Challenges Persist For Many Challenges Persist For Many New York CountiesNew York Counties
Presented by:
Robyn Kapiloff
Vice President/Senior Analyst
Presented by:
Robyn Kapiloff
Vice President/Senior Analyst
March 30, 2005March 30, 2005
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New York County Operating Paradigm
On average 75% of costs are fixed or mandated
Strong unions
Pay 25% of most Medicaid services
Dependence on economically sensitive sales tax ranges from 20-40%
Contribute to a fully funded pension system
Decreasing revenue raising flexibility
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As a result of the high percent of fixed and mandated costs (75% on average)
NY Counties have a poor turning radius, limiting ability to respond to revenue constraints or expenditure pressures
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Public Safety unions generally have, and often use, binding arbitration
More discretion with non-public safety employees
Relative to other states, considered very strong in NY
Strong Unions
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Medicaid
NY Counties pay 25% of most Medicaid services
By far the largest local share in the nation
Annual growth has averaged 15% over last 3 years for counties as a result of both expanded eligibility and growth in the cost of prescription drugs
Movement to cap county cost appears to have momentum in current state budget negotiations; state did pick up one program in SFY2006 providing limited budgetary relief
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Sales Tax Dependence
Revenue stream impacted by economic downturn exacerbating expenditure pressures
State ability to adjust payments retroactively detracts from cash flow predictability
23 (of 57, excluding NYC) counties have increased rate and relative dependence over last 3 years
Average rate now 3.8% vs 3.45% 3 yrs ago; 5 counties now exceed 4% local share, long considered the max
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NYS Pension System
Pension payments tied to stock market performance
Due to system losses, exponential growth in system contributions
State froze rate (4.5% of payroll) to ease in increases in 2004; 2005 rate averaged 12.5%--not expected to decline markedly in near term
State allowed bonding of a decreasing percent of expense in FY2005-2007 & changed payment due date
FY2005 costs to decline modestly; those who bonded in 2004 will not benefit from cost decrease
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Deteriorating Revenue Raising Ability
Property taxes are limited by NY State in a manner that favors those with taxbase growth
Counties with limited, or negative, growth have begun to approach their legal limit-with 5 counties very close to exhausting this taxing margin
Counties have raised various other fees and taxes to the max limiting future flexibility
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How early/aggressively they responded to expenditure pressures and slow-down in revenue growth
Political ability/willingness to pursue additional revenues
Reliance on one-shots
Counties have fared differentlyDepending upon a number of factors:
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Rating Changes Last 2 Years
16 Downgrades
4 counties currently on Watchlist for potential
downgrade
15 counties currently have a negative outlook
7 Upgrades
Largely Reflecting Story Credits (includes 3 Nassau
County Upgrades)
1 county currently on Watchlist for potential upgrade
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Where are we now?
Some counties have turned a corner as a result of:
Increases in recurring revenue
Reduction in force
Vacancy management
Expenditure reductions
Conservative budgeting and strong budget management
Other counties continue to face challenges to structural balance and financial flexibility:
Structural imbalance depleted reserves
Mounting losses reduced liquidity
Reliance on one-shot revenues and aggressive budget assumption