The Office of the New York State Comptroller issued a report yesterday (August 1, 2012) entitled “New Fiscal Realities Challenge Local Governments,” which found that New York’s local governments and school districts face serious short and long term challenges to their fiscal health, largely brought on, or made more acute, by the “Great Recession.” The comptroller’s analysis, reported on here in the New York Times, concludes that many of these entities have become “extremely vulnerable to unanticipated expenditures resulting from emergencies, mandates, or unexpected increases in the costs of goods and services. To reduce this budgetary strain, such local governments must seek additional revenues and/or reduce expenditures in the current and succeeding fiscal years.”
The comptroller’s report finds that New York’s cities are most at risk due to a number of factors, including population loss, declining or stagnant property assessments, high rates of poverty and older, deteriorating infrastructures. Circumstances such as these have given rise to renewed efforts to find creative solutions at the local level as evidenced most recently by the meeting hosted last month by Syracuse Mayor Stephanie Miner with Rochester Mayor Tom Richards, Mayor Gerald Jennings of Albany and newly-elected Yonkers Mayor Mike Spano. As reported here by Teri Weaver in the July 17th edition of the Syracuse Post-Standard, the meeting yielded no immediate solutions but was “a first step toward building collective solutions to a crisis building in cities across the nation.” The mayors made clear that they had to find alternatives to local taxes in order to keep abreast of rising costs.
Cities are not alone in carrying the burden of the bad news. County sales tax collections fell nearly six percent during this recession and have only just recovered to 2008 levels (all the while expenses have been rising). Property values in nine downstate counties and nearly half of the upstate counties have fallen. “AIM” aid has fallen $50 million since 2008-09 and been entirely eliminated for the City of New York. Towns have been particularly hard hit by the statewide reduction in mortgage tax collections, with $240 million less having been collected in 2010 than the peak of 2005. Local governments in New York suffered an actual decline in revenues between 2008 and 2009 of over $40 million, or 1.5 percent, driven largely by losses in sales taxes and state aid and offset only partly, and temporarily, by an increase in federal aid under ARRA.
Complicating the picture even further is the real property levy limit (the so-called “tax cap”). As reported previously on the NY Muniblog, Moody’s has concluded that the first round of budget adoptions by school districts throughout the state has largely deferred to a later day some of the more difficult, and controversial, budget decisions as districts confront the simultaneous, and increasingly incompatible, demands for reduced taxes and maintenance or improvement of service. The comptroller’s report underscores this point, finding that, as a result of the tax cap “local officials are more limited in their ability to raise property taxes than in the past.” Other than one reference to their contribution to the fiscal instability of local governments and school districts, however, the report makes no mention of mandates and the necessity, or prospect, for some measure of relief as a means of addressing at least some part of this issue.
A copy of the comptroller’s report is linked here.