STATE AND LOCAL WATCH
By Steve Levy, Exclusive for LIBN
The State crushed local budgets. Now it must save them.
A committee established by County Executive Steve Bellone, comprised in large part by liberal Democrats, recently issued a scant 10-page report suggesting the county had a $530 million shortfall. The number was hugely overstated.
The panel’s shortfall was predicted on an unrealistically low 1.5% growth in sales tax (the figure rises to 2.5% when the recent gas tax increase is factored in). The panel also grossly overestimated welfare costs suggesting that an additional $86 million, on top of normal growth, would be required. This may very well dissipate should the economy continue to improve.
Suffolk is on track to experience a 6.3% increase in its sales tax. Over two years this equates to a $100 million discrepancy by the panel for sales tax and $86 million in speculative revenue on their welfare estimates.
The problem Suffolk faces stems primarily from the legislature rejecting my closing of the nursing home and elimination of 700 positions. The legislature put all the positions back and created the first six-month budget in county history. No surprise there’d be a crisis midyear.
Notwithstanding the lack of fiscal discipline by the legislature, Suffolk would still face the same challenges being felt by every county around the state. Unlike most states, New York requires its counties to contribute significantly to welfare costs, while the liberal eligibility rules are controlled totally by the state. The state imposes mandatory arbitration that has pushed public safety salaries into the stratosphere, with some officers earning over $200,000 annually. Meanwhile, the state legislature mandated that the county pay an extra $35 million a year to build and maintain a new jail. The burdensome Triborough Amendment requires New York counties to continue to pay step-salary increases even after a municipal contract has expired. The state requires the counties to contribute to preschool handicapped programs they created while mandated pension rules are doubling payments for counties every few years.
During my eight-year tenure, our penny conscious approach saved hundreds of millions of dollars in recurring savings – from civilianizing the police department, bidding out our healthcare program, substituting sheriffs on the highway, requiring generic rather than name-brand drugs, and removing hundreds of take-home cars. It led to eight budgets without a general fund tax increase and budget stability until the legislature budgeted revenues from the closure of the nursing home, and then sued to prevent its closing.
New York State should not, and cannot, expect local governments to raise taxes through the roof to meet their mandates. But that’s what may happen. The Albany County Executive put forth a budget that suggested increasing taxes by 19%, while Chautauqua’s executive sought a 12% increase. Rockland’s executive floated a mid year budget note while suggesting 550 layoffs. Orange County expects a $30 million deficit in its nursing home.
As the reserves in local governments dwindle, collapse is not far away. This potential meltdown could trigger a brutal economic backlash across the state. So let me echo Manhattan Institute’s E.J. McMahon in saying that statewide financial control boards may be what the doctor ordered. Seventy-five percent of most budgets are personnel related and most of these costs are tied to unreasonable provisions imbedded in these contracts after decades of giveaways: 20-year retirements, overtime bloated pensions, automatic step-salary increases, tax-payer subsidized leaves for union lobbying, and minimum staffing requirements. A control board can rein in all of these budget busters. The control board would provide the legal mechanism by which to alter these ridiculous provisions to avoid fiscal Armageddon. Even where legislatures have the legal authority to make major changes, they too often lack the will.
The Control Board in Nassau has frozen salaries for yet another year. In Suffolk, a state imposed two-year freeze on police salaries, along with a closing of the nursing home, and a modest contribution for taxpayer healthcare costs would solve the overly-exaggerated problems proclaimed by Suffolk’s budget panel.