The Conflicts of Slush Funds

Back to New York City, where more information is coming out about the special “slush” funds given out to city council members.

According to an article in yesterday’s New York Times and an editorial in today’s, one member has, in recent years, given more than $400,000 in city funds to a nonprofit agency, run by some of his closest aides, which does almost nothing but hand money on to other organizations, and yet somehow is in a financial mess.

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The organization’s major expense (77% of expenses in the only tax return filed, 2004-5) is its office lease, which the council member apparently negotiated for an organization that has little or no staff. The organization’s four principals in recent years include two of the council member's chiefs of staff and his director of constituent services. The current director could not give a detailed picture of the organization’s activities, saying he was not directly involved in program services. Other supposed staff members would not return calls.

The current director has been the treasurer since its inception, but knows nothing about the financial problems, because he did not monitor the books. He runs another nonprofit organization that has received $120,000 in city funds, mostly through the same council member.

New York State politicians hand out $550 million in slush money each year, and the figure in New York City is $50 million.

This is the kind of mess that occurs when government spending becomes personal spending. Programs that allow council members to hand out money put them in a serious conflict of interest situation. They owe favors, they want people to owe them favors, and they’re sitting on a pile of cash that no one is paying attention to. How many politicians have a strong enough character to deal responsibly with such a situation?

Bringing transparency to this system is good, but is it really enough? New York State allows you to see each representative’s “member items,” but there is no information about who runs the organizations, how the money is spent, or what favors are being returned.

When politicians put themselves in a conflict of interest situation, it’s a double bind. The only true way to deal with it is to end the conflicts, to get politicians out of the Santa Claus business.

Robert Wechsler
Director of Research-Retired, City Ethics