Gov. Cuomo has OK’d a bill allowing suburban Rockland County to issue bonds to cover a portion of its huge budget deficit — without the customary mandate for a state takeover of the troubled county’s finances. In letting Rockland buy time with borrowed money, the governor is all but inviting New York’s other troubled counties and municipalities to push for similar treatment.
With the worst credit rating and second highest per-capita debt of any New York county, Rockland has an accumulated deficit of $125 million. Under a bill Cuomo signed this week, the county can now issue 10-year deficit bonds totaling $96 million — equivalent to roughly 90 percent of the county’s yearly property-tax levy.
The only string attached is a requirement for state Comptroller Thomas DiNapoli to look over the county executive’s annual budget submission and to recommend any changes he thinks are needed to the county legislature, which is supposed to make “adjustments consistent with” DiNapoli’s recommendations.
But an annual review by the comptroller is no substitute for an actual takeover of county finances by an active, focused and professionally staffed state control board — a board armed with the power to veto contracts, freeze salaries and otherwise insist on the kind of tough decisions that local officials have been avoiding.
This oversight mechanism was pioneered by Gov. Hugh Carey in response to New York City’s fiscal crisis in the mid-1970s. Since then, state control boards or authorities have been created on a half-dozen occasions — temporarily taking over the finances of two of New York’s largest counties, Erie and Nassau, and two of its largest cities, Buffalo and Yonkers, as well as of the small upstate city of Troy.
To be sure, control boards are no cure-all. Yonkers, for example, came under state control twice in the 1970s and ’80s, yet now again faces a serious budget deficit. The Nassau Interim Finance Authority was created back in 2000 and took control of that county’s foundering budget in 2010 — and Nassau remains a fiscal hot mess.
But while a period of state oversight is no guarantee of lasting fixes, Carey and his successors viewed control boards as preferable to the kind of outright bankruptcy filings we’ve seen in Stockton and Detroit.
Perhaps it’s time to reconsider that policy, though. The Rockland legislation is actually a big step backward — forestalling bankruptcy by handing local officials a shovel they might use to dig themselves into a deeper hole.
And it won’t stop there. A similar bill, authorizing the city of Long Beach to issue $12 million in deficit notes, has also passed the Legislature and should hit the governor’s desk soon.
While the Rockland measure is a decisive break with Carey’s more assertive approach, it’s not completely unprecedented. New York’s retreat from the Carey-era control-board model began in 2010, when then-Gov. David Paterson signed a bill allowing the city of Newburgh to issue $15 million in deficit notes.
Newburgh avoided having a control board, but its bailout bill did include seven pages of financial reporting guidelines and conditions — something largely missing from the two-page Rockland measure. The single-page Long Beach bill imposes no conditions at all.
In lieu of new control boards, the Legislature last year approved Cuomo’s proposal to create a state-level “financial restructuring board” for local governments. It can dole out added state aid to distressed municipalities willing to follow its advice and meet some rudimentary added financial-reporting requirements.
This fuzzy, strictly voluntary approach may win favor among local politicians who’d rather not lose control of their budgets. It’s certainly a relief to local unions — which will no longer need to fear a state-imposed pay freeze, even when their employers are in serious financial trouble.
But backing away from strong state oversight is not in the best long-term interests of New York’s most distressed local governments or the citizens who depend on the public services they provide.
The elephant in the room is Cuomo’s unwillingness to fundamentally reform the state’s collective-bargaining laws, which make it hard for local elected officials to restructure unaffordable contracts on their own. If he continues to steer clear of that, it may be time to adopt California’s hands-off approach to local insolvency: If a county or city in the Empire State is sliding toward bankruptcy, just let it happen.
Bankruptcy could at least provide a means of abrogating unaffordable contracts. And a modicum of market discipline might at least help fill the vacuum Cuomo is creating.
E.J. McMahon is president of the Empire Center for Public Policy, Inc.