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Public authorities reforms in New York (and elsewhere)

September 20, 2011

Although many public authorities deliver efficient and cost-effective public services, concerns about their transparency and accountability have led to a series of major reforms over the past decade.

The New York State Public Authorities Accountability Act of 2005 imposed increased reporting and auditing requirements on public authorities, called for board member training and the disclosure of executive compensation rates, required each public authority to adopt a code of ethics, directed them to make their annual reports and required documentation available online, and restricted their power to dispose of real property for less than fair market value or without public bidding. The PAAA also created the Authorities Budget Office and directed it to perform studies and analyses.

The PAAA was followed in 2009 by enactment of the Public Authorities Reform Act. This act gave the Authorities Budget Office the power to promulgate regulations, to initiate formal investigations, and to publicly warn and censure noncompliant authorities. It also directed the Authorities Budget Office to establish a definition for public authorities, to develop a comprehensive inventory of state and local authorities, to collect mission statements from each public authority, and to review the potential for consolidating or eliminating unnecessary public authorities. Significantly, the act also clarified that board members operate as fiduciaries and are responsible for carrying out their duties with a reasonable degree of diligence, care, skill, and independence.

The Public Authorities Accountability Act of 2005 can be viewed here, and the Public Authorities Reform Act of 2009 is available at this link.

New York State has become a leader in public authorities reforms, but other states have begun to impose similar regulations on quasi-public entities. In New Jersey, for example, Governor Chris Christie issued Executive Order 15 in 2010, which limits public authorities’ lobbying activities, restricts board members’ travel expenses, and directs state departments to make recommendations regarding the consolidation or termination of authorities. Christie has proposed additional reforms, such as his “Shadow Government Reform Act,” which would give him veto power over all of the state’s public authorities, allow him to remove board members for cause, require board members to provide financial disclosures, and require periodic audits by the state comptroller. To date, the New Jersey legislature has failed to act on the proposal.

Limited reforms have also been undertaken in Michigan and Massachusetts. In Executive Order 2010-2, Michigan Governor Jennifer Granholm consolidated ten separate finance authorities in an effort to improve their efficiency and cost-effectiveness. The executive order also stated that board members have fiduciary responsibilities. And in 2009, Massachusetts Governor Deval Patrick called for a review of board member compensation packages.

Additional resources on public authorities reforms in New York include the following articles and reports:

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