Maggie's big gamble 

Will Brooks' plan to change how we pay for Medicaid pay off?

The county is at a crossroads. In the next six months, decisions will be made here and in Albany that will determine the direction MonroeCounty's finances take, maybe for a long time to come. Inevitably, politics will drive whatever decisions are made. This is one case where that could be either a good thing --- or a very bad one. Democrats and Republicans at all levels of government could come together to craft a solid, lasting solution to the county's troubles. Or they could let their bickering plunge us into a nightmarish future.

So here's the problem: the county's revenue --- which mainly comes in the form of property and sales taxes --- is growing more slowly than the cost of the stuff it has to pay for. That's what finance people call a "structural imbalance," or what normal people call "living beyond your means." If your teenagers were doing that, you might nag them to stop buying so many video games or just cut off their cash flow.

But the county doesn't have that option. Close to 80 percent of its budget is spent on stuff the state says it must pay for (a big chunk of that is Medicaid). The remaining 20 percent includes things like the sheriff's department, parks, roads, and MonroeCommunityHospital. Cuts to these types of basic government services are painful to citizens and poisonous to politicians --- just ask Erie County Executive Joel Giambra.

"Do you want to live in that community?" Monroe County Exec Maggie Brooks rhetorically asked a bank of television cameras at a press conference April 13. Of course not. No one outside maybe the Cato Institute does.

Yet to avoid that outcome, county officials have to find either another way to curtail spending or a way to raise revenue. They decided to try a little of both.

After tortuously outlining the county's predicament at her press conference, Brooks announced her solution: raise the sales tax by three-quarters of a percent and opt in to the Medicaid "intercept" plan.

Medicaid is one of the fastest growing costs for counties all over New YorkState. Last year the state agreed that from now on counties only need to pay for their share of the program's cost in 2005, plus 3 percent of the program's growth each year. The rest is the state's responsibility.

And in case that wasn't enough help for struggling counties, the state included another option. It's called an "intercept," but that's just a fancy way of saying that the state takes a big chunk of the sales tax off the top, then covers the Medicaid bill for the county. In effect, the county's Medicaid bill goes away, and a significant source of revenue goes with it. All well and good.

But if the county only opted in to the intercept, here's what would happen: the city of Rochester and the rest of the county's towns, villages, and school districts --- all of whom rely on their share of sales tax as a significant source of revenue --- would sustain a severe, in some cases crippling, blow (see "The county's tax grab," April 5).

That's where the sales tax hike comes in. Under the current arrangement the county will receive about $127 million from the sales tax this year. The final numbers are still being determined, but if the county opted into the intercept, the state would take about $171.5 million. That leaves us $44.5 million short, and it has to come from somewhere. An additional .75 percent hike (that's three quarters of a penny on every dollar of taxable purchases) would generate about $75 million dollars in extra revenue, the county predicts. Brooks' plan would use that money to pay the state its additional $44.5 million, then split the rest among the county's municipalities according to the existing sharing formula. That means that instead of taking a hit, the city, towns, village and school district will actually see a little increase in revenue. The county will even get to keep a small amount, about $14.6 million.

This explanation notwithstanding, it's as simple and elegant a solution to some thorny problems as could be hoped for in the strange world of government finance. And there's no question that it would achieve Brooks' goals of long-term fiscal stability for the county while preserving a critical revenue stream for the municipalities.

But there's another wrinkle to this plan. For the intercept to be a good deal the amount of growth in Medicaid spending --- now capped by the state at 3 percent --- must exceed the growth in sales tax revenue. In recent years that's been the case, with sales tax revenue growing at a paltry 1.5 percent annually on average, according to County Budget Director Bill Carpenter. If that trend is going to continue, then this is a bargain that the county can't afford to pass up.

But what if, as everyone hopes, our region's economy turns a corner and begins growing steadily again? Carpenter points out that it would take years of sustained high growth to make up for a comparatively shorter amount of slow growth. In the meantime those shortfalls would have to be plugged in some other way, probably through draconian cuts. And if our local economy does start booming again, the county will still benefit, just not as much as it might otherwise. But even Carpenter acknowledges that in a way this solution is essentially a bet that we won't be seeing 5 percent growth in sales tax anytime soon. From the administration's perspective, you could call that simply being realistic.

From another perspective, that smacks more of pessimism than realism. Paul Haney, a Democratic Legislator who had Carpenter's job in the Tom Frey administration, doesn't like that kind of gamble.

"I would hope sure as hell that the last few years aren't the future of this community," he says. If they are, he says, then "we'd better get ready to close up shop. I would hate to think that's the long term prognosis for our economy.

"We're either committing ourselves to a future of mediocrity or we're giving up future growth," says Haney.

Kent Gardner, President and Chief Economist for the Center for Governmental Research, comes down somewhere between the two.

