Statement of

ANDREW S. ERISTOFF

Before the

Joint Fiscal Committees of the New YorkState Legislature

And the

New YorkState Comptroller Screening Panel

January 23, 2007

Good morning Chairman Farrell, Chairman Johnson, Comptrollers Goldin, Regan, and McCall, and distinguished legislators. Thank you for this opportunity to present myself as a candidate for New York State Comptroller.

I am aware that the political dynamics of this selection process make my candidacy … atypical. However, I have long held an interest in the office of State Comptroller and --- more importantly --- in reforming and improving the Department of Audit and Control. This public selection process offers an unprecedented opportunity to encourage an informed debate over the functions and structure of this often misunderstood, but incredibly important, office. Accordingly, after briefly reviewing my credentials, I will focus the balance of my presentation on a specific reform, policy, and operational agenda.

My career to date includesservice as a tax lawyer, legislative counsel, New York City Councilmember, New York City Finance Commissioner, and Commissioner of the New York State Department of Taxation and Finance. I have led large public organizations of almost 5,000 people successfully, managed budgets in excess of $400 million per year, and have significant experience overseeing audit functions, internal audit and control, procurement, contract management, vendor payment, cash management, strategic planning, performance budgeting and management, project portfolio management, high-volume processing, and local government finance.

As City Finance Commissioner, I served ex officioas a member of New York City pension boards (mostly through a professional designee) and am an investor, so I am familiar with portfolio investment management and appreciate the necessity of retaining expert independent professional advisors. As a tax lawyer I had exposure to tax exempt financing.

As the holder of an Advanced Professional Certificate in Information Technology from New YorkUniversity, I have had training in the audit and control of information systems.

In sum, I am a proven public servant who is comfortable with financial controls and operations, technology, and the particular challenges of leadingand managing a large public organization.

Let me now describe my agenda.

Reform is in the air. Pick your flavor --- fiscal reform, debt reform, campaign finance reform, ethics reform, public authority oversight, Wicks Law and procurement reform, legislative rules and redistricting, etc --- New Yorkis the poster child of reform opportunity. The good news is that we do not suffer a lack of well-conceived ideas for reform. The hard part is knowing where to begin.

Without disputing the urgency of other reform agendas, I believe reform starts at home and that the events which have brought us here today represent a special charge to the next Comptroller to place his or her highest priority on reforms that will help to restore and maintain the public’s confidence in the Comptroller’s officespecifically.

I believe two reforms are critical:

  • As others have advocated, we mustamend State law to prohibit candidates for Comptroller from receiving gifts or campaign contributions from persons or firms doing business with the Department of Audit and Control or the retirement fund. This is a long overdue step to enhance the credibility of the office and its work by removing the obvious potential for real or perceived conflicts.
  • We must amend the State Constitution to reform the Comptroller’s status as sole trustee of the pension system. I recognize that the current web of advisory committees functions quite well as a practical matter. However, as a matter of public policy and accepted fiduciary standards, a system in which just one person is ultimately responsible for more than $140 billion of public employees’ retirement savings is nothing short of ludicrous. A reformed system should, at a minimum, include the creation of a pension board that provides key stakeholders, including public employee unions, with a formal seat at the table and the accountability that comes with making decisions on the public record. As there are many functioning models to consider, I would appoint a commission to draft proposals for the Legislature’s consideration after reviewingall the options and best practices.

Let me turn now to other reform topics. Our time together does not allow a complete review of all the important issues, but my commitment to “truth in advertising” compels me to share some policy priorities:

