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.
This article appears in Apr 26 – May 2, 2006.
