Imagine organizations with chronic money problems, leaders who like to dole out benefits to their cronies, and a role in the financial system that makes them too important to fail.
These may sound like banks, but they're actually villages, cities and counties all over New York. The recession, rising medical and pension costs, strong anti-tax feeling among voters, and deindustrialization have combined to push many places to the brink.
It's part of a national problem with big local implications. On Long Island, Nassau County has had a state financial control board since 2000. Now Suffolk faces yawning budget deficits and Long Beach is struggling. Nearby, the fiscal bug has infected Yonkers and Rockland County. Syracuse is the most visible of several older industrial communities upstate with serious budget trouble.
All over the state, communities are exhausting reserves, using one-shot maneuvers such as land sales to raise cash and, of course, tightening belts. If things get worse, any one of these places could go bankrupt, at least theoretically, and that could threaten the ability of other places to borrow, or at least raise the cost of doing so.
That's why New York's policymakers don't let bankruptcy happen. Instead, cities and counties at the brink get state supervisory boards. The Nassau Interim Finance Authority, for example, can freeze wages, reject contracts, and even halt spending and borrowing. These control boards are no panacea, however. NIFA has gone along with borrowing to fund county operations, a cardinal budgetary sin, in exchange for the promise of cuts that have yet to fully materialize.
The trends creating local budget problems aren't going away anytime soon. So it's imperative that New York act now to help counties and local governments avoid a crisis.
One great move would be to require local governments to adopt "generally accepted accounting principles" of the kind used in business -- and imposed on New York City as a result of its fiscal crisis in the 1970s. This would eliminate a lot of the stopgap measures politicians use to submerge fiscal problems from one year to the next, only to have the dam burst when the economy tanks.
New Yorkers already pay more local taxes than any other Americans, so closing deficits must mean cutting costs. Start with labor. Personnel accounts for at least three-quarters of municipal spending, and state laws help inflate this. When a union contract expires, a law known as the Triborough Amendment requires that the provisions remain in force, undermining bargaining. When givebacks are on the table, unions prefer to let contracts expire and wait for better times. New York State is now littered with such expired agreements still producing raises.
Health care inflation is driving government labor and Medicaid expenses skyward. The counties in particular need relief from Medicaid, which in most other places is covered entirely by the state and federal governments. (Albany recently agreed to pay for Medicaid growth, which will provide some relief over time.)
Soaring pension contributions are another problem. Albany recently cut pension benefits for local public employees -- but only future hires. The state constitution bars changes for current workers.
While cities often are victims of factory closings and the like, counties often make their own troubles. The woes of Nassau and Suffolk, for example, won't ease until the cost of policing, inflated by rigid work rules, is brought under control.
Much is made of easing costly state mandates. That can help, but it's only part of the solution -- and still leaves taxpayers with the tab, since whether Albany or city hall writes the check, taxpayers pay the bill.
Ultimately, communities and their elected leaders must make tough choices -- for themselves -- about what mix of cuts and higher taxes they can live with. Chances are, both are in the offing.