Creates an independent authority budget office; repealer

Summary of specific provisions

AND JUSTIFICATION: In 2003 and 2004, findings of wrongdoing by public authorities made clear that many of these entities were operating without adequate accountability for their actions. Public officials, members of the Assembly and Senate, as well as civic groups and academics, recommended a variety of reforms, result- ing in passage of the Public Authority Accountability Act of 2005. At the same time, the Commission on Public Authority Reform, led by corpo- rate governance expert Ira Millstein, conducted an in-depth analysis of public authorities in New York State. In 2006, the Commission published a report recommending improvements to the Public Authority Accountabil- ity Act of 2005. This legislation includes many of those recommendations and others intended to improve public authority operations and over- sight.

In 2005, New York State enacted major reforms of public authorities. The Assembly and Senate Corporations, Authorities and Commissions Commit- tees, continue to find ways to strengthen the 2005 Act, knowing that it was only a first step. Additional reforms and fixes are necessary to make the system more accountable and transparent.

Literally billions of dollars are expended each year by the hundreds upon hundreds of authorities throughout the State. Ongoing legislative hearings into events at the Metropolitan Transportation Authority, the Thruway Authority and the Canal corporation, among other public benefit corporations have shown the need for significant improvements in trans- parency and responsiveness. The major areas of reform included in this bill are:

1. THE CREATION OF AN AUTHORITIES BUDGET OFFICE The Reform Act will create an Authorities Budget Office with the staff and budget to finan- cially review public authorities. The ABO will be headed by a Director who will be nominated by the governor with the advice and consent of the Senate. The office will be independent office located within the Depart- ment of State. The Director will serve a 4 year fixed term and will be able to appoint a staff and shall only be removed for cause.

2. AMENDING THE 2005 LAW TO TOUGHEN RULES GOVERNING THE SALE OF PROPERTY BY PUBLIC AUTHORITIES The 2005 Reform Act will be amended to close loop- holes regarding the disposition of authority property.

3. AMENDING THE 2005 LAW TO STRENGTHEN THE AUTHORITY BOARD REFORMS The Reform Act will add to and strengthen provisions governing public authorities' board of directors. The Reform Act will strengthen provisions of the 2005 law with regard to Board accountability and reform. This section creates a fiduciary duty that is enforceable by the Authority Budget Office Director. The Act will require authority boards execute an acknowledgment confirming that they understand their inde- pendence as a member and their fiduciary duties to the organization. The Act will further require each member of a public authority's audit committee to possess the necessary skills to carry out the duties and functions of the committee, to be familiar with corporate financial and accounting practices, and be or become financially literate. Further- more, this section will require each member of a public authority's governance committee to possess the necessary skills to carry out the duties and functions of the committee, and expand the responsibilities of those members to include the examination of ethical and conflict of interest issues; performing board self-evaluations; investigate term limits, reappointments and board responsibilities; develop by-laws which include rules and procedures for conducting board business; and make recommendations for new directors.

4. PROVIDING THE COMPTROLLER THE POWER TO APPROVE PUBLIC AUTHORITY CONTRACTS Prior to publication of bids each authority must submit to the Comptroller contracts over $1 million. The Comptroller must notify the authority that it wants to review the contract within 45 days. If no action is taken within 90 days the contracts are approved.

5. CREATING STRICT NEW RULES TO CONTROL PUBLIC AUTHORITY DEBT This legislation will begin the process of controlling public authority debt. Boards of directors will submit to the OAO limitations on public author- ity debt and the OAO will submit to the Legislature and Governor recom- mendations on reforming debt issuance by public authorities.

6. RULES CREATING SUBSIDIARY PUBLIC CORPORATIONS AND AUTHORITIES This legislation will ensure that public authorities, including subsidiaries are subject to Legislative and Executive approval. The Reform Act will subject all public authority subsidiaries and affiliates to the provisions of the Public Authorities Law and prohibit the creation of new public authority subsidiaries or affiliates without specific legis- lative authorization.

7. WHISTLE BLOWER PROTECTIONS FOR EMPLOYEES OF PUBLIC AUTHORITIES The legislation includes a "Whistleblower Access and Assistance Program" to protect those individuals who report wrongdoing.

8. MINORITY AND WOMEN'S BUSINESS ENTERPRISE Amends Executive Law §310 to extend to all state authorities such section's contract participation requirements relating to MWBE.

Prior legislative history

Amends Chapter 766 of 2005. A.11745 (20072008)

Fiscal implications for state and local governments

Undetermined at this time.

Effective date

This act shall take effect on the sixtieth day after it shall have become a law.