Subsidy Sheet: The Stench of Pay to Play in Albany

August 5, 2022

Another week in Albany, another eyebrow-raising story about big political donors to the Governor getting huge state contracts. The Times Union reports that mega-donor Russ Maxwell received a $5 billion contract from the state shortly after he and his spouse donated $30,000 to Governor Hochul’s campaign, and $30,000 to the State Democratic Party (run by Hochul). Maxwell owns Medical Answering Services, a Medicaid firm likely to benefit from the contract.

Maxwell has contributed over $300,000 to Hochul and former Governor Cuomo, and his firm has received hundreds of millions of dollars in state contracts since 2004 (NY Post). Multiple companies competed through the two separate bidding processes, both of which Medical Answering ultimately won.

Of course, one can never say for certain whether this is pay-to-play, but it looksterrible. Receiving donations one day and gifting donors the next will always seem suspicious to voters, and for good reason: At least one study suggests that when contractors donate, they are indeed more likely to win contracts (though the biggest factor for winning is having a history of contracting).

Unlike NYC, New York State does not have a pay-to-play law that limits how much bidders or lobbyists can contribute. The contribution limits for Governor are currently $69,700 per election cycle – the highest of any state with limits – and will drop to $18,000 the day after the November 2022 election (and will still be three times higher than for presidential candidates).

Senator Myrie and retiring Assemblymember Galef do have a bill (S483-A/A5839-A) that would ban contract bidders from donating to candidates whose offices would have direct control over a contract (generally meaning gubernatorial candidates). This year, the NY Senate passed that bill. The Assembly did not.

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Check out this excellent interview in Nonprofit Quarterly on the secretive world of site consultants that help corporations land huge tax breaks. Good Jobs First’s Greg LeRoy interviews former site consultant (and #BanSecretDeals coalition member CJ Girod) on the ins and outs of the subsidy underworld and how taxpayers can fight back:

LeRoy: Besides designating the pursuit of discretionary economic development incentives as lobbying and banning NDAs in connection with economic development deals, what else should states be doing to rein in the power of site consultants?

Girod: […] The first key reform is to require transparency from the company: the exact status of the project; all sites under consideration; a full gap analysis/location comparison including all start-up and operating costs, taxes, and incentives over a 10- to 30-year period; copies of incentive offer letters from competing location(s); and the name of the consultant(s) involved and their fee structure.

The second involves enhanced corporate accountability. Any company requesting a subsidy must have its CEO and chief legal counsel certify under penalty of perjury the accuracy of all information submitted (incentive applications, gap analysis, and so on), the incentive award is a material factor in the company’s location decision, and the project will not move forward at the respective location without the incentive award.

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Other subsidy stories from this week:

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Fun fact: The NYS Comptroller’s office received $235 billion in contracts in 2020, more than the annual GDP of Greece ($222 billion).

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If you got this from a friend, sign up here. Subsidy Sheet is written by Tom Speaker, Policy Analyst at Reinvent Albany, and edited by John Kaehny.

Please send questions and tips to tom [at] reinventalbany.org. We look forward to hearing from you!