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Gov. Cuomo details Financial Restructuring Board for distressed local governments


Gov. Andrew M. Cuomo has sent a bill to the state Legislature that would provide fiscal planning, money and arbitration assistance to help distressed local governments manage their finances.

The legislation includes:

n Creation of a Financial Restructuring Board to work with cash-strapped municipalities to develop a strategy to manage their books more effectively. The board would be composed of the state budget director, secretary of state, attorney general, comptroller and one private-sector consultant.

n $80 million to assist local governments that elect to follow the board’s recommendations.

n A binding arbitration panel to bring swift resolution to disputes between a distressed municipality and its unions.

“Growing retirement costs, declining populations, decreasing property values and the recent crisis have all contributed to the difficult financial issues facing localities today,” Gov. Cuomo said in a news release. “The Financial Restructuring Board will bring together state and local officials to help localities make tough decisions and solve this crisis now instead of kicking the can down the road.”

Simply providing more money to distressed local governments apparently is not the solution.

According to the governor, the state’s existing aid program is not effective because it does not provide an incentive for municipalities to improve their performance.

As detailed in the bill, the purpose of the program “is to recognize municipalities that have undertaken significant and innovative actions to improve the overall efficiency of governmental operations and produce quantifiable recurring financial savings that reduce the municipal tax burden on residents.”

The proposed legislation has met with approval from many upstate officials, including Onondaga County Executive Joanie Mahoney and city of Oswego Mayor Thomas W. Gillen.

But local leaders say the state needs to be less involved with their finances, not more.

Michael E. Kaskan, deputy administrator for Jefferson County, said that while the county is not a “distressed municipality,” the state would be better off working to reduce the number of unfunded mandates it passes down instead of creating a program like the governor has proposed.

With state programs unlikely to go away, savings would have to be realized by squeezing local funds, according to Mr. Kaskan.

In recent years, Jefferson County has chafed under the state’s 2 percent cap on property tax levy increases as it has tried to negotiate the demands of state mandates.

The amount of property and sales tax revenue that the county sets aside for funding state-mandated programs has increased by seven percentage points since 2009. In 2013, county officials expect these programs to eat up almost half of total tax revenue and take 82.9 percent of the property tax levy.

Those programs include Medicaid, public assistance/safety net, child welfare, preschool special education, early intervention, indigent defense, youth detention and employee pensions.

The county receives more than $37 million in state and federal aid to offset the $78.2 million it costs to provide those services.

While an $11 million reserve fund provides a financial cushion for the county in lean economic times, an annual report released by state Comptroller Thomas P. DiNapoli in December highlights the strain that local governments are experiencing.

The comptroller’s report noted that throughout the state, county expenditures jumped 17.2 percent while revenues climbed 13.4 percent. City expenditures — excluding New York City — increased 8.4 percent while revenues increased only 6.4 percent. And town expenditures grew 12.9 percent, but revenues only increased 7.1 percent.

And while municipalities still have managed to balance their budgets, “many local governments have nearly exhausted their resources in an effort to avoid severe fiscal stress,” according to Mr. DiNapoli’s report.

Under the governor’s plan, to determine whether a county, city, town or village is distressed, the budget director may consider:

n Fund balance.

n Full value property tax rate.

n Operating deficit.

n Population.

n Constitutional tax limit exhaustion.

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