Budget Allows Hochul to Spend $1.5 Billion Without Normal Review

In the recently passed state budget, lawmakers quietly exempted nearly $1.5 billion from key oversight, allowing Governor Kathy Hochul’s administration to ink an array of future contracts without approval from the state’s fiscal watchdog.

An analysis conducted by the government reform group Reinvent Albany and shared exclusively with New York Focus found the exemption was applied to a wide range of taxpayer-funded programs, including $500,000 for a golf tournament; $40 million for projects to promote swimming; and $212 million to expand rural health care options through a program that includes expanding telehealth and addressing staffing challenges.

Comptroller Tom DiNapoli’s office normally exerts independent oversight over executive branch contracts. This approval process promotes fair competition in the bidding process, helps avoid wasteful spending, and saves taxpayers hundreds of millions of dollars a year, according to DiNapoli’s office. But the executive branch has at times bristled at this added layer of bureaucracy that can delay projects, and the Hochul administration has chipped away at DiNapoli’s authority in recent years.

In a budget passed several years ago, for example, lawmakers explicitly exempted a contract to oversee a multibillion-dollar home care program from review by DiNapoli’s office. The transition has since allegedly led to turmoil in the home care program. Democratic lawmakers have expressed concern about the contract’s bidding process and at times have struggled to get answers about its details.

Before this year’s state budget was passed in May, DiNapoli’s office typically had the power to approve or reject executive branch contracts of over $50,000. In this year’s budget, Hochul’s office sought to raise that threshold to $300,000 for certain contracts. After negotiations with the legislature, the figure for some contracts was raised to $150,000.

The $1.5 billion identified by Reinvent Albany has largely escaped public notice. In these instances, the contracts ultimately funded through the budget appropriations will be exempted from comptroller approval, even if they exceed $150,000, according to Reinvent Albany. This exemption was often coupled with another allowing Hochul’s administration to skip the normally required competitive bidding process.

“This year’s final state budget included provisions that significantly reduce competition, independent oversight and transparency,” said DiNapoli spokesperson Jennifer Freeman.

A state Division of Budget spokesperson, Tim Ruffinen, called use of the exemption a “permissible legal process that has predated the current administration and can be used for a variety of reasons, including addressing emergency and time-sensitive situations.”

He declined to answer questions about why specific funding pots identified by Reinvent Albany required exemption. But he said DiNapoli’s office still has some power over these contracts.

Under the state constitution, the comptroller retains the authority to review and reject payments to a vendor for work performed under a state contract. DiNapoli’s office also has the right to conduct audits of all agency programs and spending. 

According to DiNapoli’s office, however, this does not make up for the powers stripped away. When it reviews a contract, the comptroller’s office examines factors including whether the selection process was conducted fairly; the reasonableness of cost; and whether the selected vendor’s history raises red flags.

The comptroller’s office can only approve or reject payments to a vendor based on the terms of their existing contract, “no matter how imprudent” the terms may be, Freeman said. And DiNapoli has no power to approve the original contracts funded by this year’s $1.5 billion, according to the Reinvent Albany analysis.

New York Focus found that, at times, funds exempted from comptroller review have then gone unspent for lengthy periods, raising questions about whether a speedier process skipping normal oversight was truly necessary. Ruffinen did not address specific questions about those appropriations.

In true emergencies, DiNapoli’s office argues, state law already provides the executive branch means of working around the normal review process, such as through the issuance of executive orders. 

And according to DiNapoli’s office, its average approval process for state contracts last year took only about eight days. Nearly 90 percent were reviewed within 15 days, the office said.

Freeman, the DiNapoli spokesperson, told New York Focus that “history has shown the negative consequences when the State Comptroller’s office is cut out of the process and competition is eliminated.”

Early in his tenure, then-Governor Andrew Cuomo pushed through changes that exempted state university contracts from normal comptroller approval, allowing hundreds of millions of dollars to be spent on Cuomo’s signature “Buffalo Billion” economic development initiative without this oversight. These contracts ultimately became the centerpiece of a sprawling federal corruption case against the Cuomo administration concerning alleged bid-rigging. 

When Hochul came into office, “she actually reversed, initially, a lot of what Governor Cuomo had pioneered,” Alex Camarda, a senior policy advisor at Reinvent Albany, told New York Focus. “But then, in recent years, she’s started to do the same thing.”

The Reinvent Albany review found that in this year’s budget, at least $733 million in new budget appropriations had been exempted. In addition, lawmakers reapproved the spending of $745 million that had been exempted in prior budgets, but had so far gone unspent. The vast majority of the previously exempted funding stems from budgets passed since Hochul took office in 2021.

“Are they setting it up so that one vendor gets chosen and not another — or is it truly on the merits, and they’re just trying to speed up the work because it’s important to the state?” Camarda said.

The use of the exemptions in the current budget may go even further than $1.5 billion: According to Reinvent Albany, they could end up being applied far more widely. 

For instance, the budget also allows up to $100 million to be spent on a program aimed at greenhouse gas reduction — without comptroller approval or competitive bidding — if agencies receive permission from the state budget director to bypass these processes. According to Camarda, it’s unclear from budget documents what proportion of this pot of money, the Sustainable Future Program, will ultimately be exempted.