Fri July 26, 2013
Comptroller DiNapoli: We Can't Let NY's Cities Go Bankrupt
The City of Detroit’s declaration of bankruptcy has left some in New York wondering whether any upstate cities will be next. State officials say they are trying to help with financial planning guidance, but local governments say more needs to be done.
State Comptroller Tom DiNapoli has created a fiscal stress monitoring system that measures the financial health of New York’s local governments. A preliminary report found two dozen cities, counties and villages are moderately to severely fiscally stressed. DiNapoli say he hopes they can avoid the fate of Detroit.
“We’re all going to do everything we can to make sure we don’t have bankruptcies in New York State, which would be a terrible outcome,” said DiNapoli, in an interview with public radio and the public TV program New York Now. “It would send a very bad message.”
The New York Conference of Mayor’s Peter Baynes says many upstate cities share many of the troubles that have plagued Detroit and led to bankruptcy.
“I don’t know if we’re next, the cities in New York, but there are definitely many cities on that path,” Baynes said.
He says, like Detroit, upstate cities also have “unaffordable” pension and health care costs, an eroding property tax base and declining monetary aid from state government.
“Over a very short period of time you could cities confronting the same difficult choice that Detroit had to make,” Baynes said.
Governor Cuomo convinced the legislature to enact a financial restructuring board for local governments, which would help them manage tight budgets and shrinking resources, as well as help resolve disagreements over union contracts.
Baynes says while support from the board and could be “helpful”, local leaders already know what the solutions are, but lack the power to actually make the hard decisions. He says many state mandates, including how to negotiate with workers, and which benefits and services to provide, prohibit them from acting.
Baynes says the state needs to step up with more money. Aid to localities has been cut by $50 million dollars since the recession began in 2008. He says cities don’t expect a bail out, but want “reasonable and predictable growth” in state aid.
“We can’t just tell our cities ‘you’ve got to do a better job, you’ve got share some services, come on, get your act together’,” he said. “It’s not just a few cities that aren’t managed properly, that’s not the problem.”
Baynes says without help from the state, it will be a “very difficult problem to fix”.
Comptroller DiNapoli agrees that more state aid is needed for local governments. He says it should be affordable, now that recession is easing and New York’s budget is healthier.
“We cannot stand by and see any of our cities fall into a state of full crisis or bankruptcy,” DiNapoli said.
Governor Cuomo has been resistant to giving local governments more money, saying it only prolongs making the tough choices. But his financial restructuring board would also provide some money, up to $5 million dollars, as long as the local government follows to the letter the board’s exact recommendations.
Comptroller DiNapoli says there may be a glimmer of hope soon for fiscally strapped cities. He says another report on the state’s pension fund is due out at the end of the summer, and he predicts that, because of the strong stock market, there will be a leveling off or even a decrease in the pension contribution rates for localities.