State Super Control Board Taking Over Struggling New York Local Governments?

In recent news it has been stated that New York Gov. Cuomo and Comptroller Thomas DiNapoli are looking to propose legislation that would create a state super control board.  The board that would take over the finances of struggling local governments on the verge of bankruptcy, including cities, towns, villages, and counties.

Of course public labor unions oppose such legislation because it would allow the state to violate union contracts, which represent one of the largest local government expenditures.

Such control boards are not uncommon in New York and have been set in place at the local level.  The governments of Troy, Buffalo, Yonkers, and Nassau County have been under finance control boards because they were on the verge of an economic crisis.  It was reported that currently 300 local governments ran deficits and more than 100 local governments do not have enough to pay the bills.

The proposed legislation was described as not “…completely replac[ing] the locally elected official.  But it would provide them with the political ‘cover’ many privately say they need to stand up to the powerful unions, which have consistently resisted spending cuts.”

Conflicting reports show that Comptroller DiNapoli has not been in discussions with Gov. Cuomo and he believes it is premature for the installation of such a board.   In a press conference DiNapoli emphasized that the idea needs to be examined in more detail.

Illinois’ Controversial Proposed Pension Reform

With many cheering, and many picketing, Illinois’ proposed pension reform is very controversial.  Governor Quinn has avoided reforming the pension system until recently when he announced a bold plan that is designed to secure retirement for public workers and to fix the state’s pension issue at the same time.

The major highlights of this proposal include:

  • 3% increase in employee contributions
  • Reduce cost of living adjustment
  • Delay the cost of living adjustment to earlier of age 7 or 5 years after retirement
  • Increase retirement age to 67
  • Establish 30-year closed actuarially required contribution funding schedule

This proposal is expected to save taxpayers $65 to $85 billion.  However, there are concerns from those whose pensions are being adjusted.  Many teachers in the state have taken to picketing government offices.  School districts and teachers are concerned that under this reform the employer will be responsible for paying the costs of pensions.  Elementary school superintendent Kevin Skinkis stated, “I am very concerned that the governor will shift [teacher retirement system] employer pension cost to school districts.  This would cause. . . financial distress and it would force us to have to make some serious reductions to a budget that is already carrying a deficit.”

With only six days left in the spring legislative session, the entire state of Illinois is watching and waiting on the fate of public workers’ pensions.

This post was prepared by Chelsea Keenan Albany Law School ’14

New York Announces Competitive Grant For Local Government Performance and Efficiency

In efforts to help reduce the heavy tax burden on New York residents, Governor Andrew Cuomo announced an initiative designed to incentivize performance and reduce costs to local taxpayers.  A $40 million competitive grant fund is now set up as a part of Governor Cuomo’s structural reforms to relieve local governments from unfunded state mandates. This grant was initiated in the 2011-12 fiscal year, and is being renewed in the budget for the 2012-13 year.

The grant is now available to counties, cities, towns and villages, either individually or jointly. Based on an application, a reward will be given to local governments that have excelled in reducing property taxes and streamlining government.  The projects that are eligible must have started on or after January 1, 2010.

Applicants may receive as much as $25 per resident, with a maximum of $5 million.  The actual amount of the award will be based on the population, and the percentage of fiscal impact on the applicant’s total government expenditures.

The local government performance and efficiency incentive is highly beneficial to taxpayers, and the municipalities alike.  As Stephen Acquiario, Executive Director of the NYS Association of Counties said, “[t]hese. . . grants will recognize local governments which have stood up for their taxpayers and found smart, more efficient ways to keep costs under control.”

This post was prepared by Chelsea Keenan Albany Law School ’14

New York: An Update on the Municipal Financial Crisis

An article authored by Robert Ward was just released by the Rockefeller Institute of Government describing the financial crisis of the many New York municipalities.  Ward was recently appointed by State Comptroller Thomas DiNapoli as his new deputy for budget and policy analysis.  In his article Ward notes that around the nation municipalities are falling into bankruptcy and slashing their services.  For example, Highland Park, Mich. is turning off their residential street lights, Stockton Ca. has cut their police force by a quarter in the face of increased crime, and many others have declared municipal bankruptcy.

Ward mentions that Gov. Andrew Cuomo has warned the legislature about this impending fiscal doom and if the problem of unfunded mandates is not addressed the matter will get worse.  In response, the legislature recently created a new pension plan that would require employees to contribute more, among other things,  in an effort to ease the pension burden that is placed on local governments.  However, Ward mentions that this new pension scheme will not result in immediate cost savings because new employees will first have to enter the state workforce.  Therefore, savings may not be recognized for ten years.

Budget gaps are expected from the Great Recession and the lack of available state aid.  However, Ward identifies that these gaps are the result of local governments rubber stamping the same budgets without considering the changing fiscal environment.  This also pushes the financial problems of today into the future.

Further, Ward states that New York has not enacted a state policy that would require local governments to plan ahead in order to avoid a financial crisis.  Local governments have the ability to ask the legislature  for special permission to acquire longer term bonds, however that permission is usually attached to some form of state oversight and is granted because New York does not want to see any local government fall into municipal bankruptcy.

Ward concludes by suggesting two options.  First, local governments facing a crisis will have to accept state oversight and give up some degree of autonomy when forming their budgets.  Second, local governments must recognize and deal with  financial problems at their early stages.

Robert Ward’s article is available here.