Wow, great article…

Help Us, Governor Spitzer!
This crusading reformer has his work cut out for him.

Many New Yorkers, dismayed at Albany’s sleaze, dysfunction, and stagnation, are cautiously optimistic about Eliot Spitzer as the Empire State’s new governor. After all, the former state attorney general ran on a platform of “wholesale reform, so that we can collectively get back to effectively dealing with the real problems of our state.” As Spitzer put it in one campaign speech, he’ll do to State Street what he did to Wall Street: open up a “system that is controlled by special interests . . . that is not efficient, is not open, and [is not] transparent.” Maybe he’ll put the fearless spirit with which he relentlessly attacked what he saw as private-sector corruption to work on the state level, too.

Trouble is, the new governor’s proposed reforms won’t come close to the heart of the problem, which runs very deep—deeper perhaps than Spitzer dares to let himself recognize.

There’s no question that New York’s already national notoriety for political corruption is worsening. Recently, and most spectacularly, Democratic comptroller Alan Hevesi, the state’s fiscal watchdog, resigned in a felony plea deal over his misappropriation of public resources for personal use. Republican state senate majority leader Joseph Bruno announced in December that the FBI is investigating his outside business practices, doubtless to see if he has exploited his legislative position for illegal gain. Right behind Hevesi and Bruno come Democratic state senator Efrain Gonzalez, Jr., indicted by the feds for misdirecting nearly $500,000 in pork-barrel legislative spending to his personal accounts, and Democratic assemblyman Brian McLaughlin, facing federal racketeering charges for stealing over $2 million through embezzlement and kickbacks, including $95,000 from Little League teams. It would be hard to go much lower.

As-yet-unprosecuted corruption is rife in major state programs. The New York Times reported last year that the state’s $45 billion Medicaid program loses up to $4 billion a year to fraudsters—such as the dentist who billed for 991 procedures supposedly done in a single day and ambulette companies charging for phantom rides. And Gonzalez’s indictment was only the beginning of federal investigations into the state legislature’s $170 million-per-year slush fund of “member items,” doled out by Bruno and Assembly Speaker Sheldon Silver to vote-rich community groups to protect incumbents’ seats, or to lawmakers and their districts, often to benefit those connected to the pol in question. (Silver himself gave more than $1 million last year to the Metropolitan Coordinating Council on Jewish Poverty, whose CEO is married to the speaker’s chief of staff.)

New York State has been unable or unwilling to clean up this mess. Though an Albany prosecutor indicted Hevesi, the feds—rather than state authorities—are working the cases against Bruno, Gonzalez, and McLaughlin, for example. Ironically, while Spitzer as attorney general claimed that he unleashed his prosecutorial hounds on Wall Street because federal agencies weren’t rooting out wrongdoing there, federal agencies have gone after New York public corruption in recent months because Spitzer never launched a systemic investigation in his own backyard.

That’s why a key job for Governor Spitzer—and one that it’s reasonable to expect him to take on, given his background—must be a major crackdown on public-sector fraud against New York taxpayers. Spitzer can rely on a tool befitting a star prosecutor: the Empire State’s century-old Moreland Act, which allows him to vest a team of investigators with subpoena powers to examine any aspect of state government. Over the decades, governors have used the act to scrutinize everything from nursing-home horrors to school-construction overruns. One 2006 Republican gubernatorial candidate, former Massachusetts governor Bill Weld, had pledged to launch a Moreland Commission on his first day in office to examine New York government, top to bottom.

In investigating state government corruption, Spitzer can draw on his own considerable prosecutorial experience. As attorney general, he excelled at using his subpoena power to dredge for documents at Wall Street firms and find evidence of illicit activity, while creating easy-to-follow PowerPoint presentations to make his intricate legal cases luminously clear to reporters—a skill that would come in handy in explaining to New Yorkers how, exactly, some state officials are abusing the public trust.

He’ll also benefit from his well-tended reputation for honesty. Since his election as governor in November, Spitzer has maintained that reputation by appointing professionals rather than political hacks to some key posts, such as Patrick Foye, a reportedly incorruptible corporate lawyer, to head the Empire State Development Corporation, a huge public authority that has long been a patronage-rich home for top fund-raisers and other political cronies.

But while illegal corruption wins headlines, it isn’t, by a long shot, New York’s most pressing problem. The larger issue is that much of the state government is today a legal racket. Many of the programs that the state funds or runs have become a kind of machine for shaking down taxpayers and funneling ever more of their money to special interests, who in turn shovel campaign contributions back to the legislators who do them these favors, working to keep them in perpetual power. It’s this legal racket—a conspiracy against the public—that Spitzer will have to dismantle if he really wants to turn New York around.

New York’s Medicaid program, nearly as large as next-largest California’s and Texas’s together, is the racket’s biggest component. It provides almost every imaginable service, including Viagra, fertility treatments, and lightly regulated services that seem designed to invite fraud, such as ambulette rides to and from doctors’ appointments. Medicaid’s spectacularly high reimbursement rates for inpatient services have long served as a life-support system for the state’s hospitals and nursing homes. And New York just covers more people: nearly one out of every five state residents participates in the program, including children of working parents, who could pay for insurance through their employers. The New York City health department notes that Medicaid paid for 52 percent of the babies born in the city last year.

Other states, such as Florida, have taken steps to reform Medicaid long before spending got as out of control as it has in New York. But Albany has never made a serious effort to reform the program. And overhauling it would be a hard slog, since the state’s entrenched and manifold Medicaid interests spend millions a year in political contributions and lobbying to keep things as they are. Just look at who heads the list of Albany’s leading political action committees and lobbying groups. According to the New York Public Interest Research Group, fully one-third of the $6 million spent by New York’s top 16 PACs in 2004 came from groups benefiting from Medicaid money, among them Dennis Rivera’s powerful Local 1199 of the Service Employees International Union (SEIU), which counts the state’s hospital workers among its members; the Empire Dental PAC; and the Pharmacy PAC.

The $3 million or so that this vast Medicaid industry spends annually on lobbying Albany clearly pays off. For instance, when then-governor George Pataki tried to pare a mere $4 million—not even a rounding error in the state budget—from the Medicaid program a couple of years ago by cutting funding for the private ambulette firms, senate chief Bruno swiftly restored the spending. Maybe he worried that elderly people wouldn’t be able to get to their doctors’ appointments. But, more likely, he blocked reform because a well-connected Albany lobbyist for the ambulette owners—so well connected, in fact, that he happened to be Bruno’s son Kenneth—entreated the legislature to resist the cuts, as the New York Post noted. (Bruno fils has stopped lobbying in order to start his own law firm, focused partly on personal-injury cases.)

Even the fact that Local 1199 didn’t protest last fall’s blue-ribbon state commission’s recommendations to close or reconfigure 58 state-subsidized hospitals isn’t a sign of the union’s weakness but of its Medicaid-bolstered strength. The recommendations were only a very modest start toward overhauling the state’s health-care system, and the closures won’t result in any net job losses. Had the commission tried to go further, its members doubtless realized, union opposition surely would have crushed it. For evidence, consider the tough warning that Local 1199’s Rivera and his ally, Greater New York Hospital Association head Kenneth Raske, issued with their tacit endorsement of the hospital downsizing: “There is simply no need for further cuts. Not only is there no need, there is an affirmative obligation to oppose them. Make no mistake: Medicaid budget cuts would doom the commission’s recommendations to failure.”
much, much more–>