The Baystate Objectivist

The Baystate Objectivist

Wednesday, June 6, 2007

Deja Vu

Here is our latest excavation from The Ogulewicz Chronicles, the now out of print memoirs of former three-term Springfield City Councilor Mitch Ogulewicz. This episode deals with the fiscal crisis of 1989, and is essential reading for anyone who wants to understand how Springfield ended up where it is today. Indeed you may find yourself asking, "Did this happen eighteen years ago, or eighteen minutes ago?"

As the City Council gathered for its first meeting of the year, acting-Mayor Vincent DiMonaco led the Council members and spectators in the Pledge of Allegiance to the flag. When they got to the part about "one nation under God," Councilor Francis Keough instead sarcastically said, "One nation under Vincent DiMonaco . . ." only he didn't realize that his microphone was turned on, causing the council chamber (and no doubt the public watching on television) to break out laughing. Unfortunately, laughing at a red-faced Frank Keough was one of the few moments of levity the Council would have that year.

It had been obvious for most of the previous year that the city's finances were in disarray, and some of the problems had to do with factors that Springfield had little control over. As early as May of 1988, Ogulewicz had warned in a Union-News (today called The Republican) article that, "My greatest fear is that a year from now, whoever is mayor is going to be faced with a fiscal crisis." He couldn't have been more right.

The so-called "Massachusetts Economic Miracle" that had propelled Governor Michael Dukakis to the Democratic Presidential Nomination began unraveling even before Dukakis was defeated. As a result there was a sudden tightening of the purse strings in Boston, leading to significant cutbacks in the local aid which had been rising steadily throughout the 80's, and upon which the city had become increasingly dependent to fund its ever expanding amount of programs and employees.

Also throughout the 80's there had been a tight struggle to comply with the tax limiting measure Proposition 2 1/2. Passed by Massachusetts voters in 1980 as a check on the rapid expansion of municipal governments in the 1970's. Proposition 2 1/2 limited tax increases from going up by more that two and one-half percent in any one year. After the free-spending 70's, Springfield was hard pressed to learn to live within a strict budget, although much of the pain had been alleviated by the generous increases in state aid.

Most of the credit for Springfield?s financial survival in the face of these challenges was due to former Mayor Ted Dimauro. Despite inheriting a $6 million dollar deficit from his predecessor William Sullivan, through strict fiscal discipline Dimauro was able to wipe out Sullivan's debts and go on to accumulate a surplus of nearly seven million dollars. When Dimauro left office, he passed all that surplus cash on to his successor, Richard Neal. The cruel reality facing the city in 1989 was that after Richard Neal left for Congress it was discovered that every penny of that surplus was gone.

Since Neal had been mayor during a period when Massachusetts had enjoyed such unprecedented economic success that our governor was nominated for the presidency because of it, there simply was no explaining how Neal could have blown the city's entire surplus during such a time of plenty. Unsuccessful attempts were made by the City Council to get an overview of the city's finances from Neal before he left for Washington, with Councilor Mary Hurley stating in the newspaper, "We have to sit down with the mayor and ask, "What's up Doc?" Yet Neal departed for Washington without any such meeting being held.

Details of the fiscal mismanagement of the Neal Administration began coming to light almost immediately after Neal left. Fifty new police officers had been hired by Neal, which he had heavily touted in his campaign for Congress as evidence of his commitment to crime fighting. Yet it was now discovered that he had never budgeted the money to pay their salaries, putting the City Council in the awkward position of considering firing police officers who hadn't even been on the beat for one year. In the end Police Chief Tommy Fitzgerald was forced to lay most of them off, despite the fact that the city had paid the cost of training them and some had been on the force for as little as four months. In a major embarrassment, officials from Tampa, Florida came up and hired many of them, cashing in on the law enforcement personnel Springfield taxpayers had paid to train but couldn't afford to keep. Then in quick succession other, even more serious problems came to light, so much so that even a die-hard Neal defender like Springfield Newspaper columnist Carol Malley was forced to express dismay:

"City officials have been reeling following a series of surprise announcements of shortages in this year's budget," Malley wrote, "and it is unclear how they are going to be made up." With considerable understatement, Malley conceded that "Neal's biggest weakness as mayor was probably his inattention to fiscal matters, particularly over the past couple of years." Such an admission stunned much of the public, who had been told throughout the 80's (in particular by the Springfield Newspapers) nothing except that Neal's mayoralty had been an absolute model of effective government. Malley then went on to list the fiscal disasters discovered in Neal's aftermath.

