Welcome to the Capital Connection, a weekly program questioning New York State leaders
on a variety of issues.
Your host is Dr. Alan Shartock, political scientist and professor emeritus at the University
at Albany.
Distributions for the Capital Connection is made possible with the help of New York
State United Teachers, representing professionals in education and healthcare, online at nysut.org.
That's the Capital Connection, hi I'm Alan Shartock, joining us this week is our friend
and a man I much admire.
New York State controller Tom DiNapoli, welcome back sir.
Alan, great to be back with you.
Hey, I hear you just got back from Bangladesh, what were you doing over there?
Well it was very interesting and challenging visit Stuart Applebaum, who's head of the retail
workers union, RWDSU, can be the delegation of union members, largely RW members and
senior Kevin Sullivan, who's head of Catholic charities for the New York Archdiocese.
And myself from the perspective of an only government, from being an investor with our
pension fund and some of the big, you know, fashion brands that we're all familiar with,
who contract with factories that produce the garments that many of us wear.
And as you know, there have been some real tragedies there from a worker safety point of
you, the RAN apply as a factory collapse over 1100 workers killed in that tragedy, the
Tarzine fire and other factory fires that also others have been injured or killed.
In many ways, it harkens back to where New York was at with a triangle shirt waist factory
fire, where 16, large, they make it largely women and that's the same profile of the workforce
in terms of women in Bangladesh.
And it was really a fact finding opportunity and a way for us to elevate the discussion
of what responsibility the companies we invest and have for ensuring that those who they
contract with at the factory level in Bangladesh, what they need to do to upgrade their building
and safety code standards.
So what do you do?
I mean, who do you talk to?
Do you talk to the people who own the factories?
Do you talk to the people who own the companies, the American companies that deal with the
factory?
How do you do that?
Well, actually on our trip, we were supposed to meet with the factory owners.
They have an association.
They're very powerful there.
Oh, but they are.
Well, because that's the emerging part of the economy.
I mean, they're really rapidly developing.
That's the source of wealth.
And it's interesting that so they have this clothing manufacturers, the factory owners
association.
So they not only have economic power, they also are very well represented by their own members
in the parliament.
So one of the issues is the lack of adequate laws or enforcement of existing laws in Bangladesh
is a lot of corruption in that country.
So when we were there, there was also a political stalemate going on.
You know, it's power struggle between the current prime minister and the former prime minister.
Their fathers were the prime ministers and Dicti and they have quite a history since
they broke off from Pakistan and created independence.
So they were blockades.
They're a bit of a series of strikes.
Unlike what we do in Albany, they have blockades on roads and they fire bomb buses with
people on them.
So were you scared?
You know, I was not prepared for the level of intensity of the blockade.
We kind of heard that this was happening.
We were actually having lunch one day at the hotel and we heard some explosions.
We were outside the terrace and we went and looked over the railing.
It was an attempted fire bombing of a bus right in front of our hotel.
We were one of the more secure and better areas of the city of Dakar, the capital.
The fire bomber missed his mark.
So there was just the gasoline stain and the road.
But the day before 18 people were killed in a bus from a fire bombing.
So that drove home the point and when we went back over the airport, we had, you know,
someone with a rifle traveling with us in a bulletproof vest.
I don't have a bulletproof vest, but the security guy did.
So it underscored that the overall landscape there is very much in turmoil.
But we certainly don't want anybody to lose sight of the fact that these workers deserve
greater protection.
And with some of the folks who survived the collapse of Rana Plaza, we met with a factory
worker.
She started working in her teens.
I guess she was in her 20s now.
She spent about three hours in the rubble hearing the mones of her fellow workers, just
a few feet away from her who did not survive.
She did.
She had a number of operations, more surgeries to come.
So who we talk to is trying to get the companies we invest in to talk to the folks in their
supply chain, the factory owners, the contractors, subcontractors to adhere to much more rigorous
building and fire safety standards.
So what are you going to do now?
Are you going to not put more money into Bangladesh companies or do you give them a chance
to change their ways?
Well, keep in mind, these are largely American and European countries, right?
They then contract with, because Bangladesh is rapidly becoming.
It's now the second after China, terms of manufacture, where do you get the cheaper?
They won the race to the bottom to have the cheapest labor pool, which they don't want
to miss with, right?
Right.
