'Tough love' needed in absence of federal rescue

“The state comptroller’s office is auditing Mount Vernon, where details of the city’s finances have been murky for at least the past two years, and infighting continues …” stated a Journal News story on Feb. 23. The anticipated deliverable of the audit may follow formatted examples similar to those published on the state comptroller’s web site on March 26 under “municipal audits.”

Here are two excerpts:

• “City officials did not segregate the duties of the clerks inputting payroll or implement compensating controls.”

• “The board did not appropriately budget for certain expenditures and did not properly monitor spending during the year.”

These sample audit findings appear distant and tone-deaf juxtaposed to a $2 trillion federal rescue package passed by the U.S. Senate on the same day. The evolving and dramatic turn of financial events driven by the COVID-19 pandemic will hopefully persuade the comptroller’s office to shift its focus to generate an updated version of its “fiscal stress” indicator report to the City of Mount Vernon, and to many municipalities and counties in New York state, if they are to survive the aftermath of this crisis.

To be sure, the comptroller’s office deserves high marks for establishing a fiscal stress toolkit for local governments. According to the comptroller, “fiscal stress” refers to the difficulties in generating enough revenues to meet expenditures in the long term. And it measures a local government’s ability to balance its budget, pay its bills, keep its debt in check, and have some funds left over at the end of the fiscal year.

But even that fiscal stress toolkit appears dated in today’s COVID-19 pandemic.

As the epicenter of the coronavirus pandemic, New York state’s “stay-home” requirements created a ghost town in Times Square, and in every mall, Main Street and municipality. “In terms of the economic dislocation, I think it’s fair to say we are going to quickly surpass anything we saw in the Great Recession,” said Mayor Bill de Blasio.

In a move to get a jump on “flattening the curve,” to avert straining the state’s health care infrastructure, Gov. Cuomo suggested that “we can’t win on defense. We win on offense.” Those remarks should apply to the economic front as well. According to WAMC News, referring to the pending April 1 budget, state senate majority leader Andrea Stewart-Cousins said the entire spending plan has to be re-evaluated. “Every assumption has to be adjusted for the realities that we are in.”

Helping local governments (counties and municipalities) cope and deal with those new realities should be the subject of the updated COVID-19 fiscal stress report. Equally important to include in the report is the “tough love” and “kisses and sweeteners” to address the expense side of the budget.

How do you make personnel cuts in this setting? Compassion reigns supreme, and for good reason. The alternative then becomes unthinkable: raising taxes.

With New York having three of the highest property-taxed counties in the nation (Westchester, Rockland, Nassau), and with no real solutions to the SALT deduction cap, the governor’s decision to push the state’s filing deadline to July 15 may be a recognition of the people’s pain.

This lag in state revenues will no doubt necessitate some innovative budget responses, which local governments may attempt to emulate. Invariably, they will need some contour and structure. Moreover, opportunities to fill the broader $15 billion revenue budget gap — despite New York’s share of the recent $2 trillion federal relief package — are slim without a fourth federal rescue package that considers the proportionality of the devastation sustained by New York.

To make matters worse, the timeline for that aid is unclear.

This is where we can “win on offense” — but not flatting, but crushing the curve of ailing municipalities. Without the contour, structure and compliance timelines to guide local governments from the comptroller’s office, many of them — including my home city of Mount Vernon — will need the equivalent of COVID-19 ventilators to keep them from going under.

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