in its quarterly update that the state
estimates it will receive $4.2 billion in 2015 from financial settlements reached by the
Department of Financial Services, Department of Law, and the Manhattan District Attorneys
Office. This is unexpected revenue for the state and has provided us with a surplus. There are a
number of ideas circulating on how or if we should spend this money. I believe we should close
schools budget gaps so that we can reduce the local property tax burden and invest in
infrastructure like roads and bridges.

The settlement money was obtained through six corporations, the largest of which was a
federal case concerning BNP Paribas. This case resulted in BNP agreeing to pay New York State
$3.6 billion for violating New Yorks banking laws in connection with international dealings.
Other companies that will pay New York for violations are Credit Suisse AG ($715 million) for
allegedly violating laws related to asset disclosure; Metropolitan Life Insurance Company ($50
million) for allegedly violating New York insurance laws; AXA Equitable Life Insurance ($20
million) for violating state insurance law related to annuity products sold; and Citigroup which
reached a $7 billion settlement with the U.S. Department of Justice of which New York will
receive $92 million.

The unexpected windfall will be collected in the general fund. When one considers that
our total state budget for the year last year was $137.91 billion, $4.2 billion is a large amount,
especially to be received from settlements. This settlement amount has been partially paid. The
remainder will continued to be paid throughout 2015. As a general matter, I am concerned about
the increased efforts by the federal government and state governments to increase revenue for
government operations through use of law enforcement. It is not coincidental that when the
state's finances started to plunge, my office began receiving calls from individuals and small
businesses upset with the aggressive nature of certain state agencies and their quick reaction to
levy fines, assessments and penalties. While I have no opinion on the cases that lead to these
huge settlements, I do know that governments are always looking for revenues and I think it is
wholly inappropriate to use law enforcement in effort to raise revenue for government
operations. If a company has violated the law they ought to be held accountable whether
criminally or civilly but they shouldn't be targeted simply to be used as the government's ATM
machine.



Despite the particulars of how or why the settlements were reached in these cases, it is up
to the governor and legislature to determine how this money should be used. While some are
calling for new programs to be funded with this money, I think it would be more prudent to use it
to help stabilize our property taxes (which we can do by providing more state aid to our schools)
and invest in infrastructure that is desperately in need of repair. In 2011-12, the state cut aid to
schools by more than $2.5 billion with a promise to repay those funds. We still owe our school
districts $1 billion. This year, we restored $602.11 million to school districts. Lets restore those
cuts entirely with this newfound money and pay back what we owe to the school districts.

We should also invest in our roads and bridges. A report out earlier this year from TRIP,
a national transportation research group, finds that 45 percent of New Yorks major roads and
highways are in poor to mediocre condition. It also finds that a quarter of our bridges need to be
rehabilitated. Repair and maintenance of our roads and bridges is a necessary expense. We have
not done a good job keeping up with these costs. For safety reasons, but also for economic
development purposes, we should use some of this new found money to make these capital
investments.

If you have any questions or comments or if you would like to be added to my mailing
list or receive my newsletter, please contact my office by mail at 200 North Second Street,
Fulton, New York 13069, by e-mail at barclaw@assembly.state.ny.us or by calling (315) 598-
5185.

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