Archive for August 2012

Why NY municipalities are going broke – By George J. Marlin

August 23, 2012

The following appears in the August 23-29, 2012 issue of the Long Island Business News:

In an important report released this month, State Comptroller Thomas P. DiNapoli diagnosed the rapidly declining fiscal health of municipalities throughout the Empire State.

“No matter how you measure it,” he states, “almost all cities in New York are stressed and have to work hard to keep their fiscal houses in order. … If a city is not facing budget solvency issues, it is likely facing service delivery stress – that is, it is having a hard time maintaining the services its residents want and need.”

The reason why municipalities are in fiscal peril: Tax revenues do not match expenditures.

First the revenue side of the ledger.

Since the Great Recession began in 2008, property tax revenues in most municipalities have declined due to the drop in residential and commercial real estate values. In the nine downstate suburban counties, including Nassau and Suffolk, property values have, on average, decreased 5.3 percent annually.

Upstate declines during the same period have been smaller, 1.8 percent a year, because many cities in northern regions did not participate in this century’s real estate boom. For instance, between 1998 and 2005, property values in Oswego were down 45 percent; Dunkirk, -38 percent; Fulton, -12 percent; Schenectady, -11 percent; and Buffalo, -10 percent.

State aid to municipalities, which peaked in 2008-2009, has declined over the last three fiscal years. Fewer home sales translated to lower mortgage recording tax income. The comptroller’s report points out that since 2005, “local governments have lost nearly $320 million in annual MRT revenues.”

Many municipalities are also reaching their constitutional tax limits. There are presently eight local governments that have hit the total amount of property taxes that can be levied.

Declining populations due to huge manufacturing job losses have also contributed to lagging tax dollars. Buffalo, whose population stood at 532,000 in 1960, is now down to 240,000. With more than 40,000 single-family homes abandoned, the city’s property tax base has been wrecked.

As for expenditures, thanks to unfunded state mandates, gratuitous public employee contracts and spiraling pension and health care contributions, local magistrates are cutting essential services to cover those costs.

There are over 2,000 unfunded mandates imposed on New York municipalities. These mandates, of which Medicaid is the most costly, consume more than 60 percent of county governments’ budget dollars. For example, Erie County in 2003 had announced that its Medicaid costs hit $175 million while its total property tax revenue was expected to be $128 million. County officials told The New York Times, “Every penny we take in the county property taxes is used to pay for Medicaid. This is before we pay for any libraries or plow any roads or pay for any police services.”

Instead of grappling with the fiscal crisis and making tough budget decisions, some municipal leaders have resorted to sloppy bookkeeping or cooking the books. The comptroller points out an audit uncovered that the Village of Freeport between 2006 and 2010 adopted unrealistic general fund budgets that resulted in operating deficits totaling $10.9 million. The budget included $5 million in transfers from nonexistent reserves. In addition, Freeport issued long-term debt to cover short-term operating deficits. This is like using one’s credit card to make a current mortgage payment. One is merely transferring debt, not paying it down.

The comptroller’s report is a wake-up call. And if state and local elected officials do not aggressively address these fiscal woes by slashing state mandates, enacting genuine pension reform, renegotiating union contracts and scrapping rigged arbitration boards, expect the day of reckoning to quickly arrive and distressed municipalities lining up to enter into receivership.

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Obama’s War on Religious Freedom – By George J. Marlin

August 22, 2012

This article I wrote appears on The Catholic Thing web site on August 22, 2012.

LBJ a role model for Mangano – By George J. Marlin

August 9, 2012

The following appears in the August 10-16, 2012 issue of the Long Island Business News:

After observing Nassau elected officials from a ringside seat the past few years, I have concluded many squander much of their day on extraneous matters. Too much time is spent attending photo opportunity events, fundraisers, golf outings and issuing reams of press releases containing dubious data and claims.

As a result, not enough time is spent governing and this, in my judgment, explains why the county is teetering on the edge of the fiscal cliff.

Governing is more than political posturing. It requires more than just showing up at one’s office. Governing is about advancing one’s policy agenda. And to achieve that end, elected executives must devote their time, energy and influence hamming out agreements with the legislative branch.

Gov. Andrew Cuomo is a good example of a chief executive who has been successful at governing. When he took office Jan. 1, 2011, he immediately tackled the $10 billion budget deficit he inherited, calling for shared sacrifices that spared no facet of government. He persuaded the Democratic Assembly and the Republican Senate to pass a budget that eliminated the deficit without new taxes or borrowing.

What exactly happened when the governor bargained with legislative leaders behind closed doors we will never know for sure. Nevertheless, I believe it is fair to assume that Cuomo’s hard-nosed negotiating and his threat to use his broad executive budgetary powers persuaded legislators to come to terms with the state’s fiscal plight.

Speaker Sheldon Silver and Senate Majority Leader Dean Skelos did receive some swag in the deal (i.e., $250 million in education cuts were restored). But that’s part of the give and take of governing. The key was for the first time in years the budget agreement was a major victory for taxpayers, not special interests.

For a real lesson in the art of governing, I recommend local officials pick up a copy of the recently published “The Passage of Power,” the fourth volume in Robert Caro’s monumental “The Years of Lyndon Johnson.”

In that work, one learns how Johnson immediately grasped the reins of power after being sworn in as president in Dallas and moved through Congress John F. Kennedy’s tax and civil rights legislation that was hopelessly logjammed for years.

Johnson, a former “master” of the U.S. Senate, wooed legislative leaders of both parties. He threw himself into the budget and tax-cut negotiations, and made the compromises and deals necessary to break the deadlock that Caro reports “before November 22, 1963, had seemed all but unbreakable.”

When Johnson was told by advisers that he should not antagonize Southern Democratic members of Congress by promoting Kennedy’s civil rights bill that had no chance of passage, he looked at them and said, “Well, what the hell’s the presidency for?”

Dismissing conventional wisdom, Johnson executed a plan strategy to get the Civil Rights bill out of committee and on to the floors of the House and Senate for a vote. “It was a struggle,” Caro writes, “whose strategy and day-to-day tactics were laid out and directed by [Johnson].”

Johnson successfully marginalized the South by persuading the members of the party of Lincoln to join northern Democrats in supporting the legislation. By using all the levers of power available to him, he broke the bill free from the Congressional logjam and on the road to passage one month after assuming office. Seven months later, on July 2, 1964, he signed the 1964 Civil Rights Act into law.

Johnson, whom the chic Kennedy crowd called “Rufus Cornpone,” proved that it takes more than glitz to govern. He proved much could be accomplished when a chief executive is determined, hardworking, and not afraid to step on a few toes.

Unless county officials heed the Cuomo and Johnson examples, expect Nassau to continue down the road to fiscal perdition.

Better to cut their pay – By George J. Marlin

August 6, 2012

This Op-ed piece I wrote appears in the New York Post on August 6, 2012.