And they mess with that.
Then the same thing that's happening with China, people go to another, exactly, another
place.
Well, the way China is developing, I think they're happy to seed the space to Bangladesh.
But Bangladesh doesn't want to lose it.
They're going from tremendous poverty to this creating jobs, but shouldn't be at the expense
of workers.
So we are pressing the companies we invest in to do what we call sustainability reporting.
How are you tracking not just your own corporate practices, but those who you contract with
to produce the garments?
And what's happening right now is that there are two camps that are forming.
And largely European companies have joined together what they call the accord on building
and fire safety code improvement.
The American companies have formed the alliance.
There's some differences in how they approach it.
We are identifying companies in our portfolio who are signed on to neither the accord nor
the alliance.
They haven't bought into the need for there to be better codes in terms of worker protection.
So we're certainly encouraging them to be part of this, to be part of the improvement.
And it all begins with transparency reporting.
One of the practices that you are encouraging because of the liability risk.
Alan, as we've talked about on your show before, while we like to do good things, the bottom
line for me is the food to share responsibility to the members and protecting our investment.
And with these kinds of repeated injury and loss of life to workers, there's liability exposure,
there's reputational exposure.
So certainly our investments are not protected if this kind of situation continues to be tolerated.
I also hope that American consumers will, I start looking at my labels.
I was surprised how much of my clothing comes from Bangladesh.
If it does, are you talking to an athlete?
Are you less likely to buy something with that?
Not necessarily because we certainly want to see the improvement in quality of life for
the workers there.
But I am paying more attention as I learn which companies are instituting these best practices.
I'm going to be a more discerning person in terms of looking at not just where is the
garment manufactured, but what company is manufacturing, what label is on it?
And is that fashion brand part of working for positive change there in Bangladesh?
Okay, that's a pretty complete report on that for now.
Let's go on to your looking at the public authorities.
And how much they're paying their employees and there've been some sort of shocking results coming out of this.
Well, as we've often talked about the public authorities, the real estate, the shadow government in New York.
We're talking about things like the poor authority, MTA, the downstate,
other authorities all across our state.
And no surprise what you find is that levels of compensation, perks, bonuses, certainly salary are typically higher than government.
Regular state agencies.
Yeah, the percentage of like 13% of public authority employees make 100,000 or more,
whereas for state agencies, only like 8%.
So we continue to want to shine in the spotlight.
We don't feel this adequate accountability in terms of how the authorities are spending money.
And this report is one of a series of reports that we've been doing to let the public know what's happening with public authorities.
Now, if you had your way, Tom, then,
that would you say enough with these authorities, let's state government do its work, put transportation and transportation,
because we know what happens is that sometimes they spend money, these authorities, and it's off the books.
And we don't really get a true picture of what the risk is.
And it's not only spending out on it, it's the borrowing.
You know, we've raised a lot of issues about the fact that when's the last time people in New York voted on a bond proposition,
it's all the borrowing's done now through these authorities.
They're not going to go away.
I don't want to be naive and say that, well, you know, tomorrow we could do without them.
And some of the authorities obviously provide very important services, but we have too many.
And there isn't the adequate oversight of them.
The governance, you know, you tend to have boards that very often have holdover appointments,
you know, even the current administration may not be in control of the authority.
So, you know, we've in terms of governance structure, we call for shorter terms of office,
and so they can be more accountability at least to whoever the governor may be.
Because that would be up to the legislature, Tom.
Yeah. Yeah.
I think we need to continue to shine more.
So by the legislature did give us a couple of years ago,
and our friend, Richard Brosky, who was a big champion of this more authority
for the controller to review contracts of authorities over a certain amount,
and we've been exercising that authority.
So this is an area where we need to have more accountability, and we don't have enough right now.
Are you giving enough money to do all these incredible tasks that you have to do?
I mean, you really have a lot of work to do.
Well, you know, we can always use more resources, but I'm very cognizant of the fact that we're in a tough time
in government right now, and every agency and every entity is being asked to tighten up,
certainly to the extent that we are the oversight office,
we need to model best behaviors as well.
So the governor has asked for us to control our spending and our budgets,
and we've been doing that year after year.
Does it mean we could do everything in an as timely way as we'd like?
No, I certainly could use more auditors.
You know, we've been doing a lot on special education services and the ripoffs we've been there.