  • We need to begin the massive task of modernizing our system of local government classification, as suggested in a Comptroller’s Office report of just a few months ago. I am convinced this topic --- totally lacking in political sex appeal and complex almost beyond comprehension --- represents the next great frontier for governmental management reform. I therefore look forward to working with Governor Spitzer’s forthcoming Commission on Local Government Efficiency, which I presume will build on the prior work of the Rockefeller Institute’s Local Government Restructuring Project in the early 1990s.
  • We must find a way to reduce the roller-coaster volatility of government employer contributions to the Retirement System, a burden that is crushing taxpayers. Whether we like it or not, the only rational solution is a slow transition to a defined contribution plan for future State and local taxpayers.
  • The Comptroller should have legal authority to audit all refundable business tax credits and IDA operations, with full access to related tax return information. Although not many know or seem to care, the State gives out hundreds of millions a year to private businesses without any appropriation and under the cloak of tax confidentiality. Where is the accountability?
  • The Public Authorities Accountability Act of 2005 authorized the creation of an Authority Budget Office to review, analyze and report on the practices of public authorities. Governor Pataki proposed creating the office within the Budget Division; the Legislature refused, demanding an independent entity. Let’s make it a functionally independent unit within the Comptroller’s Office, akin to the successful state Deputy Comptroller for New York City.
  • To impose uniform standards for debt issuance throughout the State, the Comptroller should have the power to review significant negotiated sales of securities by public authorities and local governments.
  • We must amend the State Constitution to givethe Comptroller the final word in estimating revenues during the budget process if the Governor and the Legislature cannot agree. New York’s annual dispute over revenuecontributes to chronically late budgets, a national embarrassment. This is a fair and practical approach to the problem. I am aware that the Governor and the legislative leaders have just announced agreement with respect to a consensus revenue forecasting process that would give the Comptroller an important new role; however, bitter experience with other much-heralded reforms, such as the Debt Reform Act of 2000, suggests that this change must be enshrined in the State Constitution.
  • Speaking of the Debt Reform Act – this law needs nothing less than a complete overhaul to close loopholes that have rendered it utterly impotent as a means of controlling the growth in State debt. Again, given our history, a Constitutional amendment may be necessary to give real meaning to reforms such as a limitation on debt in relation to personal income.

In sum, the next Comptroller must have the courage to use the office’s “bully pulpit” to promote an honest dialogue about the serious challenges we face such as the need to consolidate local governments, the inevitable transition from a defined benefit to a defined-contribution retirement system, the long-term crisis we face with respect to financing public retiree health benefits, or the terrible cost that special pension bills and Albany end-runs around the collective bargaining process are imposing on local taxpayers in New York City and elsewhere.

Although securing the reforms and taking on the issues I described will be my top priorities as Comptroller, I would like to take a moment to share one important idea for restructuring the business operations of the Department of Audit and Control itself.

New York’s highest-in-the-nation state and local tax burden is crippling our upstate economy and driving families out of New York. Most fiscal monitors agree that the burgeoning cost of New York’s 4,200local governments is a major factor in driving up taxes. Even acknowledging the heavy burden of unfunded state and federal program mandates, we in New York have too much local government and much of it is mismanaged (or, rather, under-managed). Our taxpayers are literally drowning in a sea of local government. The Comptroller’s Officecan and should be a part of the solution. Accordingly, as Comptroller, I will create a major unit devoted exclusively to helping localities identify ways to save local taxpayers’ money, while maintaining or improving services, through adoption of management best practices, inter-jurisdictional coordination, and --- yes --- consolidation.

We can’t help local governments save money unless they are willing to listen and cooperate. Understandably, fearing adverse publicity, manylocal government leaders would rather keep the Comptroller’s Office at arm’s length. For this reason, unlike the existing Division of Local Government Services and Economic Development, which audits local government finances, I would have the new unit function as a free management consulting firm for New York’s local governments. Local government participation would be entirely voluntary and there would be no publicity absent local government request. Further, there would be a firewall between the provision of management consulting services and the normal audit function, a core function which must continue.

Imagine the benefits to local taxpayers --- and ultimately to the State --- of applying best practices in areas such as cash management, procurement, billing and remittance processing, systems integration, and fleet management to the local government level. Local government leaders want and need our help, not more unfunded mandates.

I will close by making two personal commitments that I think are appropriate given the special circumstances that have brought us together. First, if I become Comptroller, I will not seek reelection under any circumstances. Instead of raising money and courting political support, I would focus my entire efforts over the next four years to securing the reforms and pushing the issues that I’ve mentioned. I can think of no greater opportunity to do something really important for the people and State of New York.

Second, I will build a truly non-partisan professional management team. New York has a deep bench of highly talented people of all political affiliations who might find this particular opportunity to pursue a reform agenda attractive. And, if reform is to succeed, it must be bipartisan. I know that it’s easy to make this kind of commitment in the abstract, but I believe my record to date demonstrates my capacity to work across party lines effectively.

Thank you for this opportunity. I welcome your questions.

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