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.

Pension Reform in New York Expected to Save $80 Billion Over 30 years

Pension reform is a hot topic all over the country.  State and local governments are realizing that during this fiscal crisis they cannot keep pace with the current contribution scheme that was enacted when the economy was strong.  For example, Cuomo stated that in New York in 2002 pension payments from local governments was $1.4 billion, this was increased  to $12.2 billion in 2012.  This increase of 650% has come at a time of fiscal stress causing local governments to increase their taxes and layoff public employees.  Further exacerbating the situation is the recently enacted property tax cap, which places a percentage limit to yearly increases on the tax levy that a local government may asses.  High pension contributions, and limits placed on local governments’ ability to collect property taxes has created an unsustainable framework.

To ease the pension pressure that local governments are facing and in an effort to cut government costs New York has just passed legislation reforming their pension system.  The bill would increase public employee contribution rates for new employees in a progressive manner:

$0-$45,000 will contribute 3%

$45,000 – 55,000 will contribute 3.5%

$55,000 – $75,000 will contribute 4.5%

$75,000 – 100,000 will contribute 5.75%

$100,000 + will contribute 6%

The bill also includes provisions that increase the age of retirement from 62 to 63, readjust the pension multiplier, creates vesting after 10 years of services, protects local governments from state pension sweetners, creates a voluntary and portable defined contribution option, completes adjustments for SUNY and CUNY TIAA-CREF Plans, and limits pension benefits for high paid employees that earn above the governors salary ($179,000).

Comments on the new bill can be found here.

Article discussing the bill can be found here.

Court Restructuring, Economic Development, and the State of New York Courts

Last night, New York’s Chief Judge Jonathan Lippman gave his annual address on the state of the judiciary.  In his introduction, the Chief Judge echoed a familiar sentiment to those who follow most of the recent developments out of Albany: “As Governor Cuomo has said, now is the time to reinvent government and to work smarter.  Now is the time, not just to find ways to reduce costs, but more importantly, to rethink and fundamentally transform the way we do business.” The address went on to highlight a number of social initiatives, including: raising the age at which defendants in nonviolent cases are considered adults from 16 to 18; preventing wrongful convictions through a mix of eyewitness identification safeguards, videotaped interrogations, expanding the DNA data bank and enlarging convicted defendant’s rights to access to the new DNA bank; and enhancing legal services to underserved populations, particularly to mortgage foreclosure cases and indigent legal defense.

The Chief Judge also noted that New York courts “must seek to create an even more hospitable environment for business.”  To this end, the Chief Judge called for expanded electronic filing (which is still not widely required in New York) and further announced the creation of a “Task Force on Commercial Litigation in the 21st Century” to help reinvigorate the Commercial Division of the state’s Supreme Courts.

However, absent from the Chief Judge’s address was any call for court consolidation or restructuring.  The current structure of New York’s Courts has been described as:

The most archaic and bizarrely convoluted court structure in the country. Antiquated provisions in [New York’s] state Constitution create a confusing amalgam of trial courts: an inefficient and wasteful system that causes harm and heartache to all manner of litigants, and costs businesses, municipalities and taxpayers in excess of half a billion dollars per year.

New York currently has a court system that features eleven trial courts, (California, who has twice the population, only has one), and a disproportionate appellate court system which divides the state into four appellate departments (one department contains half of the state’s population) which was set up in the 1890s. Compare the structure of New York’s court system to other major commercial states, such as California or Delaware (see charts for all the states at the Court Statistics Project):

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The idea of court consolidation in is not new in New York State, and a number of appointed Task Forces have visited the problem time and again (the Tweed Commission issued reports between 1955-58, the Dominick Commission between 1970-73, the Vance Commission between 1974-76, and proposals in 1986 and 1997).

Continuing this trend, in 2006 former Chief Judge Kaye appointed a similar Task Force to assess the effective of the state’s current court structure and propose appropriate reforms.  The group, commonly referred to as the Dunne Commission, issued a report which proposed consolidation of the state’s trial courts, and the creation of a fifth appellate department. After the report was issued, the recommendations were endorsed by former Chief Judge Kaye and then Governor Elliot Spitzer. As the Commission found:

[I]n the millions of cases that are handled in [New York] state courts every year, people waste countless hours making redundant court appearances, filing unnecessary papers and briefs, and suffering through delays caused by courthouse backlogs and inefficiencies.  In addition to confusion and aguish, the practical effect of this is lost wages, lost productivity, and higher costs and attorney’s fees for individuals, businesses and government entities. Given the number of cases affected (3.7 million cases are resolved annually in the state courts) these hidden costs add up to $502 million per year.

Although the $502 million certainly seems extreme, the Dunne Commission was quick to point out that this estimate had “been vetted by economists, and the [] National Center for State Courts has not only endorsed [the] projections but referred to them as ‘conservative.’”  Through restructuring, the State would see a budget savings of approximately $60 million a year, while private individuals, businesses and municipalities would realize a cumulative savings of over $440 million.  The report further supplied an appendix which included an economic analysis to show the basis for these financial conclusions. Older reports by New York’s own Unified Court System have also projected significant savings for the state.

Notably, the Dunne Commission did not focus on New York’s vast (and oft criticized) network of Town and Village Justice Courts, and recommended that further research be done for their possible role in restructuring. The State Comptroller’s Office has a court consolidation pamphlet for municipalities, which, if done properly “could help increase the efficiency and effectiveness of justice courts without jeopardizing local court revenues or lessening access to justice.”  Local court consolidation could save municipalities budgets until greater reform is accomplished. For example, in New Orleans the Inspector General issued a report on the performance of the municipality’s City Courts and Traffic Courts. The report found that by consolidating courts, the City would see approximately $2.5 million in annual budget savings.  As states around the country reel from budget constraints, court restructuring initiatives may continue to get a harder look.

Courts around the country are increasingly finding themselves slowed by increased caseloads, yet smaller budgets. New York’s court system is no exception, and after a particularly harsh fiscal year which saw deep budget cuts that caused widespread court delays and personnel shortages, in 2012 it will operate a court system with a budget  that has been called “the bare minimum.”   An overburdened judiciary should be an area of deep concern for all citizens.

State Incentives for Local Government Efficiency

States are currently in the business of promoting local government efficiency as a way to cut local government expenditures.   However, funding is a barrier for local governments that are tryting to take steps towards efficiency.  State incentive programs offer the funding that is needed for local governments to become more efficient through shared services, consolidation, dissolution, mergers, or cooperative agreements. 

The Local Government Efficiency Program in New York is a state incentive program that will provide technical assistance and competitive grants for local governments that seek to save money through consolidation, merger, dissolution, shared services, and cooperative agreements while at the same time still provide core governmental services to the community.  The grants are awarded through the LGeGrant Program which requires the municipality to go through an application process to be awarded the funding.

The Local Government Innovation Fund (LGIF) is an Ohio incentive program (click here for program policies) that will provide financial assistance to municipalities that are trying to set in place innovative and more efficient ways to deliver government services to their community.  Local governments seeking this award should be expected to describe how the plan will also improve the business environment and attract members to the community. With 45 million dollars available, 9 million for grants and 36 million for loans, the LGIF is a resource that local governments should use to implement innovative ideas.

For more information, and technical assistance, on local government consolidation, dissolution, mergers, and shared services visit the Center for Government Research, as well as, the Technical Assistance Manuel for New York’s Share Municipal Services Incentive Grant Program  prepared by the Government Law Center of Albany Law School for the New York Department of State, Division of Local Government Services.