By: Bennett Liebman
Government Lawyer in Residence
This January, Governor Andrew Cuomo, following the death of his father former Governor Mario Cuomo on January 1, decided not to deliver his annual State of the State remarks when the State legislature reconvened on Wednesday January 7. Instead, he delivered his remarks on Wednesday January 21, 2015, two weeks after the original time of the State of the State.
The question arises as to what legal constraints were in place that might have limited the Governor’s ability to change the timing of his State of the State remarks. What precedents were there on the delivery of these remarks?
The short answer is that there are basically no restraints on the State of the State remarks. In fact, there is no requirement that the Governor actually deliver an oral State of the State address.
The legal issue is governed by Article 4, Section 3 of the State Constitution which provides that the governor “shall communicate by message to the legislature at every session the condition of the state, and recommend such matters to it as he shall judge expedient.”
On its face, this provision states nothing about the timing of the communication. Thus, there is no Constitutional requirement governing the timing of the Governor’s message. The Governor is free to deliver this message at whatever time he or she might wish.
Nor is there any requirement of a speech. All the Constitution requires is a “message.” This is not idle language. The State of the State requirement has largely been unchanged since the 1821 Constitutional Convention. At that convention delegate Peter Robert Livingston wanted to make sure that only a message not a formal speech would be required. A message would not necessitate the legislature to convene in Albany. A message would not cost the State the time and the expense of the individual legislators.
Based on this non-requirement of a speech, New York governors for a century simply delivered written messages to the legislature. The speech element was not added until Governor Alfred Smith in 1923.
This basically tracked what was happening on the federal level where no oral State of the Union message was delivered between the time of Thomas Jefferson’s presidency until Woodrow Wilson in 1913.
Smith’s remarks 1923 remarks were the first time that a “Governor of this State has delivered his message in person.” In prior years, the message would be given by the Governor’s secretary to the clerks of the individual houses who would read the message to the members. Smith claimed, “It will at least mean that the legislators will remain in their seats to hear it, as least as far as I am concerned, for I shall not skim through it as I have heard some clerks of the Assembly do.” The New York Times added that the “Governor-elect is well aware that little attention is paid to a message from the Governor, no matter how important the topics dealt with when the message is read in the usual lackadaisical somnolent fashion by the Clerk of the Senate or Assembly.”
Smith was not joking about his non-skimming of the message. The New York Times claimed that his 1923 speech lasted one and a half hours. In subsequent years, Smith spoke for longer period. His 1924 speech was two hours. The 1925 speech took three hours.The 1926 speech was 2:10.
In his last two years as governor, Smith waived off the actual State of the State speech. In 1927, upon doctor’s orders, he chose not to deliver a State of the State speech. The 1928 message, with Smith a candidate for the presidency, was the longest message ever, encompassing 35,000 words, and Smith chose not to deliver it. Smith joked, “I wanted to go to New York Friday so I decided I would have to forego the reading of the message Wednesday.”
All governors since Smith have given their State of the State messages in person. The speeches have been broadcast, and governor have learned, unlike Governor Smith, to keep their remarks to a more manageable time period.
 Livingston subsequently served both as the Speaker of State Assembly and the President Pro Tem of the Senate
 Robert Allan Carter, New York State Constitution: Sources of Legislative Intent (Second Edition) p. 35 (2001) See also Constitutional Convention of 1821, Reports of the Proceedings and Debates P. 173.
 “Smith to Read First Message on Wednesday,” New York Herald Tribune, December 30, 1922.
 “Smith Will Read his Annual Message, “New York Times, December 30, 1922.
 “Gov. Smith Proposes Radical New Laws to Bring Home Rule,” New York Times, January 4, 1923. The Baltimore Sun claimed that his speech was one hour and forty minutes. “Liberal Government Is ‘Al’ Smith’s Plea,” Baltimore Sun, January 4, 1923.
 “Gov. Smith Presents Tax Relief Program; Republicans to Aid,” New York Times, January 2, 1924.
 Reginald Wilson, “Smith Urges Cooperation; Republicans Act at Once,” New York Herald Tribune, January 8, 1925. The New York Times clocked the speech at two hours, forty-five minutes. See “Message Longest on Record,” New York Times, January 8, 1925.
 Reginald Wilson, “Smith Wants State to Fund Housing, Asks 25% Tax Cut,” New York Herald Tribune, January 7, 1926.
