Lies, Damned Lies, and Campaign Promises

Pataki Spins Houdini Math

The scandal-tinged governorship of George Elmer Pataki is now caught in its biggest scandal of all—how he, apparently to ensure his election to a third term last year, kept from the voters the gravity of the state's financial situation and thus worsened the crisis by not taking early emergency measures to deal with it.

Some good-government watchdogs think this is a case of knowing malfeasance of office for personal gain, but in the real world, no one expects any prosecutor to seek accountability through the justice system. In any event, it is a story of how, to protect his political future, Pataki hustled the state of New York—through sleight-of-hand and a campaign trail of illusions, evasions, and the more than occasional prevarication—into the biggest budget shortfall in New York history. As all of us know from recent banner headlines, the Pataki team is now $11.5 billion short in a budget of $90 billion. That spells severe financial pain and sacrifice for millions of New Yorkers, especially those on the lower branches of the money tree.

George Pataki knew how serious the state's financial condition was nearly a year ago as he campaigned for a third term, yet he told the voters everything was hunky-dory. He gave them his vow there would be no new taxes and soothed them with assurances that the budget-gap projections they were hearing from others were wildly exaggerated.

Last September, two months before Election Day, the majority leader of the state senate, Joseph Bruno, like Pataki a Republican, said that his reading of the numbers put the budget gap already in the $10 billion range—and climbing. Pataki scoffed at Bruno's projection, telling Daily News reporter Joel Siegel: "I don't know where it came from. Joe is a wonderful leader. He doesn't always do thorough research before putting out an analysis."

Bruno's forecast was of course right on the money. And now Pataki and his spinners are scrambling mightily to distance themselves from the anger of voters who feel betrayed. These voters will be hit with huge state and local tax increases that they now know could have been significantly reduced if only the governor had acknowledged the crisis and taken early steps, such as a freeze on spending and hiring, to lessen the damage.

When reporters would ask Pataki during the campaign to explain the disparity between his rosy picture and the dire warnings of his political opponents and independent analysts, he would most often duck the questions. Even when he did respond, he would offer no details and merely say that his figures had come from his budget "professionals." He would also immediately say he was "proud" of his record.

In fact, this was Pataki's mantra throughout the campaign when asked about any scandal or controversy: He would state his pride in his accomplishments in that particular policy area and then say that all past decisions were made by the "professionals" in state agencies. It was almost as if he was setting up his own appointees and employees as possible scapegoats should he need a defense later on—say, if legislative hearings or even grand juries were convened. Poor man—he was only doing what the "professionals" told him to.

The most recent controversy, just this past week, has escalated to fever pitch—the charge by both the state and city comptrollers that the Metropolitan Transportation Authority, a rarely scrutinized adjunct of the governor's office, had diddled with its books to force an increase in the bus and subway fare this year instead of waiting until next year, when the reserves would actually have been used up. The real mystery—still unexplained by MTA chairman Peter Kalikow, a privately wealthy, major contributor to Pataki campaigns—is how and why the agency declared itself to be in surplus before the gubernatorial election, and then, as soon as Pataki had coasted to victory, declared the surplus to have remarkably disappeared—thereby necessitating a fare hike. How magical.

As in most of this governor's unorthodox dealings, money is at the heart of it, usually money that goes into his campaign chest in return for lucrative state contracts and other favors. Of course, Pataki denies there is any connection. His wife, Libby, earns $200,000 or more a year from part-time consulting contracts given to her by companies that either receive state contracts or give major campaign money to the governor. She thus earns more than the governor, whose salary is $179,000.

The pattern of Pataki's conduct would seem to be tailored after that of his mentors, chief among them former U.S. senator Alfonse D'Amato and Charles Gargano. The latter is a master campaign fundraiser who performed this service for D'Amato, who then bequeathed him to Pataki, who soon made him the state's economic development czar, through whom all major infrastructure contracts are now funneled, including the billions of federal dollars for the rebuilding of ground zero. Through their long political careers, both D'Amato and Gargano have gained reputations as men who never came upon a conflict of interest that they couldn't turn into a windfall.

I mention all this only to show that the governor has some outstanding role models.

To return to the state budget, let us examine how the charade was carried out. In his first two terms, Pataki used the economy's boom years to build up reserves and serve his political career goals. Because of the boom and the resultant surge of tax revenues, he was able to lower tax rates yet increase spending to please a wide range of voter blocs. He balanced the budget each year, a requirement under the state constitution, using lots of gimmicks and fancy juggling and one-time, non-recurring funds. With all this good fortune and prestidigitation, he was also able to lay aside as much as $4.1 billion in reserve, "rainy day" funds.

But by the time the state's last fiscal year began, on April 1, 2002, the stock-market bubble had burst, the recession was on, and September 11, 2001, had sent New York City into shock. The rainy-day reserves were already down to $2.6 billion, and by Election Day, tax revenues were shrinking so fast that the nest egg was gone and a budget chasm was widening. With Pataki hiding the extremity of the situation from ordinary voters and taking no steps to curtail his lavish state spending, the mess was on its way to becoming the worst fiscal crisis in New York history, even more severe than the one in the mid 1970s. There was a governor in Albany then, Hugh Carey, who—whatever his flaws—did not hide or run from a problem.