"It is a gamble, but it's a risk one way or the other," he told City Newspaper. "Things would have to turn around substantially for it not to be worth it." So does that means it's worth it?

"I still think it's open to interpretation," says Gardner. "The only question is: Do taxable sales grow more or less than 2.7 percent?" Well, do they? "The answer is it's probably a wash," says Gardner. "Maybe taking the deal is a little better in the short term."

But Gardner also says he likes to think of himself as an optimist. "Optimism in this case says we're going to grow as a community and therefore we're better off sticking with our sales tax revenue," he says before adding "I don't think anybody can be certain about it." (If you're wondering why Gardner used the figure of 2.7 percent, it's because the 3 percent cap set by the state isn't compounded. That means the rate of increase in the county's liability slowly "decays" over time --- to about 2.7 percent in 10 years.)

Regardless of your opinion of the sales tax intercept plan, there are other factors at play. Brooks' proposed solution exists only on paper and in a political vacuum. In the real world, there's a perfect storm of government and political interests converging on this decision.

In the wake of Brooks' announcement, the Democratic Caucus held a press conference calling the plan "ill-conceived" and "troubling" --- because sales taxes disproportionately affect the poor and lower middle classes --- and they labeled Brooks and her allies "tax and spend Republicans." Mayor Bob Duffy publicly expressed his doubt.

And any sales tax hike would have to be approved by the Democrat-controlledState Legislature, whose local delegation, led by David Gantt, is less than exuberant about the plan. There's even talk among local politicians that because of the county's unique sales-tax sharing formula and the murkiness of the intercept law, an act of the State Legislature might be necessary for that too. For once, Brooks is in a position where she may not control enough of the cards to force an outcome.

It doesn't help her situation that in a set of dueling press conferences she was more or less drawn into a feud with Democrats in the CountyLegislature. In one of the few smart political moves that caucus has made recently, the Dems unveiled their own proposal for keeping the county fiscally stable a day before Brooks announced hers. And to make matters worse for Brooks, the Democratic proposal called for neither sharp cuts nor any tax increases.

Central to the Democratic proposal is a plan to charge towns to use the sheriff's road patrol. (All county taxpayers pay for the patrol, but it's only used by towns without their own police forces.) According to the Democrats' estimates, city taxpayers --- who fund their own police department --- pay $3.6 million toward the cost of the road patrol. For Greece taxpayers that's $3.2 million, and for Brighton's, $1.6 million. Since each of those communities has its own police force, none is regularly patrolled by sheriff's deputies.

Brooks bristled at that notion.

"I think it's very divisive," she said at an impromptu press availability held in response to the Dems announcement. The community has "a long history of cooperation," she said, something such a move would undo. "It would put this community at war with one another," she said.

Brooks also says that if the county opted to charge municipalities for other services --- she cited Safety Net and MonroeCommunity College as examples --- that might disproportionately affect the budget of the city and inner-ring suburbs.

But Democrats contend that there's a fundamental difference between programs like MCC or Safety Net and the sheriff's road patrol. The former, even though they're used disproportionately by city and inner-ring suburbs residents, are available to anyone. If a student in Pittsford wants to attend MCC, they can. If a family in Wheatland falls on hard times, they can apply for Safety Net benefits. But residents of municipalities with police forces don't have regular access to the sheriff's road patrol, even though they pay for it.

When it comes to the road patrol, Kent Gardner sides with the Democrats. The existing arrangement where all the county's taxpayers pay for the service "is something I've been complaining about for years," he says. "I live in Irondequoit; we're getting screwed."

Democrats also called for the county executive to ask the Monroe County Water Authority for a payment in lieu of taxes, advocated alternatives to incarceration and programs to reduce recidivism among county jail inmates (a significant cost to the county), and a handful of other cost-saving proposals.

Responding to the Dems' proposal Brooks said she was disappointed that it contained many suggestions the Democrats had given during the budget workshops held in the past few weeks.

"Really, in terms of new ideas there's not much," she said.

But Dems counter that their ideas, and even those of their Republican counterparts, were never taken seriously by the administration in the first place.

"At some point we've got to change how county government operates," says Haney.

Perhaps this is that point.

Now that Brooks will have to lobby for her plan in Albany, Democratic legislators may have a rare opportunity to use their influence with key Democrats in the Assembly to force Brooks to discuss some of their proposals. For example, they might ask David Gantt to insist that Brooks consider their sheriff's patrol proposal in exchange for his support of the sales tax hike. (And let's face it, without the support of the area's Democratic Assembly delegation, of which Gantt is the elder statesman, Brooks' proposal is dead.) Such a compromise, assuming it involved the city and other municipalities, could bring a solid solution to some difficult problems; it'd be a true "community solution," which is what Brooks is touting. On the other hand, a political pissing match --- with state lawmakers forcing Brooks to craft an austerity budget --- could prove disastrous for this community for years to come.

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