The beast is starving

In Saugerties, budget shortfalls, due in part to a huge jump in pension contributions, have led the town to consider closing its transfer station

In announcing his 2013 city budget back on Oct. 18, Mayor Shayne Gallo offered up a frozen tax levy, a significant drawdown from the city’s rainy-day fund and harsh words for Albany politicians who he says are driving communities towards municipal bankruptcy with a seemingly endless parade of unfunded mandates.

“When you look at Albany you see an arrogant indifference to the plight of local government,” said Gallo in an interview shortly after his budget address. “There’s this sense that local government will bear the burden of political decisions the legislature has made to satisfy its base.”

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The outcry from local government leaders like Gallo over state-imposed mandates is a familiar one, but it’s grown louder since 2011, when state lawmakers and Gov. Andrew Cuomo pushed through legislation capping property tax levy hikes for municipal and school district budgets at a baseline of 2 percent. (Various factors which are plugged into a formula result in actual caps ranging from as low as zero percent to as high as, in some cases, 5 percent.)

At the time, Cuomo and tax-cap backers in the legislature promised that the landmark legislation would be accompanied by mandate relief. But two years later, big-ticket mandates like payments into the state retirement system, Medicaid and the Safety Net welfare program remain a major drag on local budgets. In Saugerties, for example, contributions to the state pension program are up by $270,000 this year, a 60 percent increase. In Kingston, Safety Net costs alone would have wiped out the city’s roughly $400,000 tax cap cushion in the 2013 budget, forcing it to take $700,000 from the reserve fund.

 

Budgets squeezed

But what to do and how to do it remain contentious, maybe intractable, issues. Two documents sum up the gulf between the desire of local governments to ease the mandate burden and the willingness, or ability, of state elected officials to do that. In 2010, with the tax cap looming, the New York Conference of Mayors and Municipal Officials (NYCOM) task force on mandate and property tax relief produced a report: “You Can’t Cap What You Can’t Control,” a dire warning about the fiscal consequences of unfunded state mandates and a call for major reforms. The same year, Gov. Cuomo convened a “mandate relief and redesign” team of local, state and school district officials to study ways to cut the impact of state mandates on local budgets.

The NYCOM report includes a chart which claims that while property tax increases for local governments across the state will be capped at $19.7 million in 2012, expenses for pension payments, employee and retiree health insurance will rise by a projected $116.1 million. The report, according to NYCOM officials, was an attempt to reconcile the tax cap with the rapid increase in mandated “cost drivers” like pension and health care costs.

“The positive thing that came out of the tax cap was that there was more attention focused on mandate relief,” said Barbara Van Epps, deputy director of NYCOM. “Because mandate relief is the only way to deal with the reality of the tax cap.”

 

Wage freeze, Triborough repeal

The NYCOM prescription calls for sweeping reforms in state law regarding government employees. Among the items on the wish list include a temporary freeze on public sector wages; repeal of the Triborough Amendment, which mandates that municipal workers contracts (including step raises) remain in effect even after the contract expires; and major restructuring of pension cost-sharing and benefits. “You Can’t Cap What You Can’t Control” also calls for a state-mandated employee contribution of no less than 25 percent of the cost of family health insurance, as well as changes disability rules for public safety workers.

The report of the governor’s task force, meanwhile, shows that Albany officials remain wary of sweeping changes in the rules governing relations with thousands of government employees backed by politically powerful unions. The list of mandate relief items passed into law in 2011 include a host of small-bore initiatives, like changing procurement laws to allow local governments and school districts to “piggyback” purchases on federal government contracts, eliminating redundant paperwork and making it easier for municipalities to carry out street improvement projects with in-house labor. According to a report released by the task force in December 2011, mandate relief measures and regulatory reforms identified by the task force and passed by the legislature would save local governments an estimated $165 million in 2012. But Van Epps, who noted that the committee had met just once or twice since completing the report, said that most local governments had yet to see significant savings.

“[$165 million] is certainly the figure they came up with,” said Van Epps. “But I’ve never seen a breakdown of that figure.”

 

A more orderly approach

101st District Assemblyman Kevin Cahill (D-Kingston) acknowledged that fellow lawmakers had done little more than “pick around the edges”— usually around election time — when it comes to mandate relief. Cahill described the prevailing attitude towards the tax cap from Albany’s perspective as a “starve the beast” strategy to force local governments and school districts to spend down fund balances as a stop-gap while they come up with innovative ideas to restructure and cut costs.

“I don’t subscribe to that idea,” said Cahill. “Because the fact is there’s not a lot of frivolous spending going on municipalities and school districts these days.”

But Cahill pointed to a fundamental quandary of mandate relief — the money has to come from somewhere. Mandates for services like special education, Medicaid or Safety Net are generally shared by state, federal and local governments. Thus, to ease the burden on municipalities requires other levels of government to pick up a greater share of the funding, or make deep cuts in services that hundreds of thousands of New Yorkers depend on. Cahill said that in the end, the solution may lay less with mandate relief and more with major changes in the way local governments and school districts deliver services. Consolidation of services, school districts and government agencies would be the key to local government’s adjustment to the new fiscal reality, Cahill said. The job of state lawmakers, Cahill said would be to remove obstacles and provide incentives for consolidation.

“We can to create opportunities and incentives for orderly, statutory consolidation,” said Cahill. “It doesn’t have to be painful.”

Many communities, including Kingston, which recently merged its tourism office with the county’s, are moving towards consolidation of services as a way out of the tax cap conundrum. But others may simply decide that unfunded mandates make a 2 percent limit on tax hikes unsustainable. The tax cap law includes a provision that allows local governments to override the limit with a supermajority vote of the governing body or 60 percent of the popular vote in a school district election. Last year, 15 percent of New York’s local governments opted to override the tax cap. But many communities that stayed under the cap did so by drawing down fund balances or juggling budget priorities. Without greater mandate relief, Van Epps said, more and more governments may decide to make the case to voters that they cannot bring down property taxes until the burden is eased.

“In another year or two you may see more communities overriding the tax cap,” said Van Epps. “Just because they don’t have any more tricks up their sleeve.”

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