Knowledgeable political operatives and scholars around the state were astounded by Pataki's strategy of denial. Two months before the November election, for example, Gerald Benjamin, a highly regarded author and political science professor at SUNY-New Paltz, and a Republican, told reporters: "There's going to be an extraordinary crisis. Nobody disagrees who pays attention and is not vested in one of these campaigns. It's going to be a very big deal. The localities are going to turn to the state, and the state is going to be in extremis. . . . This deficit should be the biggest issue in the election, but nobody wants to touch it. There is no credible plan for this."

Pataki's only plan was his vow that there would be no new taxes. "This is not going to happen," he said. "Absolutely not." This pledge was grossly misleading, because his proposed budget for fiscal 2003-2004 calls for $1.3 billion in new "assessment" hikes, which are taxes. It also includes $6 billion in one-shot revenues, a gimmick he had excoriated in earlier governors' budgets and said he would never use.

He has kept insisting that he easily handled a $5 billion gap when he first took office in 1995, so this one would not be any more daunting. This one, however, was strikingly different. Pataki had spent money like a tipsy sailor, handing out election-year goodies all over the state. He's been doing this for the last five years, as if the stock-market mania was never going to fizzle. Well, it fizzled and crashed in 2001 and remained in the tank through election-year 2002. It would have been hard for Pataki to miss the carnage.

After the election, Pataki's pretend-game collapsed quite suddenly, for the true budget numbers erupted into public view like a dam breaking. Now it was clear to everyone that the gap for the fiscal year that ended March 31 would be around $2 billion and the one for the year that began April 1 (fiscal 2003- 2004) would be at least $10 billion. Yet the governor has stuck with his "taxes are job-killers" platform and, with the crisis worsening, is still shouting it loudly every day now, with the vigorous help of his favorite newspaper, Rupert Murdoch's New York Post, always in the "right" column.

It's a bully campaign against the two legislative leaders, Bruno in the Republican-controlled senate and Sheldon Silver, speaker of the Democratic assembly. The goal is to build public pressure to get them to bend to Pataki's demands for shrinking the budget by making deep cuts in vital aid to localities—which would affect everything from public safety to schools to health care to garbage pickup to road repair. He says that if the legislative leaders pass any large increases in "broad-based" taxes, he will veto them. The leaders would then either have to override his vetoes—and thus accept any voter backlash from the new levies—or go along with some negotiated compromise.

Meanwhile, in Washington, President Bush not only wants no new federal taxes but demands big reductions in the present ones as well. Which raises an obvious question: Has Pataki—who has long thirsted for a senior post in the Bush administration, with some backers even talking about the vice presidency—been playing all these budget power games primarily to curry favor with conservative Republicans and the missionary good-versus-evil president? It's hard to know, but whatever his motives, the creature the governor has hatched walks and talks and froths like insanity.

Did Pataki really believe that he could get away with standing before the television cameras after September 11, looking caring and patriotic with a giant flag behind him, while at the same time lying baldly to the voters about a gut issue as serious as this one—and not face a justifiably enraged citizenry when they found him out? For if the president is cutting taxes and Pataki succeeds on his no-new-taxes tear, then local governments will have to come up with the money by raising their own taxes astronomically—property and school taxes among others.

In the short term, Pataki has gotten away with his flimflam. He is a sharp and cunning politician. His ploy of staying silent and giving vague responses on touchy subjects like the budget was noted and written about by reporters, but overall the press never did hard analysis on the numbers or explained what they meant for taxpayers. By Election Day, virtually every major paper in the state had endorsed the governor. Reporters—and editorial boards—are supposed to be able to add and subtract.

Ultimately, the fiscal calamity simply didn't strike a chord with the voters. Maybe they were too distracted by the terrorism of 9-11 and their own immediate pocketbook distress from an unstable economy that had made thousands jobless. And maybe they've lowered their expectations of elected officials to near zero.

Beyond all this, state government has always been a maze to the average citizen, with so many of its decisions made behind closed doors and rarely examined by independent overseers.

When I write that Pataki used illusion and denial to disguise the budget crisis, I am not suggesting that no governor or legislature ever juggled the figures before to balance the state budget or used gimmicks and one-shot revenues. I covered Albany for five years in the 1960s when Nelson Rockefeller was governor, and those tactics are as common in Albany as fleas on a junkyard dog.

I remember the scene one year, at the annual budget briefing for the press in the rare-art-filled governor's mansion on Eagle Street, when Rockefeller, during his presentation with charts and an easel next to one of Picasso's Guernica tapestries, said he had solved a particularly tricky fiscal problem with an infusion of $75 million. Where in the budget did you get the money from, reporters asked. Nelson smiled and said his budget director, T. Norman Hurd, had discovered the treasure in some obscure fiscal cranny. At which point Charlie Dumas, the AP bureau chief, a skilled reporter who was also incurably puckish, called out to the multimillionaire: "Come on, governor. Where did you find it? Did you send an old suit to the cleaners?"

But Pataki, with his illusionist games, has gone light-years beyond the usual Albany higgery-jiggery. He has created an honest-to-goodness crisis.

Oddly, one opposite of the word magic is tragic. Our alchemist governor has spun his magic with mirrors and doublespeak. The end product is a tragedy. And if any reckoning comes out of this mess, it could bring him down.


Research assistance: Jennifer Snow
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