Yeah, but you know, we could do just so much,
just like with the school accountability,
and a few years ago, we actually Governor Spitzer insured working with the legislature.
We had more money for auditors.
We'd like to see more help in that department.
Why? When we can do audits and we can do recoveries for the state of millions of dollars,
those investments in those audit services more than pay back.
And you can throw the crooks out and see it.
We've had several criminal referrals and indictments.
And, you know, so I think the accountability agenda of what the control is all of us does
is more important today than it's ever been because everyone is so concerned about waste of taxpayer dollars.
So Tom, to an aptly, how you doing in terms of the investments that you are putting into the stock market
in other places, would you say you're happy?
Yes, the short answer is yes.
Certainly from where we were at a few years ago,
when the global financial crisis hit, we lost 26% value of our fund in one year.
This past year, we value the fund on March 31st.
We were at over 160 billion dollars.
We've never been at that higher figure.
So that means we've made all the 26 back that you've lost.
We've not only made it back. Keep in mind, you know, last year alone,
we painted over 9 billion in benefits.
So we've been paying out all these benefit dollars.
And yet we're still adding historic high.
Who makes the decisions about way to put the money?
Well, contrary to what some people think,
well, they hear that I'm the trustee.
I don't trust you.
I don't trust you.
I only like that phrase.
You see, I can see with your eye shades sitting up there.
Right.
Wall Street Journal, by little sale high, right?
We have a chief investment officer who's terrific,
Vicki Fuller, is our chief investment officer.
She has a team about 50 people that work in the pension fund on our staff.
And then we have our consultants and advisors.
And we obviously hire money managers who work with us.
So there are internal and external checks and balances.
I do the final sign off and some of the investments.
But we have a very rigorous process,
especially with our alternative investments,
real estate, private equity, those areas.
So because of the volatility in the stock markets,
we've been trying to diversify a little more
within the legal constraints that we have.
But the good news is real estate has come back.
Private equity, I think, is doing pretty well.
The public markets are certainly doing well,
where we have a real challenge is a big part of our portfolio
is in fixed income.
So because money is so cheap right now,
obviously the fixed income portfolio is not producing,
you know, outsized numbers by any means.
So that could change.
And the other parts of the portfolio make up for that.
That's why you have diversification.
You don't put all your money in one basket
and a pension fund certainly can't do that.
And we have the benefit of being a perpetual investor.
We're going to be around forever.
We could be very patient, capital.
And I think because we've had a rigorous commitment
to our asset allocation that takes a long-term view,
that's why we've been able to recover.
And Alan, we continue to be the best fund
of all the big state pension plans in the country,
one of the best of all the 50 states.
What does that mean?
Best fund in other words, we have money...
We have money...
We have money...
We have money behind your obligations.
Exactly right.
So the problems you see, we read about Illinois,
that's been capturing the headlines,
even Jersey, Detroit, which is a city plan.
We don't have those problems.
We have more than enough money to pay our obligations.
Well, it sounds like it's done to anewly.
It sounds like you're doing extremely well,
which is why I'm a little puzzled.
I hear rumors that the governor's office,
principally a guy named Loskey, Ben Loskey,
are trying to take over the investment function.
Now, if I'm the governor, I'd like to do that too.
Sure, Tom DiNapoli has a lot of responsibility,
and a lot of power.
So if I'm a governor, especially a governor
who is looking to try to control everything,
which is his rap sheet,
then I want to take this away from you.
This is a very serious situation, as far as I'm concerned.
No, I don't even react if at all.
Well, I read recently a sage, Albany Souce,
or had some prediction in this regard.
And I would just say that...
The independence of the control's office, I think, is key.
Particularly with regard to matter.
That's what we have in independent control.
Independently elected.
And we very strenuously guard that independence.
That being said, there is an oversight role
for the Department of Financial Services.
Used to be the insurance...
That's a guy Loskey, you know.
And we had worked with Eric Denallo,
who was the insured superintendent at the time
that I first came into office
when Elliot Spitzer was governor.
And we understood part of why what happened
during the Heavacee administration happened
is that insurance department probably had not been
as faithful to its oversight role.
So we have been very much a part of revitalizing that role.
That does not mean micromanaging our investment strategy.
We just had an outside fiduciary review
by Funston Advisory Services,
gave us more than a clean bill of health
with how we manage the pension fund.
