Dobie: Budget grind gets grittier for LI governments

Oyster Bay plans to borrow $30 million to

Oyster Bay plans to borrow $30 million to address cash flow problems. Above, a view of Town Hall on March 26, 2012. (Credit: Nicole Bartoline)

Michael Dobie

Michael Dobie is a member of the Newsday Michael Dobie

Michael Dobie is a member of the Newsday editorial board.

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The news landed on town supervisor desks with a dispiriting thud: Next year's tax cap is even lower than this year's.

That's good news for taxpayers, of course. But it means more headaches for budgeters.

The state-created cap -- which limits increases in the amount of property taxes collected -- is 1.56 percent for everyone whose fiscal year starts Jan. 1. That includes Long Island's 13 towns, both counties and the City of Glen Cove. The 2014 figure was 1.66 percent.

Now, grumbling about the cap has been de riguer for the four years of its existence, and some are moaning about this year's trifecta: The cap for 2015 is the lowest yet, the costs of health care, pensions and utilities continue to rise, and mortgage recording taxes -- a significant source of town revenue -- still lag in many places. Balancing the books, officials say, gets harder every year.

That's the point. The cap isn't supposed to be easy.

It's supposed to offer taxpayers relief and force municipalities to do what their constituents do: live within their means. On that, it's worked: Property taxes statewide have risen on average a shade over 2 percent per year the last two years, less than half the rate of the previous 10 years.

Some towns got there by raiding reserves, trimming staff and using one-offs such as selling property. But those options are vanishing and hard decisions await.

Preliminary budgets are due by the end of September, with public hearings to follow. So, what's going to happen?

First, the wild cards: Under new legislation, taxpayers this year get a rebate from the state if their government stays within the tax cap. That should ratchet up the pressure to keep taxes down. On the other hand, it's not an election year for local officials.

Here's what to watch for:

The shell game. Towns have several taxing funds. In this game, they increase taxes in the general fund, the largest, and offset that with reductions in lesser-noticed funds with surpluses, such as garbage, to stay within the cap. The problem? Your taxes created that surplus, too, so you already might have been paying too much.

Reserve fund changes. Most towns mandate that reserve funds stay above a certain percentage of the budget. Bond rating agencies like that. But it's easy to quietly lower that percentage, tap reserves again and avoid hard decisions.

Optimistic predictions. Too-rosy projections of sales and mortgage recording tax revenues produce balanced September budgets that fall apart later when reality bites.

Don't bother looking for some real, if painful, ways to make ends meet. You're as likely to see those as you are to drive the length of the LIE without once tapping the brakes. The tax cap was designed to force governments to consider those options eventually. But we're probably not there yet.

Among them: trimming patronage lard and looking hard at labor contracts that might have been politically expedient but fiscally unwise.

Huge savings also can be found by sharing services. Do we need town and county fire marshals? Can't everyone use the same computer system and share one municipal IT department? Why not consider our roads one big system and have one highway department? And why provide veterans' services at every level of government? Goodness know we must help our vets, but can't we designate one level to do that?

In some respects, the tax cap has changed the way government operates. It's made the budget process more public, forced leaders to explain their decisions and increased the pressure to keep taxes down. But it has not succeeded in the bigger task of restructuring government itself. Yet.

Michael Dobie is a member of Newsday's editorial board.