Subsidy Sheet: Dozens of groups and unions call on Hochul to sign bill restoring Comptroller contract oversight powers

October 7, 2022

Reinvent Albany published a new memo of support for an extremely important bill restoring the Comptroller’s power to review state contracts before they are finalized (S6809-A (Reichlin-Melnick) / A7925-A (Zebrowski)). The memo was signed by eight unions including RWDSU, NYSUT and CWA District 1, as well as groups across the political spectrum, from the right-leaning Empire Center to the left-leaning Empire State Indivisible. The bill passed the legislature this spring.

The Governor’s contracting activity has been in the news recently after it was revealed New York paid twice as much as California for $637 million of at-home COVID tests from a middleman called Digital Gadgets, owned by a CEO whose family donated hundreds of thousands of dollars to the Governor’s political campaign.

Along with the groups and unions, the Comptroller bill is supported by at least four NY editorial boards. The Syracuse Post-Standard’s editorial is particularly worth reading. Some highlights:

“DiNapoli argues that his office’s oversight also protects the executive from accusations that a contract was bid unfairly. If the comptroller approved it, fingers would be pointing at him.”
“The comptroller also pushes back at complaints that contract approval takes too long. He has the receipts. In 2021, the comptroller reviewed 18,605 contracts valued at $173.4 billion. 94% of contracts were reviewed within 15 days; 99% were reviewed within 30 days. An infinitesimal number of contract reviews took 76 to 90 days. Most contracts are approved in six days. In an emergency, DiNapoli said, his agency can turn around a contract review in 24 hours.”
“The comptroller can always audit spending after the fact, but it’s harder to claw back money than to keep it from being misspent.”
“The comptroller’s data undermines SUNY’s main objection to this bill: that it would ‘result in costly delays for hundreds, if not thousands, of SUNY contracts, and further hinder SUNY’s ability to compete for students, faculty and research.’ That’s a bit dramatic when the vast majority of contracts are vetted in less than two weeks.”

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Is this why New York State was in such a rush to create a new $10 billion tax break for chip fabs in June? NYS will be giving as much as $5.5 billion to Micron, a semiconductor manufacturer, to establish a “mega-fab” in Clay, NY, near Syracuse (NYT).

Like many mega-subsidy press releases, the Micron release sent out by Governor Hochul and Senator Schumer overflows with hyperbole – and many will not be verifiable for next 20 years:

“The deal will create 9,000 jobs.” Recent chip fabs employ closer to 1,000 people, and the biggest fab in New York, GlobalFoundries Fab 8, near Albany, employs roughly 2,700 people. Is the new Micron plant – which will be even more automated than Fab 8 – employ more than three times as many people? Additionally, Micron claims that it will spend up to $100 billion on the Clay fab over the next twenty years – a staggering amount that would probably make it the most expensive fab or factory ever built. (Let us know if you can find a more expensive one and we’ll send you a Reinvent Albany pen.)
“The project is expected to bring an additional 40,000 supply-chain and construction jobs to the Syracuse area and New York state.” Chip fabs are incredibly capital-intensive. Fab machines cost about $150 million dollars, most of which come from a single factory located in The Netherlands. According to industry experts, each fab needs about 20 machines to be economically efficient. That’s a huge amount of investment that goes to places far, far away from NYS – meaning that many of the jobs created won’t be NY-based. To boot, it’s hard to say how much local employment will be built up over time. Even at GlobalFoundries, an established plant, some positions are outsourced to The Netherlands. For example, when a machine breaks, the Dutch company that makes them sends an engineer from The Netherlands to fix the machine.
“New Yorkers will get most of the jobs.” Press statements from the Governor imply that New Yorkers will get most of the jobs, but “those familiar with Micron’s plans say the company is expected to fill the jobs by recruiting locally, nationally and globally.”
“The project is ‘green.’” NY’s tax breaks for Micron are greenwashing. The Post-Standard notes that “the manufacturing complex could consume up to 10 million gallons of water per day, enough to supply a whole town or village. The entire city of Syracuse, by comparison, uses an average of 40 million gallons per day.”

In other Micron-related news, the Post-Standard writes about how Micron was lured, and the Buffalo News asks why upstate Genesee County’s “STAMP” site – home to a $4 million-per-job tax break – hasn’t managed to win a chip fab despite millions in investments.

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Liz’s Library

Welcome to Liz’s Library, where our Senior Research Analyst Elizabeth Marcello highlights timely research on corporate welfare.

New York has been buzzing lately with an apparent pay-to-play scandal involving Governor Hochul and Digital Gadgets, a company that sold over-priced COVID tests to New York State. The scandal, of course, is no real surprise for those familiar with New York’s feeble campaign finance laws and rules about doing business with the state. As it turns out, empirical studies also show evidence for pay-to-play. For example, Aobdia et al. (2021) find that state governments give more subsidies to politically connected firms. In fact, a firm is nearly four times more likely to receive an award, and the award is 63% larger, when they make a campaign contribution to a state politician. How long do we have to wait for legislation that cracks down on these sort of practices?

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