Shadow Government: The Hidden World of Public Authorities - And How They Control $1 Trillion of Your Money.

• Author: Blume, Jessica L.

Donald Axelrod provides readers who are unfamiliar with the structure and reasoning behind public authorities with enough alarming tales that, after reading this book, they fear the power of these authorities and only see the negative side of the approximately 35,000 of these autonomous agencies that exist across the country today. He delves into the reasons given the public for the formation of the authorities versus the actual results that they achieved, in most cases at a tremendous level of cost. He frightens the reader with the dollar amounts of debt that they have issued, their tenuous ability to pay and the liability to the taxpayer should these authorities fail to generate the projected revenue streams. Compounding the concern are the cases of mismanagement and excessive spending at many public authorities cited.

The book begins with an explanation of how some of the largest of the public authorities began. The first wave of public authorities occurred during the Great Depression. Many authorities, or "government corporations," rolled out during this time, including the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, the Government National Mortgage Association and the Tennessee Valley Authority.

Nelson Rockefeller, the governor of New York from 1959 to 1974, was instrumental in the formation of several large, "off-budget" public authorities that had the power to issue debt and, therefore, provide the services that the people of New York needed but had defeated in several voter referendums that proposed to provide these services or facilities through increased taxation. Other state and local governments got in the loop and saw the opportunity to provide the needs by a method that would bypass the referendum. The "moral obligation" bond became the facility that allowed these public authorities to issue massive amounts of debt with no requirement by the state or local governments to assist in the debt payment should the authority's revenue fall short of the required amount.

Authority boards have the power to run their financial affairs, approve their budgets, control the hiring and firing of staff, and establish compensation. Axelrod states, "The use of public authorities signals a breakdown in the traditional political, fiscal, administrative and legal structures of state and local governments. . . . |Public...