It was never easy being an official responsible for running a village’s finances. These days, however, the position seems especially susceptible to an occupational hazard in the extreme.
We call it budget whiplash.
Roll back the calendars to early December 2018. Everything seemed so placid and, dare we say, predictable, in the budget world. Department officials in Scarsdale had put together their annual spending and revenue wish lists for the 2019-20 year, having reasonably clear expectations of what funds were going out and what funds were coming in. The budget plan contained caveats and contingencies, as is normal practice.
Then, a surprise.
In January, Gov. Andrew Cuomo proposed the New York state budget for the fiscal year beginning April 1 with a potential change that has caught local officials off guard. Hardly anyone saw it coming.
Buried in the details of the governor’s $175 billion budget plan was a proposal to make cuts in a program that funnels money to towns and villages. Called Aid and Incentives for Municipalities (AIM), this budget item, though relatively small, helps local governments make ends meet and keep taxes at bay, which is especially important, given the state-imposed caps on local taxes. AIM funds are unrestricted, meaning the village or town can use them to shore up budget lines for projects or to cover unfunded mandates.
No one can say for certain if this part of the governor’s plan will stick or is merely posturing to look tough on fiscal issues (the governor also is proposing to make permanent the 2 percent tax cap). Municipal leaders weren’t taking any chances, either way. They raised their voices in protest.
In response, the governor last week revised his plan. He said he would “restore” the AIM program by using new revenue from a proposed internet sales tax starting in June. But with this new plan, Cuomo is shifting the burden of funding for AIM from the state to the counties, which will be responsible for collecting and distributing a share of the new internet sales tax.
We are not fooled by this and we doubt the workaround will be reliable. If internet shopping dips, the anticipated revenue stream will not materialize. The idea also robs Peter (the county) to pay Paul (the state). There should be a full restoration of AIM, not smoke and mirrors to shift the cost and force counties to pay for the state’s unfunded mandates.
Not knowing whether they can count on AIM or an alternative source of funding next year, Village Manager Steve Pappalardo said the village was “very conservative in our budget estimates.” According to Pappalardo, a member of the executive committee of the Westchester Municipal Officials Association, AIM funding provides revenue that Scarsdale counts on every year — about $203,110 last year and $186,500 estimated for 2019-20.
The Town of Greenburgh receives almost $500,000 a year from the state — about 1 percent of its tax rate. “New York State is encouraging local governments to comply with the tax cap. If they keep cutting financial aid it makes that more difficult,” Town Supervisor Paul Feiner said.
Yet another potential new budget factor is emerging, this time from the county. But unlike the surprise described above, this change could actually be a net positive for our local governments.
To help address Westchester’s long-standing budget imbalances, County Executive George Latimer is seeking state approval to raise county sales taxes by 1 percent, to 8.38 percent. If the governor and state lawmakers permit this change in the state budget, Latimer said last week he will propose keeping the county property tax flat for two years. His 2019 budget already includes a 2 percent property tax levy.
Proceeds from the county sales tax already generate hundreds of thousands of dollars for local governments and the school districts. The increase, if approved, could mean higher revenue levels that could start to flow into local coffers later this year.
Sales taxes are not a panacea, of course. They disproportionally hurt seniors and other lower income residents. Local officials should support the county sales tax increase only if it exempts food, clothing and other necessities. But by taking pressure off property taxes, at least in the near term, the county sales tax increase is finding support among municipal leaders like Pappalardo.
For now, it’s important to remain cautious for a number of reasons. For one, the county executive’s proposal is still in the discussion stage and more changes are possible. For another, sales tax income is notoriously volatile. During the last recession, for example, many areas saw it plummet dramatically. So, no municipality should hang its hat on that component.
But they might want to hold onto their hats to weather further budget surprises this year that might still be blowing their way.