Bichotte, Cuomo Lock Horns Over MWBE Veto

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Assemblywoman Rodneyse Bichotte (Ditmas Park, Flatbush, East Flatbush and Midwood), yesterday blasted Gov. Andrew Cuomo for his Dec. 29 veto of a bill that would have eliminated a cap on the personal net worth for certification for Minority and Women-Owned Business Enterprises (MWBEs).

But Cuomo argued the veto was necessary because it would open the state up to legal challenges.

Assembly Member Rodneyse Bichotte

Bichotte, Chair of the Subcommittee on the Oversight of Minority and Women-Owned Business Enterprises (MWBE) sponsored the measure (A2819/S3018), which passed with bipartisan support from both legislative chambers.

“Governor Cuomo’s decision to veto a bipartisan bill that would have leveled the playing field for minority and women-owned businesses is deeply discouraging. [The bill] would have made it easier for Minority and Women business owners to compete with larger contractors and continue to thrive,” said Bichotte.

The Division of Minority and Women’s Business Development was created to promote the employment and business opportunities on state contracts for minorities and women. Being certified as a MWBE qualifies eligible businesses to access to educational programs, technical assistance for processes such as bonding and paperwork requirements, and access to a statewide advocate to act as a liaison to and investigate complaints of state agencies.

One of the qualifications in order to be certified as a MWBE is having a personal net worth that does not exceed $3.5 million, with the exception of certain assets such as one’s primary residence or the mortgage for that residence, up to $500 thousand in qualifying retirement savings plans, and ownership interest in the business applying for certification. This qualification was added in 2010, 22 years after the original passage of the bill creating the MWBE program.

Bichotte said the veto was especially troubling given that much of the statistical data, including the data provided by Mason Tillman who was hired by the State to conduct the 2016 Disparity Study, has noted that adding a personal net worth cap requirement has been shown to impede many MWBEs’ ability to access capital and bonds.

“This is especially true with small businesses in the construction and financial sectors. In turn, this lack of access to capital leaves many MWBEs in a space where they are found too small to win contracts or too large to remain certified,” Bichotte said.

Supporters of the bill noted that its passage would have made it easier for the state to meet its 30 percent participation goal from NWBEs for state contracts.

Gov. Andrew Cuomo

Cuomo, in a compromise effort, offered to eliminate the personal net worth requirement through a proposed chapter amendment, but only if his staff via internal policies and regulations had control of who received the cap or not. The chapter amendment also enabled his staff to increase or lower the cap based on the industry.

But Bichotte balked at the compromise, arguing that the subjectivity of the selection process and the decision on arbitrary numbers to be used as a cap threshold would put the integrity of the program at risk and would open the door for potential “play to pay” type of dealings.

In his veto statement Governor Cuomo gave two reasons for vetoing the bill. He argued that eliminating the personal net worth cap would expose the MWBE program to legal challenge because it removes an essential component of the program without replacing it with a corresponding limiting factor.

Two years after its creation, the program was challenged on constitutional grounds and the Supreme Court held in Burrowes Bridge Constructors, Inc, v. Cuomo that government programs that classify individuals on the basis of race, like the MWBE program, must be narrowly tailored to remedy prior discrimination. Comparable programs without a personal net worth cap or other limiting factor have been struck down as unconstitutional.

Additionally, he argued that the bill did not remove the references to the personal net worth cap in every part of the bill where it was referenced resulting in contradictory interpretations and other possible legal challenges.

Although the bill is defeated, Cuomo did note in his veto memo that as the MWBE program is set to expire this year the personal net worth cap issue should be discussed again during the 2018 legislative session.