Faso: Albany's bizarre bazaar

Former minority leader of the State Assembly and Republican candidate for governor in 2006, Faso is a partner in the law firm Manatt, Phelps & Phillips.

The last few days of any state legislative session in Albany resemble a Middle-Eastern bazaar. Determined sellers hawk their wares -- in this case, legislative proposals -- and hangers-on all mill about, trying to make some sense of the spectacle.

This year, the scene has had an added intensity due to the expiration of the rent laws in New York City and Gov. Andrew M. Cuomo's push to allow same-sex couples to wed. The Capitol has been overflowing with noisy advocates on both sides of the marriage issue. And tenant advocates have also flooded the halls seeking to "strengthen and expand" New York's laws controlling rents, which mostly affect New York City.

Public polling indicates that neither marriage nor rent is the issue foremost in the minds of New Yorkers, however. The most important issues are the economy and taxes, particularly property taxes. The governor, Speaker Sheldon Silver (D-Manhattan) and Majority Leader Dean Skelos (R-Rockville Centre) announced agreement on a property tax cap last month -- but that matter was held in abeyance pending resolution of the rent legislation.

In many ways, the rent issue illustrates a basic New York problem -- the tendency to pretend we are immune from the basic laws of economics. If you attempt to arbitrarily control the price of something, in the face of increased demand, shortages will arise. In this case, the rent laws decrease the supply of affordable housing in the market, except for the lucky folks who personally benefit.

These rent laws have existed in New York since immediately after World War II, when a "housing emergency" was declared due to a shortage of homes for returning veterans. Every few years, the "emergency" is declared to continue -- the legislative equivalent of fantasy.

Some decontrol provisions were added in the 1990s after studies proved that the "emergency" had long passed -- and that the law had distorted the housing market and basic laws of supply and demand. Most places in the United States and around the world -- including Ho Chi Minh City in communist Vietnam -- have long abandoned rent control as inefficient and disruptive of their housing markets. But the laws have lived on in New York. Virtually nothing has been said in Albany about the fundamental illogic of the government controlling apartment prices and pretending that a postwar emergency created by returning vets still exists.

Meanwhile, the legislature plowed away all last week, often late into the night, passing scores if not hundreds of bills, most of which will never merit a line in any newspaper or media report.

Many are routine extensions of authority for counties to levy an extra penny on their local sales taxes. Dozens more authorize nonprofit organizations to make a late filing for a property tax exemption past the normal filing deadline. A newcomer in the pantheon of legislative favorites is the establishment of income-tax check-offs for various charitable causes -- thereby increasing the complexity of state tax forms and barely generating any new revenue for the charities. Most won't be enacted, but legislators will keep trying -- next year.

Other proposals of great import to the state and its citizens were already finalized before the end-of-the-session bazaar. The budget, closing a projected $10-billion gap, should be seen as Cuomo's singular accomplishment in his first six months as chief executive. But even more intractable issues await, such as transportation funding and how to reverse policies controlled by Albany and protected by special interests, which hurt the economy. Real mandate relief to control costs, particularly in public employee contracts -- as was just enacted in New Jersey -- is key to fixing the economy. Private sector job growth will only come through lower tax burdens on investment and employment. Albany hasn't even begun to scratch the surface on these long-term issues.

The property tax cap is just a first, essential step to fixing New York. Cuomo's ultimate success as governor will depend on how well he can address these factors and in the process, tame Albany's legislative bazaar.