In the course of a year or so, the state will take more than $750 million from the New York Power Authority to help the Paterson administration balance the state's deficit-ridden general fund.
Power Authority officials say the lost money will not affect operations and that they are happy to help the state during these troubled times.
But critics say the move comes at a terrible time, given the condition of the economy. The authority, the nation's largest state-owned power company, could have used some of the money to lower electricity rates, especially for struggling upstate companies that have decried the cost of power in New York as a competition killer, these critics say.
"Essentially, they're using surplus NYPA funds from selling our hydropower on the open market to fund pork-barrel spending in Albany. It's outrageous," said Assemblyman James Hayes, R-Amherst, the ranking Republican on the Assembly Ways and Means Committee. He voted against last week's deficit-reduction package.
The latest "sweep," Albany parlance for transfer, of money from off-budget agencies occurred last week when Gov. David A. Paterson and the Legislature authorized more than $700 million in cash transfers from various entities to the state's general fund. It helped close a $1.6 billion deficit in a way that let Paterson and lawmakers avoid deep spending cutbacks.
Of the more than $700 million in total sweeps, $306 million is coming right away from the Power Authority, which runs the Niagara Power Project and other facilities. That's on top of money already swept from the authority last year and over the next fiscal year beginning April 1.
"It's a voluntary contribution we're making," said Richard Kessell, Power Authority president.
"If NYPA didn't do this, they'd have to get funding from someplace else," Kessell said.
Right, say some critics. Like spending cuts.
And then the Power Authority could have used some of the reserves, Hayes said, to lower costs of electricity, especially for companies located close to the hydropower plant at Niagara Falls.
Kessell said the lost money will have no impact on services, will not force any Power Authority layoffs or cutbacks at facilities, will not affect low-cost allocations to certain companies and will not force any rate hikes. "NYPA was in a position to help and we did," Kessell said. He said the state is facing an "extraordinary time" with its fiscal problems that requires "extra actions" like the fund sweeps.
The authority failed to make public Friday an analysis of the money transfer that was prepared for its board by the Bank of America. At a Power Authority board meeting last week approving some of the sweeps, one member said the bank warned that the authority could risk credit-rating downgrades on its borrowings if such large transfers continue.
Hayes and others say the point is not that rates will go higher as a result of the fund sweep, but that rates could have gone lower at a critical moment in the economy.
Just a few hours before the Legislature approved the deficit package Tuesday, Power Authority board members, scattered around the state and country, rushed together via teleconference to back the sweep. Some members, though, sounded underwhelmed.
Eugene Nicandri told his fellow board members that he didn't believe the transfer was necessary to begin with because the state is about to be bailed out by Washington in the federal stimulus bill. He added that local communities that host authority power plants have as much right to get some of the authority's "dividends" as the state's general fund.
But Nicandri mostly had trouble with steering money to the state budget instead of the authority sticking to its core mission "to stimulate the economy by reducing electricity rates for its customers." That, he said, would be better than the authority's money "going for member items in the state budget."
Power Authority acting Chairman Michael Townsend said he shared some of Nicandri's concerns.
"I think it is prudent to do this under these historical circumstances at this time, but I am concerned about the precedent of future voluntary contributions of this magnitude," he told the board. He promised the authority would be more "stringent" in its future requirements to help the state. "We just cannot continue to do this indefinitely," he said.
Elise Cusack, a board member from Erie County, called it a "tough decision," but she voted for the sweeps.
Fiscal watchdogs say the Power Authority has long been used as a tapping source for extra cash for the general fund. But the latest grab, they say, is especially egregious because the authority is giving the state some of the money in the form of loans -- to be paid back by 2017. That amounts to the state's using borrowed money for operating purposes.
"It should affect their credit rating now because their willingness to do this is a reflection of very bad management," said E.J. McMahon, director of the Empire Center for New York State Policy, a fiscal think tank.
"I've never seen them abuse the Power Authority like this," he said, noting the money transfer comes at a time when high energy rates were being blamed for job losses upstate long before the recent meltdown in the economy. "This is an extraordinary form of new fiscal abuse," he said.
"The euphemism that says the Power Authority doesn't need the money is another way of saying the Power Authority doesn't feel it needs to give back to ratepayers or use it for economic development purposes," McMahon said.
One legislative analysis obtained by The Buffalo News said the money swept from the Power Authority could have been worth a two-cent per kilowatt subsidy for every small business in the state for two years.