 “Smith Not to Read Message to Legislature; Breaks His Custom by Doctor’s Advice,” New York Times, January 4, 1927.
 “Gov Smith Faces G.O.P. Majority,” Associated Press, Boston Globe, January 4, 1928.
 Theodore C. Wallen, “Smith to Give Nation Views In Message of 35,000 Words,” New York Herald Tribune, December 29, 1927.
 “Smith Feared Message Would Take Up 3 Days,” New York Herald Tribune, January 4, 1928.
 The one exception to this shortened State of the State approach may have been Governor Cuomo’s actual 2015 State of the State address which ran for one hour thirty minutes. Arguably, the fact that this peech was combined with the budget presentation could conceivably have justified its length. See Kyle Hughes, “Cuomo Talks Gambling, Schools,” Oneida Daily Dispatch, January 22, 2015.
The November 19, 2014, event “Discussing Detroit: The Potential Ripple Effects of the Largest Municipal Bankruptcy in U.S. History and What it Might Mean for New York,” primarily sponsored by Albany Law School’s Government Law Center, the Nelson A. Rockefeller Institute for Government and the Albany Law School/ University at Albany Institute for Financial Market Regulation, generated lively discussion about the causes and consequences of municipal fiscal distress. The program consisted of a keynote address by former Lieutenant Governor Richard Ravitch, followed by a panel discussion featuring Albany Mayor Kathy Sheehan; Peter Kiernan (of counsel, Schiff Hardin LLP); Albany Law School Professor Christine Sgarlata Chung; Donald J. Boyd (Senior fellow, Rockefeller Institute); Richard Mulvaney (NYS Troopers Police Benevolent Association). David Unkovic (Of Counsel, McNees, Wallace & Nurick, LLC, State-Appointed Receiver for the City of Harrisburg, PA) served as moderator.
In his keynote address, former Lieutenant Governor Richard Ravitch highlighted the most compelling reasons why Detroit entered bankruptcy and identified key agreements reached through mediation. Mr. Ravitch focused on the legal issue of feasibility under Chapter 9. For a Plan of Adjustment in a Chapter 9 (municipal) bankruptcy to be confirmed, the Bankruptcy Court must determine that the plan is feasible, i.e., that it can be implemented in a manner that does not lead to an “18” — a subsequent Chapter 9 filing. Mr. Ravitch emphasized that the alternative to Detroit’s Plan would have been chaos, but also noted that there is no assurance the plan, while feasible in its construct, can be implemented successfully. Chapter 9 filings are rare and remain a venture into the unknown. Also unknown are many exogenous factors impacting Detroit’s finances, such as whether the federal government will reduce local government assistance to education and health care, whether infrastructure improvements will be able to be financed, whether Detroit’s bureaucracy will be able to respond effectively to changing governmental challenges, and whether Michigan will be proactive in its support of its largest city. Detroit achieved debt relief and now has more borrowing capacity, but there is no evidence yet that it will have new, willing lenders, and its underlying problems of declining population, loss of industry, and an eroding tax base remain.
The Lieutenant Governor briefly contrasted Detroit’s circumstances with those of New York City in the mid-1970’s Fiscal Crisis. Although insolvent, New York City did not file for bankruptcy. Rather, the state provided substantial assistance to the City and supported an elaborate, politically accountable process that led to the implementation of many financial management reforms, including the requirement that the city maintain balanced budgets.
Following the Lieutenant Governor’s keynote, the panelists explored causes and responses to municipal financial distress. Many of the panel members agreed that the problems afflicting Detroit and Harrisburg also imperil many municipalities in New York State. This was given substance by Kathy Sheehan, the Mayor of Albany and an Albany Law School alumna, who described Albany’s fiscal challenges in the face of tax saturation, high and increasing personnel costs, and limited resources. As Mayor Sheehan and several of the panelists explained, municipalities face a fundamental structural challenge to fiscal health. They must spend money on public services and infrastructure to meet public health and safety needs, but face severe revenue constraints due to population loss and industrial decline, and may have few opportunities for expense reduction or debt relief. Especially during times of economic strain, this structural revenue challenge can make it difficult for municipalities to achieve and maintain fiscal health.
