Published: September 25, 2008 08:28 pm      

NIAGARA FALLS: Memo to Albany: Don’t pass the buck

A day after President Bush warned of a potentially “long and painful recession,” leaders from counties across New York state gathered in Niagara Falls to send a unified message to Albany lawmakers.

The message: This time, don’t just pass the buck.

Concerned about looming cuts in state aid for counties in the wake of the country’s financial crisis, Democratic and Republican leaders from New York’s 62 counties joined forces at Conference Center Niagara Falls to demand real, cost-saving reforms from Albany as opposed to what they fear will be more cost-shifting measures that could lead to higher bills for county taxpayers.

“In unity lies strength,” said Niagara County Legislature Chairman Bill Ross. “We know what direction to go. We are going to fight those cost shifts all the way.”

County leaders are visiting the Falls this week as part of the New York State Association of Counties fall seminar. Members of NYSAC, the primary lobbying organization for the state’s counties, met Thursday morning to discuss issues facing Albany, including an anticipated revenue shortfall and the likelihood of an across-the-board, 2-percent cut in state aid for counties.

Members of the state Legislature already convened for one special session earlier this year in which they trimmed $427 million from this year’s $122 billion state budget. Gov. David Paterson has said he will likely be forced to call state lawmakers back to Albany again, possibly before the Nov. 4 election, to make additional cuts. Paterson has said that recent events on Wall Street, including the bankruptcy of Lehman Brothers and the government bailout of AIG, have likely wiped out any savings realized by the earlier budget cuts.

County leaders are worried about the impact of additional aid reductions, suggesting Albany lawmakers have had a tendency to reduce their own spending by passing their costs down to county governments in the form of mandates.

“This is the time to step up and make real reform a reality,” said Erie County Executive Chris Collins. “The rhetoric only goes so far. Actions speak louder than words.”

County leaders said sweeping cuts in state aid may leave them with little choice but to consider drastic options, including possible raises in local sales and property taxes. On Thursday, they said they would prefer Albany deal with its own economic issues by enacting long-awaited reforms. Their wish list includes tighter standards on expensive programs like Medicaid and welfare, rolling back cost-of-living raises for health and human services employees and promoting cost savings through consolidation and shared services efforts.

“Make no mistake about it, we are in a period of economic turmoil,” said Suffolk County Executive Steve Levy. “We fear that things are going to get very ugly in Albany post election day. There’s no doubt that the Legislature will reconvene and they are going to bring their ax. The question is whether that ax is going to fall on the local property tax payers.”

Niagara County Manager Gregory Lewis said it remains unclear at this point just how deep the cuts will go locally or what the specific impact will be on county services and taxpayers.

“We’re going to have reduced revenues from the state and we are going to have increased costs from the state,” he said. “Whether that will materialize into concrete facts upon which we can make judgment is uncertain.”

Lewis said not knowing for sure if or when state lawmakers will convene for a special budget-cutting session makes it difficult for local officials to determine where exactly they stand in terms of state revenues. Lewis said county department heads are now working on their respective budgets based on “reasonable assumptions” about state aid.

“It puts more pressure on an already pressured situation,” he said.

Lewis said county department heads were unable to meet their Sept. 1 goal of developing an overall county spending plan that included no more than a 3 percent increase in property taxes.

On the plus side, Lewis said the county has enjoyed an increase in sales tax this year which could help offset some of the pending cuts in aid. He cautioned the sales tax trend may not continue in light of current economic conditions.

Lewis said the county still has a healthy fund balance from which to draw if necessary, but indicated that it is not a preferred option moving forward.

“Use of fund balance is a one-time only solution,” he said. “So, it leaves a hole. If we solve our problems on the back of the fund balance then we would be, next year, in a deeper hole.”

John Cape, a former New York state budget director who led a presentation Thursday on the potential impact of proposed state spending cuts, said New York’s financial situation is unlikely to improve any time soon. Cape said the state anticipated a $5 billion spending gap in the 2009-10 budget. Through the first quarter of the year, Cape said the gap widened to $6.4 billion. In 2010-11, Cape said the state budget could have a structural imbalance as large as $9.3 billion. The following fiscal year, Cape said, the gap could grow to more than $10 billion.

Cape said New York’s financial problems are compounded by Wall Street’s struggles where more than 49,000 employees in the financial sector have lost their jobs so far. Cape said the state’s financial sector accounts for roughly 20 percent of New York’s annual revenues. The state, he said, can now expects to lose significant amounts of revenue from unemployed Wall Street professionals who once earned some of the highest salaries and consequently paid the most taxes in the state.

Even with projected increases in state revenues, the elimination of 5,000 state positions and substantial reductions in Medicaid and school aid, Cape said Albany lawmakers still needs roughly $1.6 billion to close this year’s spending gap.

He expects state lawmakers to do find the money where they have in the past: county taxpayers.

“Counties are going to take big cuts next year,” he said. “There’s simply no other place to go.”