Friday, August 22, 2008

State Cuts Grants for PULP

The New York Legislature met this week to consider cuts in the previously enacted budget for the year beginning April 1, 2008. PULP and many other programs were cut by 6% in this unusual midyear budget revision, undertaken in response to declining state tax revenues in the current recession.

For the last twenty-six years, state budget appropriations provided financial support to PULP, with the exception of 1998 when Governor Pataki vetoed its legislative appropriations. This support enables PULP to advocate for low income consumers in the enforcement of their rights under HEFPA and energy assistance programs, to provide training and consultation to local advocates for utility consumers, and to participate in developing the record of complex and time consuming rate case and generic proceedings at the PSC, where rates, terms and conditions of utility service are established.

Historically, PULP's financial support was based on a tripod of regular funding from three sources, augmented by occasional small grants from foundations such as the Energy Foundation and State Bar Foundation, special appropriations for specific purposes, and small individual donations. The three core sources were the Legal Services Corporation, the New York IOLA Fund, and state budget funding. But in 1994, Congress, under the influence of Senator Gramm and Newt Gingrich, restricted LSC appropriations to end all funding to organizations that provide support for local legal aid lawyers and advocates. Next, the state IOLA Fund, which was and apparently still is under sway of former Governor Pataki's appointees, eliminated all funding for PULP in 1998, as well as ending funding for other organizations performing similar roles. The tripod of core funding from multiple sources was destroyed.

After Governor Pataki's 1998 veto, PULP was kept alive only due to the steadfast support of the State Assembly and Speaker Silver, who eked out funding through the legislative member item process to continue PULP and other organizations throughout the state providing advocacy assistance to the poor.

In 2001, after the World Trade Center attack, state appropriations for PULP and many other organizations were cut by 25%. PULP has received essentially the same level of funding every year since then. Now this will be cut by another 6%.

PULP is operating at less than half of the nominal funding level of the early 1990's, not taking into account cost inflation since then, so the real resources for our work are much less than half.

PULP has been continuing its operations by borrowing in anticipation of receipt of the appropriations. Although the bulk of the latest state budget cuts apply to funds undisbursed as of August 15, PULP has to date received none of the appropriated funds, due to delays in the state contracting process. See NYS Continues to Disadvantage Not for Profit Grantees, discussing the slow payment of state funds to non profit organizations. Thus the 6% annual cuts will need to be implemented in the second half of the year. PULP's Board of Directors will consider a revised financial plan for 2008 - 2009 at its next meeting in September, which will probably include suspension of employee pension contributions.

Last year, four Assembly Committee Chairs asked the Governor to appropriate $1 million in utility special revenue funds to PULP to restore it to a more appropriate level of funding and operations. Utility special revenue assessments support the cost of the PSC and related functions associated with utility regulation, in contrast to general revenue appropriations. For several years prior to this year, the PSC had not used the entire assessment and had been rebating unused funds to the utilities, who had included the cost of the assessment when setting the rates charged to customers. Like most utility expenses, there is no true-up between PSC assessment costs projected when rates are set and actual expenses. As a result, utilities were benefiting from PSC under expenditure of the assessed amount being paid by consumers as a small part of their rates and utility bills. A special revenue appropriation for PULP would not have added to the general budget and would not have appreciably affected utility bills.

In the 1980s and early 1990s PULP received significant utility special revenue funds to support its participation in PSC proceedings and other utility work, in addition to general budget funds and annual support from LSC and IOLA. Despite the request of the Assembly to resume special revenue funding for PULP in the Governor's budget this year, the Governor included no appropration at all, and a general fund appropriation had to be added again, as in every year since 1995. While the rationale for not including PULP in the Governor's budget is unclear, the request for special revenue may have met opposition because the PSC may have intended to use the maximum assessment level allowed by statute for its own operations and so it seemed there was insufficient "headroom" to provide additional funding for PULP.

In this week's budget cuts, the Governor set a target for the PSC to cut its budget by $2.6 million in the current fiscal year. This means that money collected from utilities through the PSC assessment under Public Service Law 18-a which funds the PSC and the Consumer Protection Board will be refunded or credited back to the utilities. The CPB funding for utility intervention function, funded the same way as the PSC, will also be cut.

Unused PSC assessment revenue will not save tax revenues and will not be credited back to consumers. The result, which we would hope is not intended by the Governor, is that PSC regulatory oversight of utilities is reduced, the consumer advocacy function of both CPB and PULP withers during a period of mounting energy burdens and rapidly changing utility policy and practices, and utilities again get a windfall, the refund of unexpended assessments.

As the state moves toward more austerity in the next year, it is important not to lose sight of the critical importance of independent consumer advocacy on behalf of low and fixed income residential customers in the utility regulatory process. Other states like Pennsylvania, Ohio, and California recognize the importance of this function and devote far more resources for utility consumer advocacy than New York.

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