With respect to municipal bankruptcy, several of the panelists noted that New York is one of twenty-seven states that, with varying conditions, permit their municipalities to file for bankruptcy relief. (Pursuant to the U.S. Constitution, a political subdivision must have its state’s permission to file; a state cannot file.) To date, there have been no municipal bankruptcies of note in New York history. Instead, as was seen during New York City’s fiscal crisis in the 1970s, and with several New York cities subsequently, New York State employs the “Financial Control Board” approach when a local government faces severe fiscal distress. Such control boards provide a forum for negotiated solutions among certain stakeholders, including lenders, creditors, labor, government, and business. In contrast, Michigan and a number of other states allow for the appointment of an emergency manager or receiver entrusted with authority to make certain financial decisions while the distressed municipality attempts to navigate through financial distress. In the case of Detroit, the emergency manager there ultimately sought permission to file a Chapter 9 bankruptcy petition on the City’s behalf. One panelist expressed the view that the control board approach supports political processes, incentivizes local government to find solutions, and places a premium on political accountability, but acknowledged that control boards cannot generate revenue. Other panelists questioned whether municipalities are disadvantaged when municipal bankruptcy is not an option, whether for legal or political reasons.
One issue that inevitably arises in the context of municipal financial distress is how a municipality will deal with the OPEB (other post-employment benefits) and pension benefits of current and former municipal employees. New York has a State-administered pension system for all local governments except New York City. Under the New York system, municipalities make an annual contribution to the Central Retirement Fund (“CRF”), in an amount as determined by the state comptroller. Several of the panelists observed that the CRF system is in one respects similar to CALPERS (the California Public Employees Retirement System), and further observed that a California bankruptcy court judge recently suggested than an insolvent municipality might be able to sever its ties with CALPERS. The panelists noted that no New York municipality has sought to sever its ties with the CRF, but further noted that the annual contribution to the CRF can be a significant line item in local government budgets.
Along with the costs and benefits associated with maintaining a viable public workforce during periods of fiscal distress, the panelists also discussed another issue surfaced by the Detroit bankruptcy – namely, whether promises to general obligation bondholders should be equated with or given primacy over promises to pension beneficiaries. In 2009, Rhode Island, by statute, enacted primacy for full faith and credit bond holders while the bankruptcy courts in Stockton, San Bernardino, and Detroit have wrestled with the relative status of pensioners, bondholders, and secured and unsecured creditors. Mr. Ravitch argued that a pension promise carries the same moral weight as does a bond promise. Others suggested that the pension promise, which is deferred compensation, should have primacy. The panelists concluded by acknowledging that municipal financial distress surfaces a range of knotty issues and competing concerns. The panelists look forward to a continuing conversation about how best to support and sustain local government fiscal stability and health.
This post was written by Natalie Jersak, a rising senior at Siena College and summer intern at the Government Law Center.
On Tuesday, June 11, 2014, the Los Angeles Superior Court moved to end the California’s public schools tenure system. The court cited Brown vs. Board of Education case’s holding that all students have a fundamental right to equal education as the basis for ending the tenure system. Under that standard, the court held that students were denied their fundamental right to education because the tenure system had the effect of retaining poor teachers who failed to supply students with a competent education. The most severe cases of teacher incompetency was overwhelmingly present in schools with a large base of minority and low-income students
Tenure rights were first enacted in 1910 with New Jersey legislation granting fair-dismissal rights to college professors. Tenure legislation for primary and secondary schools was not established until the 1920s.
Today, there are roughly 2.3 million public school teachers in the U.S. who have tenure rights. The tenure question has two sides. Opponents of tenure argue that this system protects subpar educators because the only way to dismiss them is via a mandated and costly process. On the other hand, proponents argue that teachers need protection like this because without it, at will employment can subject teachers to dismissal at the whim of schools administration. The most common example cited in support of tenure rights is to protect teachers who wish to teach their curriculum without the interference of extra-curricular forces—e.g. they want to teach according to national or state curriculum standards as opposed to locally-encouraged criterion.
The push to remove tenure rights has been quieted for over a decade. The last state to abolish tenure was Oregon in 1997. There, the state eradicated tenure and adopted a system providing two-year renewable contracts along with a rehabilitation program for underachieving teachers.
In California, the court compiled a list of items evidencing how the California tenure system denied students their fundamental right to education. Mainly the procedure protecting tenured teachers made it difficult to terminate ineffective educators. According to the court, the hearing-like process granted to every tenured teacher costs districts between $250,000 and $450,000 per tenure complaint; the process itself takes, on average, two years to complete.
