ALBANY – The State of New York in the next 30 days will be getting an unexpected $2.2 billion payment – at least – thanks to a penalty that a French bank has agreed to pay to resolve criminal investigations into currency deals it sought to hide in Sudan, Cuba and Iran.
A day after the announcement by the U.S. Justice Department of the total $8.9 billion penalty to be paid by BNP Paribas, Cuomo administration officials said Tuesday that there are no plans to spend the state’s share of that penalty money in the coming fiscal year.
But that does not mean there will not be an enormous tussle by any assortment of special interests who will want to have a piece of the new money.
The state Department of Financial Services said the full $2.2 billion heading to New York to close the matter against France’s largest bank will be deposited into the state’s general fund. There is another pot of funding from the agreement, though, that could drive the state’s share of the penalty significantly higher.
According to the deal signed by the state and the French bank, BNP Paribas will also pay an additional $1 billion for “reparations and restitution.” Officials were not revealing precisely how that extra money might be distributed, though the agreement announced Monday states that the money will be disbursed according to a memorandum of understanding between the state and Manhattan District Attorney’s Office.
With an election year under way, state officials might be tempted to use the funds for an unannounced program or to juice up an existing state initiative that might be popular with voters.
But Cuomo administration officials, speaking on background Tuesday, said that no such plans are in the works.
“It’s subject to the budget process,” said an administration official, who said the money would not be “used for ongoing programs” or as a “one-shot”’ infusion of cash to pay for recurring programs.
The State Senate did not respond to attempts to seek comment.
Michael Whyland, a spokesman for Assembly Speaker Sheldon Silver, D-Manhattan, said the penalty award and agreement between the state and the bank was still being studied by Assembly officials.
“Once we get more clarity, we’ll comment,” he said.
That no one from the administration or Legislature is actually committing to a plan – or at least a push for a plan – does not mean in the coming days or weeks that the size of the windfall won’t pose too great a temptation to ignore in 2014. Besides the governor, members of the Legislature are up for re-election this year.
The state wins legal settlements all the time, and it is not unusual for penalties in cases to be deposited into the general fund – the state’s main checking account, from which money for thousands of programs is disbursed. But a $2.2 billion check coming three months into the state’s fiscal year is somewhat unusual, especially because the Cuomo administration suggested – though other state officials disagreed – that the money is not earmarked for a specific purpose, such as helping with foreclosure programs, like the big legal settlement the state had with mortgage lenders a couple of years ago.
To be the $2.2 billion in some perspective, the state budget division’s financial plan for the current year’s budget states that the state will spend $2.2 billion on all its public health and aging programs across New York. It is also an amount just several hundred million below what the state will spend on higher education programs this year, though far below the $22 billion Albany will provide public schools in state aid.
Technically, the governor could not suddenly announce a new program to be funded with the proceeds unless given approval by the Legislature. There are no plans for lawmakers, as of now, to return to Albany until January.
One fiscal watchdog, though, said the governor and lawmakers should not be tempted to simply use the new cash to pay for the state’s operating budget. Instead, said E.J. McMahon, president of the Empire Center for Public Policy, the state has an expiring set of capital construction programs for its two biggest transportation agencies: the Department of Transportation and the Metropolitan Transportation Authority, the giant downstate rail, subway and bus system.
McMahon noted that the state’s transportation infrastructure is badly in need of funding for upstate roads and bridges and downstate mass transit, and that the state already needs to be coming up with a five-year capital program in next year’s budget deliberations.
He likened the windfall to a family in need of a new roof suddenly receiving an inheritance.
“You don’t go on vacation or order a richer cable package,” McMahon said.
“This money needs to be used strategically for long-term purpose of filling the holes in our capital transportation programs.”
Federal officials and the New York Department of Financial Services Superintendent Benjamin M. Lawsky on Monday announced that the French banking giant would pay the penalties to end criminal probes into the transfer of more than $190 million between 2002 and 2012 through New York-based institutions for banned transactions chiefly through its Swiss operations for use by clients in Sudan, Cuba and Iran.
The order also includes the firing of bank executives and new safeguards for certain types of transactions through its New York and other bank operations.