Labor Spotlight

Budget watchdog group careful who it bites

by Michael Hirsch

Mar 4, 2010 4:16 PM

Not-so-nonpartisan Citizens Budget Commission favors business over workers

In “Gravity’s Rainbow,” novelist Thomas Pynchon wrote, “If they can get you asking the wrong questions, they don’t have to worry about the answers.”

For nearly 80 years, the corporate-backed nonprofit Citizens Budget Commission has asked the wrong questions about city and state financing: What government spending and taxes can we cut? What public sector workers can we lay off? What can we privatize?

Rarely has it looked at how to equitably increase public revenues or how to make public sector jobs more meaningful and more productive, not simply fewer and less well-paid.

The self-appointed “commission” markets itself as a good government organization, but it is far from a neutral body representing the interests of all New York City citizens.

Public school teachers were in the CBC’s gun sights last November, when the group released a 10-page report asking “Is it a Good Deal? How New Yorkers Should Judge the Next Teachers Contract.”

Its first question was “Does It Save Taxpayers Money?” Its conclusion: a contract with raises is money squandered.

Among the CBC’s other recommendations, all duly reported as gospel by the city tabloids, the city should:

• replace longevity increases with merit pay to “encourage good teaching”;
• dismiss ATRs after six months; and
• reduce pension and health insurance benefits to private-sector levels.

That report got recycled in an op-ed in the Feb. 2 New York Post by CBC President Carol Kellermann, a former city deputy finance commissioner, demanding that teacher unions “support vital reforms” (she added one new recommendation: eliminate seniority rights during layoffs).

Despite its business leanings, the CBC gets a pass from the city’s media as “a nonpartisan, nonprofit organization” and a “fiscal watchdog.” Typical is The Bond Buyer, the daily newspaper of the municipal bond industry, which calls the CBC “one of the oldest and most respected independent fiscal watchdog groups in the country,” while Business Week named it “a not-for-profit civic organization that influences constructive changes in the finances and services of New York City and New York State government.”

But whom does the CBC watchdog refrain from biting?

While unaffiliated with any party and not endorsing any candidate, the CBC in its research reflects the outlook and interests of the city’s business community, which favors lower corporate taxes, less public spending, the privatization of municipal and state services and the reduction of public sector jobs, including in education.

The CBC was founded in 1932 by oil and banking magnate John D. Rockefeller Jr., railroad lawyer William C. Osborn and others of America’s Depression-era super-rich to ride fiscal herd over a then-corrupt city administration.

Today, its 11-member executive committee and 135-member Board of Trustees is filled with top real estate, banking, insurance and Wall Street executives, plus managing partners from pivotal white-shoe law firms. There are no union leaders, no heads of charitable, direct-service nonprofits, no full-time educators or advocates for the poor.

Among its more visible members are Chairman James L. Lipscomb, the executive vice president and general counsel for both MetLife Inc. and investment arm MLI. The CBC’s vice chairman is David R. Greenbaum, president of Vornado Realty Trust’s New York office and member of the executive committee of the board of governors of the Real Estate Board of New York, the state’s landlord lobby.

These trustees and other business backers underwrite much of the organization’s costs. Its current five-year city and state budget study, for example, was funded by global real estate advisors Newmark Knight Frank.

The CBC runs on a modest budget of some $1.5 million, earned largely from its return on investments, proceeds from an annual black-tie trustee dinner, public events and private donations (not itemized in tax filings).

Its office at 1 Penn Plaza comes courtesy of Vornado Realty Trust.

The CBC can be counted on to make one-sided policy recommendations. In November 2004, for example, after the court-appointed special masters in the Campaign for Fiscal Equity state aid lawsuit called for increasing state operating aid for schools by $5.6 billion and capital aid by $9 billion over four years, the CBC blasted the increases as excessive and leading inevitably to tax increases.

When Gov. David Paterson proposed a Draconian $2.8 billion midyear budget cut in December 2009, CBC analyst Lynam called the savings “loose change” and told the Buffalo News that slashing state work force jobs “has to be part of the solution.”

When the governor recommended a $1 billion cut to schools in his January budget proposal, Lynam opined in The New York Times that the Paterson presentation “looks pretty clean” and “makes a reasonable down payment on the problems the state is facing.”

The CBC harps on the high pension-fund contributions that the city and state pay, without acknowledging that it was the Wall Street collapse — the outcome of some of its own trustees creating and churning toxic debt — and dropped earnings that necessitated higher government contributions to keep the plans solvent.

In an Oct. 15, 2009, Daily News op-ed, Kellermann blasted public employee compensation rates as “far out of line with the realities in the private sector.” In a New York Post op-ed on Dec. 21, Kellermann argued that the city could save billions of dollars by offering inferior benefits to city workers, including paying just a portion of an employee’s health premium and ditching secure defined-benefit pension plans for risky 401(k)-type plans.

“City benefits are more generous than the job market requires,” she wrote, calling them “gold-plated worker perks.”

Even as the CBC lambastes city workers’ salary and benefit levels as excessive, it’s silent about Wall Street brokerage firms’ platinum-plated pay packages, including at Goldman Sachs, where employees received a bonus of $498,000 on average this year.

Among the recipients of outsized bonuses: Goldman Sachs managing directors and CBC trustees Kevin Willens and Alicia Glen.

The Fiscal Policy Institute’s James Parrott faults the CBC for trashing taxes and spending without accounting for corresponding needs such as building and maintaining the city’s infrastructure, police protection, a fire department equipped and trained to fight high-rise blazes, and a strong public school system responsible for educating many special needs students.

“All these things make possible a greater density of economic activity in the city, which makes for greater productivity,” says Parrott. “Yes, taxes are higher here, but so is productivity.”

Batting zero on finding equitable and meaningful solutions is what happens when you ask the wrong questions.