Representatives from the California Teachers Association will appeal the decision on the grounds that the court has interrupted the principles of checks and balances by circumventing the legislature to end tenure.
Governor Cuomo of New York State has a new economic development plan called START-UP New York. This program was organized to strengthen the private-public partnership between business and the government of New York State as well as help fuel innovation and economic growth and development. In short, New York State is encouraging new and expanding businesses to organize in New York through business-friendly tax incentives. These incentives are only available if the business aligns its business mission with the sponsoring organization’s mission; all sponsoring organizations are public and private colleges or universities.
This is an overview of the business eligibility requirements as set forth in the draft regulations issued under the START-UP NY program. The draft regulations are available for public comment until 5PM Monday, December 30, 2013. More information about the program and the public comment contact is available here.
Under START-UP NY, the legislature has set aside a lot of space for entrepreneurs to set up their offices. All office space is part of public and private NY university/college property. Colleges and universities may offer existing vacant space for the program; schools in certain geographic regions are permitted to also use off-campus land for START-UP NY applicants. To make sure education resources are not overextended, the program restricts college/university campuses from offering too much office space for entrepreneurs. For example, SUNY colleges upstate of Westchester may use vacant space and land on campus for this program, and only up to 200,000 square feet of additional land within one mile of campus for applicant office space.[i]
Tax Benefits under START-UP NY
START-UP NY assists organizations that contribute to New York’s economic development and innovation. Under this program, eligible businesses (eligibility is described below) will be permitted to operate tax free for ten years. This includes business, corporate, state, local, sales, and property taxes. Employees of those businesses would not pay personal income tax (state tax) on their wages for the first five years. After five years, employees will not pay tax on their income up to $200,000 – $300,000 depending on their filing preferences.
The proposed regulations set forth the following eligibility requirements for businesses seeking to participate in START-UP NY. At the outset, it is important to note that there are thirteen types of businesses that are ineligible for this program:
- Retail/Wholesale business
- Real estate brokers
- Legal services (i.e. law firms)
- Medical practices, including dentistry
- Real estate management
- Financial services
- Personal services (i.e. dry cleaning or photofinishing)
- Administrative or support services[ii]
- Accounting firms or services
- Businesses providing utilities
- Businesses distributing utilities
As long as a business is not found within one of the proscribed thirteen sectors set forth above, entrepreneurs may begin assessing their eligibility according to the following six items: business start date, business form, legal compliance, business mission, business growth, and business originality. This is a summary of those six eligibility components.[iii]
Generally, a business must be new if it is to participate in START-UP NY. There are a couple of definitions for “new business.” At first, it means that the business is not operating in New York at the time it applies to START-UP NY. The definition does not exclude businesses currently operating in other states, but, in those circumstances, currently operating businesses cannot transfer existing jobs into the tax free areas. If a business outside of NY wants to apply to START-UP NY, it must create new employee positions here in this state.
Businesses that have graduated from a NY Incubator are new businesses for the purpose of this program. Businesses that operated in state but moved out of New York on or before June 1, 2013 may take advantage of the program if the Commissioner of Economic Development finds that the business will substantially restore jobs in New York that were lost in the move out of state. If a business wants to expand into a tax-free area, the owners can apply to the program; if the Commissioner determines that the business will create new jobs in the tax-free area and that jobs will not be eliminated in connection with the expansion it may be accepted into a tax-free area.
Any business organized as a sole proprietorship, partnership, limited liability company, or a corporation may apply to the program. This appears to eliminate certain business forms that professional organizations usually take, such as a limited liability partnership. In any event, many of those business forms are ineligible under the program as it is currently conceived.
New businesses applying to START-UP NY must comply with workers compensation rules, unemployment insurance, environmental laws, and all other employment laws and regulations. Applicants must also be up to date on their taxes—federal, state, and local property taxes.
START-UP NY is a public-private partnership between the government and industry. Therefore, business mission statements of the applying entities must align with the purpose of the sponsoring organization. Sponsor organizations under START-UP NY are academic institutions all over the state.
In addition to aligning mission statements, each applicant must show its business will contribute to the community in some positive way. One example of such a contribution is stimulating the economy. This could include offering internships or vocational training, as well as collaborating with the local economy and fostering entrepreneurship. Community contribution is a broad concept, but revolves around promoting and creating economic opportunity within the sponsor’s community.
