Comptroller warns local governments that fixing fiscal crises won't be easy
New York state’s comptroller kicked off a week long forum at SUNY’s Rockefeller Institute to examine the plight of economically stressed local governments and school districts across the state.
Comptroller Tom DiNapoli says the new normal for schools and local governments around the state is prolonged fiscal stress. He says a combination of rising health care and pension costs, reduced state aid, and a two-year-old property tax cap have put the squeeze on municipalities.
“The fiscal challenges confronting local communities are not a passing problem,” DiNapoli said.
Di Napoli says 32,000 municipal jobs have been lost in New York since 2009.
The comptroller says choosing bankruptcy or a financial control board imposed by the state are not good answers, but he admits there’s no easy solution. He called on government leaders to make the same level of commitment and focus as during New York City’s fiscal crisis in the 1970s.
He says consolidations and sharing services are necessary options, but he also recommends that state aide to localities be increased. He says increasing the $715 million spent on aid to municipalities, or AIM, is small compared to the $50 billion spent on health care and education.
“For example, even a 50 percent increase in AIM funding represents less than one half of one percent of the state’s operating budget,” said DiNapoli. “It would certainly, though, do a lot to hold down local property taxes and help our localities across the state.”
DiNapoli says in exchange for more money, though, the government leaders and school boards should make public more of their financial information to voters.
E.J. McMahon, with the fiscally conservative think tank The Empire Center, agrees, saying failure to publish a five-year financial plan is a “key shortcoming,” and does not give voters a context for what are “long-term problems.”
McMahon says the comptroller has offered tools, including templates, for municipalities and schools. But many have not taken advantage of them.
Meanwhile, Moody’s has issued a warning about the pension stabilization plan approved in the recently enacted budget by Gov. Andrew Cuomo and the legislature. DiNapoli signed off on the plan. It allows local governments to amortize their costs for current pension payments over a 12-year period, and is similar to a plan put in place by the state comptroller three years ago. Cuomo had originally sought a proposal that would allow local governments to pay off their present pension costs over a 20-year period.
Moody’s calls the plan “a stopgap with long-term risks” that could hurt the state pension fund and possible local government’s credit ratings, because it involves deferring pension contributions.
DiNapoli says he hasn’t seen Moody’s comments, but he says he’s not pushing the plan on schools and local governments. He says they should only do it as a last resort.
“It’s not meant to be the be all and end all,” said DiNapoli. And he says local governments have the option of paying off the amortization plan early.
The comptroller has instituted what he calls an early warning system for local governments who potentially face financial crises. He says his office has been monitoring the municipalities and will release its results in a few weeks. He predicts that for many, it will be a “painful wake-up call.”