"City councilors are trying to find out why the health insurance account was underfunded when, according to the personnel director and a health care consultant, the auditor was told a year ago that more money was needed . . . . They are also trying to find out why 50 new police jobs were created and filled, but not funded."

Attempts were made to get Budget Director/Auditor Henry Piechota to explain the fiscal situation, but the hearings that were held produced nothing but contradictory information, with Piechota alternately claiming that all was well or that all was headed toward disaster. It seemed impossible to determine the true status of the city's finances.

"What is particularly irking to city councilors," Malley wrote, "is that each new shortfall announcement comes to light after assurances that there are no more surprises coming." Even more infuriating, Piechota kept finding new money where none was thought to exist. "On the other side of the picture," Malley explained, "Piechota appears to have come up with what councilors are calling "hidden pockets" of money, which they were not told existed when they asked for reports on the fiscal budget. One of the hidden pockets was a "reserve from prior year funds" which none of the councilors had ever heard of before."

This news of hidden money in mysterious accounts caused an outcry from both the public and the City Council, with many calling for an indepth inquiry into just what had been going on in the last days of the Neal Administration. But Piechota seemed to be either unable or unwilling to provide the answers.

The rapidly unfolding fiscal crisis was taking place against the backdrop of the campaign to determine whether Vinnie DiMonaco would continue as acting Mayor or be replaced by his challenger Councilor Mary Hurley in a special election. The entire political establishment was behind Hurley, with the exception of only a few prominent persons (such as former Mayor Dimauro) who were backing Vinnie. One of his most colorful backers was Mary Ladeux, a little old lady on Union Street whose home had been in danger of being taken for condominiums. Vinnie successfully lead the fight to preserve her home, in which she had lived all her life, with the help of Mitch and Kateri Walsh.

Yet despite the fact that all the big power players were behind Hurley, in reality the terms "insider" and "outsider" didn't really apply in the race, since in the face of the severity of the fiscal crisis, everybody was stuck in the same sinking boat. Indeed, Vinnie and Hurley managed to work together with a surprisingly low degree of political animosity, united by the knowledge that whichever one of them would win the full mayoralty, they would face an overwhelming fiscal challenge.

Vinnie brought both skills and liabilities to the mayor's office. He had a depth of knowledge and experience to share from his decades in public service, and in some respects he was one of the most qualified persons to ever occupy the mayor's office. Even many of Vinnie's critics felt that the chance to be acting mayor was a well-deserved culmination of a remarkable career. However, in temperament and personal style DiMonaco was not well equipped to deal with a crisis of the magnitude the city was facing. His manner with Piechota was blunt and often sounded accusatory, creating an atmosphere of defensiveness that made Piechota even less forthcoming.

DiMonaco even went so far as to begin blaming Neal openly for the financial difficulties, which so angered Neal that he threatened to abandon his official neutrality in the mayoral race. Vinnie came to feel that he was badly served by former Neal aide Kevin Kennedy (currently Neal's congressional aide), who seemed more concerned with protecting the congressman's reputation than he was in fixing the fiscal crisis. DiMonaco would later tell Ogulewicz that he believed that keeping Kevin Kennedy on after Neal left was the worst mistake he had made as mayor, because instead of getting advice that was good for Springfield, he was given advice that was good for Richard Neal.

In contrast to Vinnie's outbursts and aggressiveness, Mary Hurley seemed very professional and above the fray. She had Mitch to thank for some of that. Whenever she had a question or comment that she knew would look political or provoke Vinnie, she would ask Mitch to raise the issue instead, thereby getting her point across while not appearing overtly political. Vinnie was too politically sophisticated not to see through their ruse however, and would growl at Mitch, "We know whose water you're carrying," and once even said openly, "Councilor Hurley should have the guts to get up and speak for herself." Yet the city was looking for a calm voice amidst all the confusion, and with Mitch's help Hurley was able to project the competent professional image that the electorate was searching for to find its way out of the fiscal disaster.

So it was no surprise on Election Day, April 25th, when Mary Hurley was elected mayor by a landslide margin in the special election. Even Vinnie seemed to take his defeat in stride. He still had his position as Council President, and frankly it was hard to envy Hurley the terribly difficult task that awaited her. What no one knew was that the worst was yet to come.

