By JAMES FANELLI and ANGELA MONTEFINISE
June 1, 2008
The practice of stashing funds in the city budget through allotments to phantom organizations goes back at least a decade, The Post has learned.
An investigation of budget documents shows phantom groups first appearing in fiscal year 1998, when $150,000 was allocated to "Elder Statesmen" - a name identified by City Council Speaker Christine Quinn as phony.
In interviews with a dozen current and former council and mayoral staffers, The Post was told that the practice - which it revealed has hidden as much as $17 million since 2001 and which has brought on federal and city investigations - began in the Giuliani administration, when Peter Vallone Sr. was council speaker.
The idea grew after a 1989 charter revision made the council the city's sole legislative body and gave it power to approve the mayor's budget, former Vallone staffers told The Post.
Each year, the council staff received discretionary funds to dole out to community groups. Normally, the money is allocated to these groups through "member items," which are approved in the budget.
But sometimes groups were mistakenly omitted. To fix that, the council staff left some funds untouched. These reserve funds could be distributed later in budget modifications requiring mayoral approval.
But budget sparring got tougher under Mayor Rudy Giuliani, a notorious micromanager who took office in 1994.
"Under [Giuliani], the budget director would get every single line item, every single member item, and it would be reviewed," a former Giuliani aide said.
The annual conflict came to a head in 1998, when the council and Giuliani declared a stalemate over the 1999 fiscal-year budget. The two sides were forced to pass the prior year's budget without discretionary funds. Any new funding then had to go through budget modifications.
"I think [the council] started thinking of ways to control their money," the former aide said.
The answer was found in member items, which could be reallocated later without mayoral approval. Reserve money would be hidden under phony names listed among the member items.
During Vallone's tenure, the phantom groups were few and amounts were small. In fiscal year 2000, "Elder Statesmen" received $50,000, and in 2001 another confirmed phantom group, "Business Works NY," received $147,000.
But the phony organizations flourished in Gifford Miller's term as speaker. Their names - including "The Coalition of Informed Individuals" and "Senior Citizens for Equality" - became more refined, mirroring real-life groups.