So we're going to certainly protect our interests,
but we are going to certainly be cooperative
with appropriate oversight for our responsibilities.
I think that's something that the people of the state expect.
We got a Olympics coming up in Russia.
And as you know, Putin and some of his people
have been displeasing the gay lesbian and transgender communities
by some really homophobic activity in remarks.
Is there a role you can play in this?
Yeah, well, terrible legislation enacted in Russia
on the federal, basically infringes on the rights,
particularly of free speech of gay and lesbians
and the gays and lesbians in Russia.
And here they have this premier opportunity
to showcase their country with the Olympics.
And many people have been very upset about the situation there.
I'm very concerned about our athletes
that will be going there that may be gay and lesbian,
how will they be treated there?
As you know, there are many voices,
and certainly here in New York,
some of them in Daniel Donald's been
and Senator Brad Hoyleman leading the charge to say,
we should be doing something different
and not just standing by idling.
Some have called for divestment of our investments
with companies that are involved
with sponsoring the Olympics or companies
that are operating in Russia.
You know, we don't like to do divestment,
that's the last resort,
because we're investors,
we need to make money for our retirees
and for taxpayers.
But we certainly have the same concern.
So similar to what we talked about earlier with Bangladesh,
we have reached out to the major corporations
that are sponsoring the Olympics
and call to their attention the fact
that it's an unacceptable situation.
Again, reputational risk to our investment.
If you're invested in Coca-Cola,
which obviously many people in their portfolio
would be investing Coca-Cola,
and Coca-Cola is sponsoring the Olympics,
and they are consumer boycotts of that product
in response to what's happening there in Russia,
that could hurt our investment.
So we feel we have an obligation to say,
and I shouldn't pick on Coke,
there are other companies as well.
Nobody's interested in it.
It's an example, it's an example to make it real for people,
to say, are you aware what's happening in Russia?
And are you raising your voice
to suggest to the Russian Federation,
they need to revisit these new laws that they've enacted?
What are you doing to ensure that your employees
who may be there are participating in the Olympics
as a sponsor, that they're gonna be protected and safe,
and not be harassed because of the environment there in Russia?
And also, what are you doing to work
with the Olympic Committee, the International Olympic Committee,
to ensure that the athletes from all countries,
regardless of sexual orientation,
will be able to participate fully
and not be subject to harassment or any kind of discrimination.
The Olympics is supposed to be
truly a level playing field,
and these laws compromise that,
and again, our concerns for the reputation
of the corporations that are underwriting this.
So we have written, Law with John Lew,
the city controller,
and a number of other institutional investors
to companies that are part of the sponsorship,
to say, you need to look at this,
and you need to work with us
in trying to change the climate there.
Okay, we only have seven minutes to go,
so I wanna ask you some real fast questions, Tom.
First of all, on the Moreland Act Commission,
you know, the governor appointed this Moreland Act Commission,
that's supposed to look into, you know,
the way in which the role money plays in politics.
And one of their chief recommendations
was to get rid of the state board of elections,
which they say is doing a terrible job.
You've been around politics for a while, what do you think?
Well, you know, there are a lot of issues with the state board.
I think part of it is a resource issue.
They only have the resources to do
with what they would like to do and what they need to do.
So the legislature starves them
so they don't can't do too much.
Well, you know, probably in the scheme of things,
if you're talking about money for senior program
or for schools or healthcare versus one
or money for the board of elections,
what will be more popular with the folks back home?
Well, sure, but we're not talking about, you know,
it's about huge amounts of money.
But so I think in fairness,
I'm not trying to defend the board,
where they've made mistakes or they haven't done an adequate job,
but beefing up the responsibilities and the resources,
I think would certainly make sense.
To me, the most important change,
and I hope the Moreland recommendations
will give more support for this,
will be to have public financing of campaigns in New York.
I think that's the essential.
You've always called for that.
Oh, we've always said, if you want to make a list,
start with me.
Start with me.
Start with the control office,
the place that should be most above the political fray.
And obviously more limits on the amount of money
that people spend.
The amount of money is that rate
just that we spend on elections.
So what about Pete Barrar,
the US attorney down in the Southern District?
He's talking about taking the pensions away
from the political crux we've gone to prison
from the legislature.