The state Department of Revenue, deeply concerned over how Springfield's finances had crashed so suddenly and without warning, decided to withhold action until an investigation could be conducted into the mysterious and unique situation in Springfield. For that purpose the Commonwealth brought out of retirement former Department of Revenue Auditor Newell Cook, chosen by the state because of his decades of expertise in municipal financing and reputation for unbending integrity.

The Dukakis Administration wanted as unbiased and objective an appraisal as they could get, because they had little desire to embarrass unnecessarily their fellow Democrats and supporters in Springfield. They also knew that the report had the potential to have explosive political ramifications, possibly even threatening the career of the newest member of the state's delegation to the United States Congress, Richie Neal. Cook would have to navigate quite a political minefield in order to present his investigation?s results in a way that would avoid accusations of political interference.

Surprisingly, the final report Cook wrote for the Department of Revenue released in September of 1989 succeeded in obtaining that political objectivity. Yet ironically the report was all the more powerful in it's political implications for the very fact that no one could accuse Cook of bias. One of the means by which Cook avoided casting political aspersions on anyone was to refrain throughout the report from mentioning anyone by name. Richard Neal was referred to only as "the Mayor" and Mitch and his colleagues were always referred to simply as "the City Council," so no one could claim that they were being singled out personally.

Although officially titled "City of Springfield - Analysis of Financial Status" the document soon became known simply as "The Cook Report." Financially, the city got both good news and bad out of the report. The bad news was that Cook opposed a direct bailout of Springfield through a special appropriation by the legislature. Cook reasoned that there was no reason for the taxpayers of the entire state to be hit with a bill for the fiscal mismanagement of Springfield.

However, the report did urge the state to come to Springfield's rescue through special legislation allowing Springfield to deficit spend (in essence borrow against future taxes to be collected) which would provide a short term fix that would solve the fiscal crisis of today by spending money that the taxpayers would be forced to pay off tomorrow. It was hardly a solution for the public to cheer about, but at least it avoided the only other alternative, which was for the city to go into bankruptcy, which would have resulted in a forced state takeover of the municipal government and placing Springfield under state receivership. The city was left broke and in debt, but at least under Cook's recommended legislation allowing deficit spending, Springfield could at least keep its sovereignty, thereby allowing the city to preserve its last remaining crumb of dignity.

In return for providing this way out, Cook insisted on a list of reforms that he believed were necessary to guarantee that Springfield would not fall into the same financial hole again. It was in the course of making these recommendations, and describing why they needed to be adopted, that the Cook Report emerged as a political as well as a financial document, despite the author's plain desire to avoid doing so. However, there was simply no way of describing what went wrong, without making obvious who was responsible for the wrong-doing. As a result, the Cook Report was inadvertently a scathing condemnation of the mayoralty of Richard Neal.

The report began with a frank appraisal of the city's terrible fiscal situation. "The City of Springfield," Cook wrote, "has found itself, apparently without advance warning, in financial distress." He described the components of that distress as "1) the operating results for FY1989 have been clouded with surprises, uncertainty and acrimony; 2) the budget for FY1990 requires a reduction in total spending and has consequently required reductions in service levels and the layoffs of many employees, and; 3) the elected and appointed officials of the City believe that the public has lost respect for and belief in the financial operations of the government."

Cook then goes on to state that "the root cause of the distress is a general and longstanding weakness in sound fiscal management." How longstanding? Cook pointed to "the generous growth in spending capacity experienced over the prior five years." Of course everyone reading the report knew who, and who alone, had been mayor during that five-year period, even though Cook never mentioned Richard Neal by name.

Cook partially excused Ogulewicz and his colleagues from having a significant role in causing the crisis. Although he suggested that the City Council should have exercised a more aggressive oversight role, he acknowledged that there were legitimate reasons why that did not occur. "It had not been until December 1988 and January 1989 that the public and most City officials were aware that there were any major problems." Cook wrote. "Indeed during the fall and into the early winter of 1988, the financial officers of the City had been presenting reassuring projections." In other words, the City Council couldn't be expected to carry out its oversight functions while it was being completely misled by those in charge of the city's finances. Again, no names were mentioned, but every reader knew that Cook was referring to Richard Neal and his advisors, Henry Piechota and Joseph Dougherty.