Applicants must also be involved with the sponsoring organization. This can be through scholarship, teaching, or sharing intellectual property with the sponsor. START-UP NY is focused on establishing a strong entrepreneurial economy through this collaboration. So applicant involvement can vary as long as there is some sort of direct collaboration with the sponsoring institution.
Applicants must show that their business will create new net jobs. Under START-UP NY, a new net job is a job created by the applicant under the program that is:
- New to New York;
- Is not transferred from a business outside New York through reorganization or transfer;
- Is not given to a person employed in New York within the past five years by a related person;
- Mandates at least thirty-five hours of work time a week;
- Is located within one of the tax-free areas; and
- Is filled for at least six months of the year in the tax-free area.
In general, the business must be a new business. It should not be a business that used to exist in New York within the last five years that is being reinvigorated through the program by the same business owner. If the applicant wishes to bring in a pre-existing business, the applicant is only eligible to participate in START-UP NY if the business moved outside of New York on or before June 1, 2013 and the Commissioner determines that the applicant will restore the jobs that were lost when the business moved. Other local existing businesses seeking to expand into a tax-free area are eligible if the Commissioner determines that the business will make new net jobs with the move and that it will not eliminate jobs within the state when it expands to the new area.
Maintaining Eligibility under START-UP NY
Once accepted under START-UP NY, businesses must continue to meet standards imposed under the program in order to continue receiving the tax-free benefit. The program requires that all businesses at least maintain the number of new net jobs that were created under the incentive. Specifically, the average number of employees must reflect or exceed the average numbers from the year before the business submitted an application for START-UP NY plus any new net jobs created during the business’s tenure in the program. Numbers should be gathered quarterly, at the end of March, June, September and December, to get the average. Businesses must submit an annual report of their numbers to the Commissioner of Economic Development.
[i] Upstate SUNY schools may go outside the 1-mile radius with approval from Empire State Development.
[ii] Unless the Commissioner of Economic Development grants permission
[iii] The regulations impose additional eligibility requirements for applicants seeking to locate in downstate NY. Those businesses must be in the formative stage of development or be involved in high technology such as design, development, information technology, advanced materials, processing engineering, etc.
In California gasoline prices are reaching $4.65 a gallon and as a result Gov. Brown and state agencies decided to take action. California decided to allow the sale of winter gasoline a month earlier then usually. Winter Gasoline is less environmentally friendly because if used during warmer temperatures will evaporate into the atmosphere quicker than alternatives. This is even true for gas that remains in subterranean storage tanks. It was noted that if a major heat wave hits California the switch to winter gasoline may have a large effect on the air quality.
While gas prices always fluctuate, California is seeing a rise in price above the national average because of problems with their state refineries. The national average was noted to be $3.814 with California prices reaching $4.65.
This bring an interesting question to state and local government reform. With the large impacts that gas prices have on the everyday economy and everyday lives of residents, when should a state intervene in the market in an attempt to lower gas prices? And how much weight should be given to the environmental effects that may result?
The article showcasing this California action is available here http://www.latimes.com/business/la-fi-gas-prices-governor-20121008,0,7934574.story
In recent news it has been stated that New York Gov. Cuomo and Comptroller Thomas DiNapoli are looking to propose legislation that would create a state super control board. The board that would take over the finances of struggling local governments on the verge of bankruptcy, including cities, towns, villages, and counties.
Of course public labor unions oppose such legislation because it would allow the state to violate union contracts, which represent one of the largest local government expenditures.
Such control boards are not uncommon in New York and have been set in place at the local level. The governments of Troy, Buffalo, Yonkers, and Nassau County have been under finance control boards because they were on the verge of an economic crisis. It was reported that currently 300 local governments ran deficits and more than 100 local governments do not have enough to pay the bills.
The proposed legislation was described as not “…completely replac[ing] the locally elected official. But it would provide them with the political ‘cover’ many privately say they need to stand up to the powerful unions, which have consistently resisted spending cuts.”
Conflicting reports show that Comptroller DiNapoli has not been in discussions with Gov. Cuomo and he believes it is premature for the installation of such a board. In a press conference DiNapoli emphasized that the idea needs to be examined in more detail.