New York Governments Fear Detroit-Like Fiscal Cliff


Half the school crossing guards in Auburn lost their jobs, Fire Station No. 7, which has served Syracuse since 1954, will close, and Yonkers can’t afford full-day kindergarten as the fiscal crisis that sent Detroit into bankruptcy this month hits New Yorklocal governments and their taxpayers.

New York’s local governments face unaffordable public worker payrolls and growing pension costs while employers and residents who pay for it flee the Rust Belt. Union protections and Albany’s unfunded mandates of programs also handcuff local governments.

Experts in municipal finance make the case that Detroit and today’s New York State lack what brought New York City back from the brink of bankruptcy in the 1970s: powerful political will.

Detroit “was a political system unwilling to address the problem in a constructive fashion. The world has changed,” said Richard Ravitch, who helped save New York City from financial disaster in the 1970s. He and former Federal Reserve chairman Paul Volcker have spent recent years studying and warning about the emerging local government crisis nationwide.

Ravitch said New York won’t likely face bankruptcies like Detroit because of laws and procedures unique to the state, where the pain for residents would come in the form of state-ordered financial control boards.

New York State, cities including Binghamton, Buffalo and Yonkers, and counties including Rockland, Monroe and Nassau must take bold, unified action the way state and local leaders did to rescue New York City in the 1970s, Ravitch said.

Albany’s lack of will for such a unified front to make difficult decisions against powerful special interests was clear when the state faced its crisis beginning in 2009. Labor unions ran heart-wrenching ads against Gov. David Paterson, one of his own commissioners rebelled against his layoffs, and Democratic leaders trashed the fiscal recovery plan Ravitch compiled because it included short-term borrowing, a political pitfall.

Today, Syracuse Mayor Stephanie Miner continues to seek a local government summit meeting with officials from across the state and Gov. Andrew Cuomo to share and propose solutions. So far, Cuomo hasn’t agreed.

Cuomo urges local governments to slash and streamline the way he did to tame the state fiscal crisis that once pushed deficits to more than $10 billion. He has also offered a tool to limit crushing public pension costs now, though at a cost in later years. Some local officials already dismissed that as risky borrowing.

Albany raised $2 billion a year with a millionaire’s tax to help address its crisis. But New Yorkers already pay some of the nation’s highest property taxes, and a state-mandated 2-percent cap on property tax growth makes raising taxes even harder.

Cuomo has also created a panel of government finance experts to help local governments deemed to be “distressed” restructure.

State Comptroller Thomas DiNapoli created an early-warning system for cities, towns and counties facing fiscal distress. He lauds individual efforts but thinks there should be closer cooperation.

But Yonkers Mayor Mike Spano said the state and federal government have “walked away” from cities. “There needs to be a summit on cities,” he said. “I’m not ready to say we’ve failed yet.”