One of the most devastating conclusions Cook reached was that the decrease in state and federal financial aid had not caused the city's crisis. Obviously those cuts did not help, but Cook plainly stated that the crisis would have occurred regardless of what happened at the state and federal levels. "Springfield's budget's growth exceeded inflation by nearly $14,000,000 over this five year period," Cook explained (and again, every reader knew who was mayor in that five year period). "While adjusting to the FY1990 level funding of State Aid, even before the further cuts required in State Aid, has led to serious cutbacks in local operations, MOST OF THIS PAIN HAS BEEN IMPOSED ON THE CITY BY ITS OWN ACTIONS OVER THE PAST FIVE YEARS" (capitals added). So even if state and federal funds had not been cut, the overspending of the Neal years would have still caused the city to go into debt following Neal's departure. Cook's conclusion robbed Neal of the excuse that he had simply been the victim of an economic downturn, and made it clear that it was the Neal Administration's own fiscal policies that had brought about the crisis.

Nor would Cook allow Neal to hide behind his fiscal advisers. "While the Auditor performs a critical role in the municipality's fiscal operations," Cook wrote, "that role does not carry with it major policy-making responsibilities. In a "strong mayor" form of government such as exists in Springfield, this role, within the executive branch, RESIDES IN THE MAYOR. The Auditor, and indeed all other department heads, are expected, with limited exceptions to carry out THE MAYOR'S DECISIONS" (capitals added). One by one, Cook was stripping away Neal?s excuses, leaving him nowhere to hide.

The implications of Cook's accusations were enormous. Many couldn't help but look back at the abrupt departure of Eddie Boland from Congress, despite every indication that he intended to run again, in a whole new light. Had Neal seen the fiscal crisis he had let build up over the past five years coming to a head, and realized that his only hope of going to Congress was to shove Boland aside, and then get out before the crisis broke? What if Boland had stayed for another term, and the fiscal disaster had been Neal's to deal with? Not only would an angry public have been unlikely to send Neal to Congress, they would've been unlikely even to re-elect him as mayor. The possibility that Boland had left office completely voluntarily now seemed even more remote.

But that wasn't the worst of it. Cook then went on to plainly state that the Neal Administration had been guilty of violating state laws. Cook stated that "the city of Springfield routinely, and with the concurrence of the City's financial officers . . . spend large sums without appropriation." Refusing to go very deep into this political and legal minefield, Cook simply dryly recommended, "Immediate compliance with the General Laws should be established."

One might have thought that such a completely devastating indictment of city government would have caused rioting in the streets from outraged taxpayers. And perhaps it might have, if the public had ever read it. Unfortunately, the media accounts, particularly in the Springfield Newspapers, focused only on the recommended reforms in the report, conveniently overlooking the far more serious implications of exactly why such reforms were necessary. Indeed, much of the material reprinted here from the Cook Report is being presented to the public for the first time in this Chronicle.

Neal was desperate to make excuses for himself. At first he absurdly stated that the report never referred to him by name, but only to some entity called "the Mayor." That excuse was so lame that even his media lackeys at the Springfield Newspapers, who at first reported that excuse with a straight face, had to back off from it. Then Neal pretended that the fiscal crisis had nothing to do with him, since it had erupted after he had left (by a matter of weeks). He was now the Congressman, and not to be bothered by questions relating to anything that happened before he held his current office.

The Cook Report had a number of recommendations as to what Springfield should do in order to prevent a similar crisis in the future. Most of them were commonsense reforms a second year accounting major could have recognized as necessary, but which seasoned professionals in the Neal Administration either couldn't or pretended they could not. Among them was a suggestion that the Auditor and Budget Director, one and the same under Neal in the person of Henry Piechota, be divided into two positions. There was a clear conflict of interest in allowing one person to do both jobs, since the auditor (Piechota) would naturally protect the budget director (Piechota) and vice-versa. Of course Pichoeta was now on an unlimited sick leave for vaguely described "heart problems" - problems apparently so severe that he was never available again to answer any questions. The local media appeared to accept Piechota's vanishing act without question.

Although the fingers of guilt were pointing toward the congressman in the wake of the Cook Report, there continued to be a massive attempt at damage control by the Neal camp. With the help of political and media allies, it looked as if Neal might emerge from the crisis without most of the public ever becoming fully aware of his central role.

Epilog: Mitch Ogulewicz no longer lives in Massachusetts. Mary Hurley is a court judge. Vincent DiMonico, Henry Piechota and Newell Cook are deceased. When the Springfield Control Board took over the city in 2003, they tried to acquire a copy of The Cook Report but couldn't find a single one in any state library or institution. Mitch Ogulewicz finally provided them with his copy, now considered the only known copy in existence. As I told the Control Board, "These people cover their tracks well."