2 October 2004
Bruce L. Fisher
Municipal Finances are Simple: a response to Spectator
Erie county's Deputy County Executive and Chief of Staff responds to Spectator's "Giambra screws Erie County, Naples stooges for DeLay, Bush scrounges for bad science and pulls strings in Iraq," which appeared in Buffalo Report on October 6, 2004.
Municipal finances are simple. City and County financial questions are very much more straightforward, and less subject to the whims of elected officials, than your contributor The Spectator indicates in his columns.
The City of Buffalo, as a municipal corporation, has three major sources of revenue:
A. property tax revenue -- capped by the NY Constitution at 2% of assessed valuation
B. intergovernmental aid -- principally from New York State
C. miscellaneous revenue -- mainly feesThe principal problem Buffalo has (along with Rochester, Syracuse, Utica, Binghamton, et al) is that the taxable real property has not grown in value fast enough to keep up with personnel costs.
Unlike the Federal government, municipal budgets must be balanced annually. Until the advent of the Buffalo Fiscal Stability Authority (the "control board"), Buffalo had no ability to run a deficit. This is not a debating point or an ideological assertion: one of the most difficult issues for an informed electorate to comprehend is that local governments are captives of their annual revenues.
So when we and others (David Rusk, former Indianapolis Mayor Bill Hudnut, current Rochester Mayor Bill Johnston, Brookings Insitution scholar Bruce Katz) say that the current structure of the City of Buffalo is unsustainable, we're all talking about the same problem, and generally about the same solution -- regional government.
As to County government, the experience of Erie County is identical to that of every other County government over the past few years. Oneida County (where Utica is) just proposed a budget with a 1.5% sales tax hike necessitated by huge increases in Medicaid. Last year, Westchester County hiked its sales tax to pay for increased Medicaid. Ditto Niagara County, Allegheny County, Chemung and five others. Every county -- every single one -- except Erie County raised property taxes in FY 2002 and 2003 to cover increased Medicaid costs.
Erie County has a projected gap of $130 million for 2005, caused by two State-mandated expenditures: Medicaid and employee pension contribution. (From FY 2000 until FY 2005, there was no -- repeat, zero -- mandate for employee pension contribution because the state employee pension fund was self-funding.)
So. Either Erie County has to get new revenue, cut services, or do some combination of revenue increases and service cuts. We prefer to enact a 1% additional sales tax (food and pharmaceuticals are exempted) rather than to add more to the property tax burden, because further property tax will reduce taxable value, and exacerbate the problems of distressed areas like Buffalo, Lackawanna, Tonawanda and rural communities.
Conclusion: local elected officials have little discretion about this stuff.
Copyright 2004 by Buffalo Report, Inc.