Friday, October 28, 2005

What is Proposition One?

With election day coming up, I haven't yet touched on Proposition 1 in a way I'm satisfied with. Let's take a swipe at this. Essentially, what Prop 1 is attempting to change is the budgeting process in a way that will both steer budget negotiations to conclusion while minimizing the economic impact of such a budget coming in late.

It slices, it dices...

NYPIRG supports Proposition 1 and they write a little about it here:

The vote on the budget reform amendment is less than two months away. NYPIRG, joined by our colleagues at Common Cause and the League of Women Voters, are urging the public to support the budget reform amendment (Proposal 1) and other proposals that are part of the package because it improves the state's budget process in three important areas:
•  Transparency. The proposal requires greater openness in the development of the Governor's executive budget.
•  Accountability. The proposal creates and independent budget office that will provide bipartisan fiscal analyses(sic).
•  Certainty. The proposal creates a “contingency budget” (essentially the previous year's budget with some exceptions). The contingency budget kicks in when there is no budget agreement by the beginning of the fiscal year. This provision guarantees that a budget will be in place if there is no agreement on a new budget by the beginning of the fiscal year.
It is the third issue listed above that has generated the most controversy. The proposal has been criticized as a “power grab” by the legislature at the expense of the executive branch and been derided as inevitably leading to “runaway spending” by irresponsible legislators.

It doesn't sound too bad. They go on to say that New York is out of alignment with 46 other states in the Union whose budgeting process is more concentrated in the Legislature. At heart, Proposition 1 really wants to do good. However, it seems like you need to take a lot of bad the good here.

The most obvious problem I have with this is, if there is a “contingency budget” in place, that kicks in during the event of a late budget, what on Earth is the motivation for lawmakers to get the budget in on time? That's just one flaw with the concept. It gets uglier.

From we get The Runaway Spending Amendment Homepage. You can go over there and cruise around it at you leisure. Marvel at their attempt to compile all the editorials that have come out against this proposition. Here's a nice summation of some points:
Does this sound like Budget Reform to you?
  • It does not require that the Legislature pass an on-time budget.

  • It gets rid of the requirement that lawmakers lose their paychecks when the budget is late.

  • And if the Legislature fails to pass an on-time budget, the Assembly and the Senate take control of the budget-writing process.

  • The Legislature has already added $12 billion to the budget in just 10 years. More budget power for the Legislature means more spending, which means more taxes. Is that what New York needs?

Which leads me to the one benefit of having the state executive ultimately responsible for the budget: you can blame him or her for it. Pissed at Albany overspending? Write the Governor. If it was the Senate and the Assembly? Good luck finding the guilty party. This kind of set-up gives those in the Legislature political cover for overspending. I can't fathom this will lead to lower spending and lowering the tax rate. I have a feeling that this concept will be going back to the drawing board after the election this November.

Additionally, I'd like to add how much I like NYPIRG. I think the organization and especially its members (politically active college kids) do some great things. We are just on different sides of an issue this time.

On the same subject, but in a lighter vein, WXXI has a good article concerning the Proposition 1 mascot, Porky.

No, it isn't the same guy from those movies in the '80s.

How Do They Know What Jesus Looks Like?

We made national news, even being mentioned on my beloved Countdown on MSNBC. Why? Because people have seen Jesus's face in a maple tree on North Clinton Ave.

I think it's fortunate that it wasn't Elvis's face in that tree. Then everyone would think we were weird.

Thursday, October 27, 2005

The Fast Ferry Report Card

The 6 month report on the CAT, or Fast Ferry, is out. The numbers are worse than originally projected. For those of you who are either not from Rochester, or have managed to avoid listening to the news since.... oh, about forever here's a Democrat and Chronicle primer.

I just want to react to some things in the article.

The high-speed ferry between Rochester and Toronto lost $4.2 million through August, a progress report released Wednesday shows far surpassing initial projections of a $725,000 deficit in its first year.

The operating shortfall alone erases half of the $8 million cushion set aside for anticipated deficits in the first three years. What remains of the cushion, and what is needed long term, might not be sorted out until the ferry board releases its 2006 plan in December.

"We're actually within budget on expenses," said City Councilman and ferry board President Benjamin Douglas. "So it becomes a revenue issue."

The loss is not so much of the blow to the operation. Given a late start for the ferry, a lack of tour promotions because of the uncertainty of the start-up, the high price of fuel, and still paying piloting fees, the revenue shortfall isn't such a terrible thing. Oh, it is terrible though. It's terrible because it is so much greater than the original projection, and that it consumes so much of the fund set aside to finance future shortfalls. Given this information, I can't fathom that the Ferry can avoid requiring more cash from public sources in the near future. The indications here are that someone didn't get their numbers right. Unfortunate, but not impossible to understand. There are a lot of unknowns in getting this thing up and running, and the sooner that is understood, the less these choppy waves will cause us trouble.

Our esteemed Dean of the Simon School of Business, Mark Zupan, was able to weigh in on the report:
An important number, not included in the 13-page report, is the operating profit or loss in August, said Mark Zupan, dean of the University of Rochester's William E. Simon Graduate School of Business Administration.

Zupan said operators must define their plan to hedge future energy costs.

Which makes a lot of sense. I'm curious as to what kind of hedging Bay Ferries has in place for its fuel costs, and whether the Rochester CAT is part of that hedge, or if the city is responsible for any fuel hedges. A hedge is essentially financial insurance constructed with marketderivativess, notes, eyes of newt, and other icons of monetary witchcraft. In this case, you want to buy something that will keep the price of fuel from going too high. You'd rather pay for some insurance you don't use than expose yourself to the risk of increasing fuel costs. I;d be very interested to see what the hedge they had in place was, and what they intend to do about it.