It seems like a good idea.
I think he's on the right track.
He's taken a variable position in this area.
We've proposed state legislation
that would enable us at the state level,
and of course, he's federal prosecutor
to do something similar,
to be able to attach to the pension benefits
that are being paid out as part of not only restitution,
but a penalty as well.
So he's using the power of his office
in an effective way.
It sends a strong message.
Don't think you're gonna get away with it
and then retire on a cushy pension.
So the strong message that people need to see.
Can you take the money away from the guys
who are already been convicted?
Well, he's trying to do that basically to,
these are cases where there are fines
or restitution, so he's attaching to it.
What I propose of a state level
is for there to be an enhanced penalty.
So it's even beyond the question of restitution.
There would be a monetary penalty
that would attach to the pension benefit.
So it would be a way of getting the money back
without violating the state constitutional protection,
which is there for good reason,
for the everyday workers who of course play by the rules
and don't violate the law like this.
What's open book New York?
That's our transparency initiative
and we've been building it and expanding it,
taking all the data that we have on state spending,
on state contracts, making available for the public.
We just had an enhancement.
So in effect, you could look at the checkbook
of the state of New York, see what kind of payments
are being made.
So if I wanna go, open book New York.
Yeah, or just put in your search engine,
your state controller, click on the open book,
and you can buy it.
So then anybody that New York State writes a check to,
I'll be able to see.
Just about, I mean, there's certain privacy matters,
depending on, it's a personal information
that we can't give out,
but for payments to contractors and vendors,
the typical kind of payments that someone might be interested in,
that information is gonna be readily accessible.
So if I wanted to compare, for example,
the governor has about $30 million in his campaign account.
Let's say I wanna compare the people
who gave him money, and the people New York State
has written checks to, could I do that?
Well, it might take a little more work
than just what's on our website,
but if you had some other list that you wanna compare payments to,
you probably could.
It would be great if you have one of those sort of tools,
you know, on your website,
you know, they do that at Tia Craf, in other places.
You have tools, and you say tools, okay,
Andrew Como, $30 million,
compare the people who got the money
and are giving the money.
You see my boy?
I can see you're in the holiday spirit, Alan,
that you're just coming up with something.
You always think I'm throwing you
as fast bulls and getting you into trouble.
You know as my voice is going,
so I can't respond to that, right?
Okay, okay.
So you have been doing audits,
and showing repeated abuse for those working
two or more public jobs.
What are you finding?
Well, dual employment, it's allowed,
but you need, in many cases, approval.
And certainly if you're working at two jobs in the public sector,
you have to make sure that you're adequately keeping track
of your time, that you're not in effect
of being paid for being at two places at the same time.
We didn't audit of about six state agencies,
and we found too many cases where it was really questionable.
The people who seem to be getting paid
for work that they didn't do,
because they couldn't be in two places at once.
It really called out for the need
for that to be greater supervision of those
who are doing a dual employment,
make sure they have the appropriate approval,
make sure that they are in fact working
the two separate jobs,
make sure that in terms of their ability to even do it,
make sure that they're not putting in excessive hours
that would compromise their ability to do either job well.
And fortunately, in this case,
the agencies instead of disagreeing
with our recommendations, they embrace them,
and we're gonna see more tightening
of the supervision of dual employment.
So you have a university hospital, for example,
and a lot of these doctors,
you couldn't have the work of the state university
and for the hospitals, unless they were also
planning clinical practices and other things.
So I guess you gotta be careful.
Yeah, to be careful,
but it all gets back to appropriate supervision,
appropriate internal controls.
So much of what we do with our audits,
when we see a breakdown, we see a problem,
you don't have the right internal controls,
you don't have the right supervision,
you know the right accountability in place,
and our audits are meant to focus on agencies
on local governments to tell them
what they need to do to get it right.
And it has the University Foundation.
Has that been improving?
I think so, we've done some audits in that area,
and there's a change in leadership there
not so long ago.
We're doing some more audits there as well.
There is still a question about how the Foundation operates.
So we're continuing our oversight in that area,
but I think some improvements have been made.
Tom, the Napoli, always great to talk to you.
I could have asked you a thousand more questions.
I guess there's been Tom, the Napoli, the state controller,
and that is the Capitol connection,
and we're delighted that you all joined us.
Thank you, Tom.
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