DiNapoli: Local Governments Face 'Profound' Fiscal Challenges

Nick Reisman

New York State of Politics

Jul 9, 2020

Local governments are facing a "profound" fiscal reckoning from the economic crisis created by the pandemic, with the typcial county government losing millions of dollars in revenue, a report released Thursday by Comptroller Tom DiNapoli found.

The loss of revenue from sales and property taxes, as well as from state aid, will likely lead to public worker layoffs and service reductions.

"The effect on the bottom lines of New York’s local governments from the loss of these revenues will be profound," DiNapoli's report found. "Without substantial help from the federal government, many local governments will likely be forced to make painful cuts to services, even if they have no additional costs for providing new services related to COVID-19."

A "typical" New York county will lose $34.9 million in sales tax revenue this year, as well as $21.5 million in state aid, which Gov. Andrew Cuomo has indicated could be cut by 20 percent if federal money is not made available.

For now many local governments are in a form of limbo, awaiting word on whether the federal government will provide any direct aid or if the state will follow through on cuts in order to make its own balance sheet work.

Federal aid was approved for local governments in April, about $7.5 million, but that was meant to cover expenses related to the response to the pandemic. The aftershocks of the resulting recession due to the pandemic are expected to last far longer, however.

New York's unemployment stood at 14 percent in May, just as businesses began to gradually unwind an economic shutdown that froze most commerce in March.

"Local governments may be able to take steps to help mitigate a few of these risks," the report found. "Some are already employing creative cost-containment strategies to provide new services with existing funding, such as redeploying existing staff to meet extraordinary new needs. The necessity for social distancing has also motivated local governments to utilize work-from-home options, as well as expand online and other innovative methods of providing services."

But typical weapons may not be available. The uncertainties surrounding the pandemic has made long-term planning for government sifficult.

"Multiyear financial planning, while more difficult in times of crisis, is an important tool for managing risk in the budgeting process, including how and when to use fund balance and reserves," the report stated. "However, these are exceptional circumstances, and many local governments will only be able to do so much before taking more drastic measures that will have a major impact on local services. Indeed, many local governments have already begun announcing impending budget gaps and associated staff layoffs."