2018 Financial Condition Report

For Fiscal Year Ended March 31, 2018

Local Government

Real Property Taxes and Sales Taxes Are Major Local Revenue Sources

  • Real property taxes are the single largest source of local government revenue in the State, making up 44 percent of the total in 2016. They have the advantage of being predictable and relatively easy to administer.
  • Some governments are even more dependent on the property tax for their revenues, including fire districts (94 percent), school districts (55 percent), towns (54 percent) and villages (49 percent).
  • Sales taxes are also an important revenue source (12 percent of total revenue) and the largest single revenue source for counties (32 percent). They are more volatile than property taxes, with strong growth in good economic times and declines in recessions.
  • From 2014 through 2016, sales tax collections had been growing about 3 percent per year. In 2017, growth improved to 3.9 percent. For the first six months of 2018, growth was 6.0 percent over the same period in the prior year.
Revenue by Source, Fiscal Year Ending 2016

Property Tax Levy Growth Has Been Trending Lower

  • Annual increases in property tax levy have been below 3 percent since 2010, significantly less than pre-recession growth. Since 2015, increases have been below 2 percent.
  • The Real Property Tax Levy Limit (commonly called the “tax cap”) was enacted in 2011 (for fiscal years beginning 2012) in an effort to temper growth in real property taxes.
  • Each local government’s tax cap calculation involves a multi-step formula, but generally the law limits levy increases to the lesser of 2 percent or the rate of inflation, with some exceptions. The law also includes provisions for a local government to override the tax cap.
  • Notably, inflation was below 2 percent between late 2013 and early 2018, after which, tax levy increases were once again capped at 2 percent.
Property Tax Levy Growth, 2007 through 2017

Education and Employee Benefits Account for Half of Local Government Expenditures

  • Education made up 31 percent of total local government expenditures for the 2016 fiscal year ($24.9 billion). Most of this is school district spending on primary and secondary education.
  • Employee benefits accounted for another 19 percent of local government spending ($15.6 billion). This is the fastest growing segment, increasing 53 percent over the 10-year period ending 2016, compared to growth in other expenditures of 20 percent.
  • In 2016, total local government expenditures were $81 billion. Counties had $24.6 billion in total expenditures, cities (not including New York City) had $4.8 billion, towns had $7.6 billion, villages had $3.0 billion, fire districts had $0.8 billion and school districts had $40.1 billion.
Expenditures by Function

Fiscal Stress Most Common for Counties and Cities

  • The Office of the State Comptroller analyzes the financial condition of each municipality and school district through its Fiscal Stress Monitoring System, which combines a number of financial indicators into an overall score intended to measure entities’ budgetary solvency. 
  • In 2017, 2.9 percent of all municipalities and school districts (63 of 2,138) were in a fiscal stress category. Of these:
    • 14 were in significant fiscal stress;
    • 17 were in moderate fiscal stress; and
    • 32 were susceptible to fiscal stress.
  • In 2017, the municipalities most likely to be in fiscal stress were counties (17.9 percent) and cities (14.5 percent), while the least likely to be in fiscal stress were towns (1.1 percent) and villages (2.0 percent).
  • Only 3.9 percent of school districts were in fiscal stress in 2017, but they accounted for 26 of the 63 stressed entities.
Municipalities and School Districts in Fiscal Stress by Class