2016-2017

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LOCAL GOVERNMENTS time. 39 The academic literature on consolidation in the United States and internationally found mixed results on whether consolidation resulted in cost savings, concluding that “overall, the literature indicates that there is no compelling evidence for consolidation except as warranted on a case-by-case basis.” 40 There are indeed instances where consolidation may be a way to reduce costs, and there are often other good arguments for consolidation, such as equity in services between different municipalities. But as a response to the fiscal strain the state has placed localities under, “consolidation” is hardly an adequate answer. Many New Yorkers face an unmanageably high property tax burden. But, the property tax cap is the wrong solution to the problem. Increasing the state share of state/local responsibilities is the main way the problem should be addressed, matched with targeted relief through an improved property tax circuit breaker to those truly straining under a tax burden, since STAR and the new property tax rebate checks do not target property tax relief where it is needed most. The property tax cap should be removed entirely. If, however, the property tax cap is not removed, it should at a minimum be amended. Because of low inflation, the property tax cap will be 0.12 percent this coming year instead of two percent. This will result in the loss of hundreds of millions of dollars to school districts and local governments at a time when they are already stretched thin. The property tax cap currently contains exclusions for a small portion of local pension costs, PILOTs, BOCES capital costs and settlement expenses arising from tort actions—although the exemption for PILOTS and BOCES capital costs have yet to be implemented. Several additional exclusions would make just as much sense. Among them: emergency expenditures resulting from damage to municipal infrastructure or equipment, expenses related to capital improvements for local governments, infrastructure investments intended to enhance the economic development capacity of a community (such as improvements related to municipal water, sewer, or transportation), and costs related to increased enrollment in schools (especially in high-needs urban school districts). In addition, the property tax cap should be amended to allow for a simple majority override, as is the case with a similar cap in Massachusetts, in place of the current requirement of a 60 percent supermajority. This makes particular sense in the case of school districts, where the state should also not penalize districts if an override attempt fails. 39 G Homsy, B. Qian, Y. Wang and M. Warner, “Shared Services in New York State: A Reform that Works, Summary of Municipal Survey in NYS,” (Ithaca, NY, Shared Services Project, Department of City and Regional Planning, Cornell University, 2013). 40 Mark Holzer et al, “Literature Review and Analysis Related to Municipal Government Consolidation,” Rutgers School of Public Affairs and Administration, May 9, 2009. 50 | Fiscal Policy Institute
A Shared Opportunity Agenda The 2017 Executive Budget takes some very positive steps in acknowledging and addressing the needs of struggling working class families in New York State. Proposals to increase the minimum wage, provide paid family leave and address poverty and homelessness are all welcome additions to this year’s budget proposal. In particular, the governor has shown great leadership and vision in forcefully advocating for a first-in-the nation statewide $15 minimum wage. In many critical human infrastructure investment areas, however, rigid adherence to a two percent spending cap is blocking real progress. The following are a series of recommendations to bolster New York’s economy and to ensure more broadly shared prosperity. Reduce Income Inequality AID THOSE IN POVERTY AND BUILD THE MIDDLE CLASS • Increase the Minimum Wage Adopt the governor’s proposal to enact a statewide $15 statewide minimum wage phased in over a period of years (reaching $15 in 2018 in NYC and 2021 in upstate). To ensure that all workers benefit, increase funding in human services contracts and change Medicaid reimbursement rates that apply to home health care, workers providing services for the developmentally disabled, and others. Medicaid and other public assistance savings and increased tax payments will help offset some of the budget costs. If the state minimum wage is increased to $15 an hour as proposed by the governor, the state should also index the higher minimum wage for inflation annually thereafter, and eliminate the separate and inferior treatment of tipped workers. • Increase the State Earned Income Tax Credit The state EITC is currently set at 30 percent of the federal EITC; increasing it to 40 percent would help lift many hard-working families out of poverty. State EITC benefits should also be expanded to aid childless workers ages 20-24 and those 65-66, and to increase amounts for childless couples. Adopt the executive proposal to make permanent the Earned Income Tax Credit provisions that apply to non-custodial parents. • Enact Paid Family Leave Insurance The governor’s proposal to provide 12 weeks of job-protected leave for all private sector workers is an excellent start. However, the wage replacement rate should be raised to 66 percent—the current proposal is that it start at 35 percent and rise to 50 percent, too low a New York State Economic and Fiscal Outlook 2016-2017 | 51
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A SHARED OPPORTUNITY AGENDA New Yor
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