August 1, 2012
DiNapoli: Local Governments Facing New Fiscal Reality
Most Cities in Stress, Struggling to Keep Financial Houses in Order
The Great Recession has created difficulties for many local governments that continue to threaten their fiscal health, according to an analysis issued today by State Comptroller Thomas P. DiNapoli. The study found that nearly 300 local governments had deficits in 2010 or 2011 and more than 100 had inadequate cash on hand to pay their current bills.
The analysis warns that some municipalities and school districts have become increasingly vulnerable to unanticipated expenses such as emergencies, mandates and unexpected spikes in the costs of goods and services. The report is based on an analysis of data from 4,000 local governments and recent audits.
“Our communities are facing a challenging economic reality,” DiNapoli said. “There are no quick fixes and any future economic shocks could have a devastating impact on some communities. Difficult choices are ahead but they start with better long-range planning and an honest conversation about the numbers. By preparing more accurate and realistic budgets, local officials will be better able to deal with these issues without overburdening taxpayers.”
DiNapoli’s Division of Local Government and School Accountability collects and analyzes the annual financial reports from local governments, school districts, public authorities, fire districts and other special taxing districts.
Although cities seem to be most at risk – due to population loss, declining or stagnant property assessments, high poverty rates and older and decaying infrastructure – the analysis shows all local governments have been impacted by shortfalls in expected revenues since the onset of the Great Recession. For example:
All told, local governments suffered an actual decline in revenues of more than $400 million during the recession. The result has been reduced spending on public safety, health and recreational programs, garbage collection and transportation.
The analysis also highlighted a number of issues identified in 60 audits released during the 2011-12 fiscal year by the Comptroller’s office (charts of local governments’ performance are included in the report). These include:
DiNapoli urged local governments to institute effective multi-year financial planning processes to identify structural imbalances between revenues and expenditures, and use excess fund balances for immediate needs such as paying off debt.
For a copy of the report visit: http://www.osc.state.ny.us/localgov/pubs/fiscalrealities2012.pdf