Last week, Gov. Cuomo presented his executive budget. Unfortunately, nothing in it addresses the issues that are the root causes of the structural collapse of local governments – the exploding pension and healthcare costs.
The governor’s Mandate Relief Council, which was tasked to address unfunded mandates in tandem with the imposition of the 2 percent tax cap, also produced a report which unfortunately generated zero savings for municipalities. To put in stark perspective, since the Mandate Relief Council was first proposed, pension costs have risen 183 percent.
In approaching the pension issue, the governor has proposed a Long Term Stable Contribution Option Plan which will, in today’s lingo, kick the can even further down the road.
Under the governor’s plan, communities will be able to lock in pension contribution increases of 12 percent annually for non-uniformed employees and 18.5 percent for police and fire for a period of 25 years versus what is the projected actual increases of 20.9 percent and 25.9 percent per annum going forward.
First, stunningly, no one is addressing the basic premise as to why 12 percent and 18.5 percent annual increases in costs is a “good deal” for anyone. Even these lower numbers are clearly economically unsustainable, and the core problem needs to be addressed, not how to pay for a bloated system.
The presumptions underlying the plan include no provision for an economic future that is stagnant or declining. The plan presumes a much quicker turnover in employee retirements, counting on many of the employees in future years to be “Tier 6” and thus contributing to their pension benefits. The realities are that government employees are staying in the system longer and retiring later due to the uncertainties in the economy and/or the dearth of jobs in the private sector. Even when employees do retire, communities are containing costs by leaving the positions vacant or simply trimming the work force. As example, in my tenure as mayor, our staff has shrunk by 15 percent.
As Bloomberg News printed recently, “the plan is a thinly disguised form of debt.”
Under a current “amortization” pension payment plan available to municipalities, in fiscal year 2011, $43.5 million was deferred from the State Pension Fund, and last year 165 communities took advantage of it with an additional deferral of $200.6 million in payments.
The new deferred payment proposal cannot work without chronically underfunding the State Pension Fund and ignoring the state constitutional requirement that pension plans be actuarially sound, threatening to put New York in the same underfunding morass as Illinois.
The benefit of the plan is that communities on the verge of insolvency can stave it off a little longer and no politician currently serving in Albany will be there when the house of cards collapses. Ambition seems to be guiding principle of this initiative. My same views have been vocally shared by Mayor Spano of Yonkers and Mayor Miner of Syracuse, who is also the co-chair of the state Democratic party. We cannot continue to refuse to confront the problem. It is simply not fair to the next generation of New Yorkers.
The governor’s executive budget proposes no new state taxes. He will be able to honor this if various new initiatives are implemented that take money from municipalities to fill state shortfalls, thus depleting some of the few local non-property revenue sources left.
As example, under the rubric of safety, the governor has proposed that municipal courts no longer be allowed to negotiate speeding tickets down to local violations, saving the offender points on his license and possible insurance premium increases.
To put in monetary context, local communities get a fraction of the value of a speeding ticket. For example, a $185 speeding ticket yields a community such as ours $5. It actually costs municipalities to issue moving violations, disabusing the idea that communities write tickets to fill the local coffers. However, if the moving violation is pleaded down to a violation, the local municipality retains the lion’s share of the fine. The governor’s plan proposes a new state surcharge of $80 per violation on any infractions that are pled down. The net result is that local non-property tax revenues will shrink, and court costs and staffing will have to increase to handle the multitude of trials that will result as individuals contest the charge due to the points and insurance ramifications. The final burden will then fall on the local property tax payer to cover the shortfall because unlike the state, local municipalities have no one to “pass through” the costs to balance our books. Everything stops with the local property taxpayers.
Unless the corrosive root causes of the significant increases in local budgets are addressed by our legislators, residents statewide will continue to experience rising taxes, a diminishment of services, shrinking workforce, decreasing fund balances and crumbling infrastructure.
It is time the local property taxpayers become the most important special interest group.