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New York Times

Local Governments Face Fiscal Peril, State Comptroller Warns

Thomas Kaplan
Wednesday, August 1, 2012


Local governments across New York State are collecting less in taxes, burning through their cash reserves and running up deficits, according to a report released Wednesday by the state comptroller.


The report by the comptroller,Thomas P. DiNapoli, cast long-term doubt on the financial health of many municipalities in the state, which are faced with anemic revenues and fewer remaining ways to cut costs.

And it offered another sobering prospect to local officials who have worried aloud in recent months that some of the state’s largest city governments may soon be unable to make ends meet.

In a telephone interview, Mr. DiNapoli said local governments were facing a “perfect storm” of financial pressures — including diminished state aid, falling property values and sluggish collections of sales tax.

The result, according to the report, is that balance sheets across the state are, in many cases, unsound, and are likely to remain that way or worsen in the coming years.

In many ways, the comptroller’s report echoed a study released last month by a task force of budget experts that concluded that the fiscal crisis facing state governments would linger even after the nation’s economy recovered. Mr. DiNapoli said the same was true of local governments in New York State.

“The challenges that are being faced now are not just a short-term cycle that’s going to turn around quickly,” Mr. DiNapoli said. “At least for the foreseeable future, there is a new reality, in terms of diminished revenues, and it’s affecting every level of government.”

More local governments, the report said, are struggling to pay their bills on a day-to-day basis. Almost 300 local governments ended the 2010 or 2011 fiscal year — or both — with a deficit, and more than 100 do not currently have enough cash on hand to pay even three-quarters of their liabilities, Mr. DiNapoli’s office found.

Even a city that is not facing immediate issues of solvency, the report said, is “having a hard time maintaining the services its residents want and need” as a result of widespread spending cuts over the past few years.

“No matter how you measure it, almost all cities in New York are stressed and have to work hard to keep their fiscal houses in order,” the report said.

Mr. DiNapoli’s study focused in part on the challenges facing local governments in coming up with the revenue they need. Peter A. Baynes, the executive director of the New York State Conference of Mayors and Municipal Officials, said mayors were increasingly desperate for new sources of revenue, like additional aid from the state or increases in local sales tax rates.

“They’ve done just about all they can do on the spending side of the equation, in terms of reining in expenses, consolidating departments and using attrition to not fill positions,” Mr. Baynes said. “All that’s left for cities is to lay off employees that provide essential services.”

As he has in the past, Mr. DiNapoli urged local governments on Wednesday to embrace multiyear financial planning and to resist fiscal trickery as they seek to balance their budgets in the short term. The report said that poor record-keeping and other questionable accounting practices were serving, in some cases, to mask the extent of the governments’ financial distress.

But Richard L. Brodsky, a former assemblyman who was a writer of a recent report on the troubled finances of Yonkers, said cities that had improved their financial planning and forsaken gimmicks found that within the next few years, they would be unable to close their projected budget gaps.

Mr. Brodsky predicted that “New York will see what California has already seen,” with localities simply unable to make the budget math work.

“You’ve got an unsolvable problem,” he said, “which logically takes you to the consequences of that, which are bankruptcy, bailout or control board. That’s where the mayors are. That’s the conversation they’re having.”




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