New York State localities’ unreserved fund balances are less than half recommended levels, the Office of the New York State Comptroller has reported.
In fiscal year 2011, the most recent year where there is data available, fund balances for these localities were 7.0% of operating expenses. The office excluded New York City, school districts and fire districts from this measure. “The Government Finance Officers Association has generally recommended that local governments keep about two months of operating expenses in cash,” according to the office’s 2012 Annual Report on Local Governments. This would be 16.6%.
The unreserved fund balance went down every year from fiscal 2006 to fiscal 2011, sliding from 9.7% to 7.0%, a 28% decline.
“Despite their best efforts, there are some local governments that may be dangerously close to fiscal crisis and in need of a viable plan to substantially improve or at least better manage their situation,” the report stated.
During the period from fiscal 2006 to fiscal 2011 local government expenditures grew in nominal terms by 17.4%, the report noted. By comparison, revenues grew in nominal terms by only 15%. Inflation during this period was about 12%.
The state’s town’s had the worst divergence between expenditure growth and revenue growth. Whereas their expenditures grew 12.9% in the period, their revenues increased only 7.1%.
Much of the increase in expenditures in the period was due to increases in mandated expenditures for health care and benefits, said Brian Butry, spokesman for Comptroller Thomas DiNapoli.
Localities have been forced to cut a variety of government services. From 2008 to 2011, “at the county level, cuts to health, cultural and recreation programs totaled $265 million. At the city level, cuts to public safety and garbage collection totaled $76.22 million,” the report stated.
“Nearly 300 local governments ended fiscal years 2010 or 2011 or both in a deficit situation,” the report noted.
“The Great Recession has certainly had a sustained negative impact on local budgets,” DiNapoli wrote in a preface to the local government report. “In some cases, particularly for our upstate cities, that impact has exacerbated long-term systemic fiscal difficulties resulting from decades of population decline and loss of manufacturing jobs.”
To address the localities’ fiscal stress, DiNapoli plans to launch a local fiscal monitoring system this winter. Those localities with problems can be identified and actions taken before a “full financial crisis develops,” DiNapoli wrote.