Wednesday, September 9, 2009

"One-shots" or responsible use of a "rainy day fund"?

It's budget time in Schenectady County.

But this is a very tough year for governments at all levels: many sources of tax revenue are down due to the economy.

Sales taxes are a significant source of revenue for the county, but they are down this year. The county legislature is reluctant to raise property taxes and actually wants to cut them by 2%. Expenses continue to go up, especially for health care, a significant fraction of the county's budget. The financial market decline has also forced the county to increase its contributions to the state pension fund.

Unlike the federal government, state and local governments do not have the option to run operating deficits. So the county can't borrow to meet its operating needs. The state is also pinched and has cut aid to the county, creating even more stress on the county budget.

How to balance the county budget in such tough times? Federal stimulus money helps, but it's not enough. Essentially, the county has built up a "rainy day" fund through careful budgeting in the past to help provide for just such difficult years as this one.

The county manager calls this a "transition budget" that "bridges to recovery." The Democrats, who control the county legislature, say the budget maintains the "status quo," while still allowing for a property tax cut.

The Republican minority leader accuses the the Democratic majority of using "one-shots" for short-term political gain and would prefer to see sustainable spending cuts.

The Democrats respond that they've used fiscal restraint in the past to build up a surplus fund precisely for times like these.

Schenectady County using federal, surplus cash to keep taxes down
Wednesday, September 9, 2009
By Michael Lamendola
Gazette Reporter

SCHENECTADY COUNTY — Schenectady County will use federal stimulus and surplus funds to reduce the proposed property tax levy by 2.1 percent in 2010 while maintaining existing programs and services in its tentative $288 million budget, county officials said.

The proposed tax levy for 2010 is $65 million, a 2.1 percent decrease from the current levy of $66 million. The levy was $61 million in 2008, $58 million in 2007, $58 million in 2006 and $59 million in 2005.

County Manager Kathleen Rooney said the 2010 budget is “structured as a transition year budget,” using one-time only stimulus money to “bridge us to recovery.” County Legislator Philip Fields, D-Schenectady, chairman of the Legislature’s Ways and Means Committee, calls the budget “status quo.”

Minority Leader Robert Farley, R-Glenville, said the proposed budget is built on one-shot revenue gimmicks and contains no real spending cuts.

The tentative budget for next year is approximately $9 million more than the current budget.

It includes no layoffs but contains an early retirement plan targeted at full-time employees with 25 years or more of service. The county expects to save $300,000 in 2010 through this plan.

The county is using $7.3 million in federal stimulus money it is receiving this year and next and is taking $2.1 million out of its $35 million surplus funds account to reduce the tax levy.

The federal money is to offset Medicaid expenses. The federal government targeted Medicaid for stimulus money because it has become a large cost for local governments. Approximately $155 million of Schenectady County’s budget, for example, goes toward social services and other mandated programs. The county’s share of Medicaid is $32 million, which accounts for nearly half the tax levy. This cost has increased steadily since 2001, when it was $18 million.

The county will use the Medicaid stimulus money over subsequent years to deal with difficult budget cycles, said Fields: “We have to prepare ourselves for the next impact. Therefore, you have to set aside contingencies for such impacts.”

The county has built up its surplus fund over the past year through several one-shot revenue sources. These include $5 million in extra Medicaid revenue for the Glendale Home; a $1.9 million settlement from the Boston & Maine railroad, which owed back taxes to the county for at least six years; and $310,000 in special grants.

The county has also been able to save $20 million over the past six years by reducing the work force, implementing health care and prescription programs, such as allowing employees to purchase maintenance prescription drugs from Canada, reducing contractual costs and making changes in the child welfare management program.

Budget growth

Rooney said the $9 million increase in the budget is the result of several factors. The county in 2010 will pay an extra $2.9 million into the New York State Common Retirement Fund, for a total of $7.8 million. It lost $1.8 million in state aid and saw interest income and sales tax revenues decline by $1.3 million. Medicaid costs and public assistance costs increased by $837,000 and $244,000, respectively. Also, the county lost $250,000 when the state changed the way it reimburses counties to house state convicts in county jails. Other changes make up the remainder.

Farley said the county budget achieves the tax cut through the use of one-shot revenues and by overestimating sales tax and other government revenues.
“We will end up with even less revenue, not more. I am worried about the fiscal propriety of the budget,” he said.


Democrats said they have offered tax cuts in three of the past five years since taking control of the Legislature. This year’s budget contained an 8.9 percent increase in the tax levy. The levy increased 4.5 percent in 2008, was flat in 2007 and dropped by 1 percent in 2006.

Rooney said the county has contained the growth of property taxes. Between 2004 and 2009, the tax levy increase in Schenectady County averaged 27 percent while those of nearby counties increased an average of 43 percent, she said.

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