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New York Post

 

Gov’s unhelpful help: Insolvent local gov’ts still trapped

August 19, 2013

By Nicole Gelinas

In mid-May, Gov. Cuomo supposedly solved a big problem: what to do about New York’s insolvent cities, towns, and counties. Yet Cuomo designed his new state-run “financial restructuring board” to be impotent when it comes to the biggest problem for broke local governments: labor costs.

Cuomo said that New York needs a new approach because the old approach — a “financial control board” — isn’t doing the trick anymore. But his answer can’t do a better job.

The old-style control board — what New York City got in 1975 — worked this way: When a local government got in so much trouble that it couldn’t pay its bills, it went to Albany for help, usually the ability to borrow under a state guarantee. Albany then took away the municipality’s budgeting authority and imposed cost cuts.

But the problem that the control board solved for Gotham is different from what municipalities face now. The city had a short-term budget problem: Its immediate costs — salaries, social services and debt — exceeded its immediate revenues.

So a combination of freezing and deferring these obligations to the future — mostly not eliminating them — worked. After a period of belt-tightening, with some “bridge loans,” once the ’80s Wall Street boom got going, the city could cover its expenses (including payments on those loans).

Today’s problem is different. It’s not immediate costs that cities and towns can’t afford, but past ones — pensions and health-care costs for retired workers. And neither a control board nor Cuomo’s restructuring board lets a locality freeze or cut those expenses.

Mind you, state policies (and local officials who use state policies as an excuse) are mostly to blame for these soaring retiree costs. State law governs local pensions; local governments don’t decide at what age and with what benefits their workers can retire — they just pay the bill to Albany’s pension funds.

Plus, thanks to Albany’s voting of the Triborough Amendment into state law in 1982, local governments can’t get out of bad labor contracts, including health-insurance agreements with workers, by letting them expire. “Expired” contracts continue indefinitely, giving unions no reason to negotiate.

Mayor Bloomberg pointed to this law in his recent warning speech on Gotham’s current finances. He said that “municipal unions are working under contracts that were due to expire three and four years ago. ... The hours, wages, benefits and raises that are built into those contracts continue.”

The Empire State’s recent experience with control boards points up the shortcoming.

Long Island’s Nassau County is the richest county in New York. Yet in 2000 — after a boom decade in which tax revenues amply kept up with inflation — it needed a bailout. Then-Gov. George Pataki and Albany lawmakers stepped in, creating the Nassau County Interim Finance Authority, or Nifa, to oversee Nassau’s budget.

But to avoid angering unions, Pataki (with the assent of county and local politicians) constrained Nifa’s powers: It can’t open up union contracts. (Under the US Constitution, nothing can void an existing contract except for federal bankruptcy — but the Nassau board can’t threaten bankruptcy.) Even when contracts expired, the Triborough amendment keeps their provisions in place.

Thirteen years and a boom and bust later, Nifa has failed: In 2011, Nassau still faced a $260 million deficit, more than 8 percent of spending. Even with police-officer ranks down 4 percent, spending on cops was up 43 percent. Spending on county pensions had quadrupled, to $114 million. Spending on public-worker health care had doubled to $272 million.

Cuomo’s new “financial restructuring board” won’t fix this problem. Towns that agree to “restructure” — it’s all voluntary — will get no help on their biggest costs.

The boards will stick to shepherding small changes, like exploring “shared services” across towns and reducing the number of elected officials. On health care, pensions and work rules, the boards can’t make unions do anything.

Cuomo’s fatal error: He only created a feel-good platform for cooperation. “It’s in everyone’s interest to make the kinds of reforms that we need,” he said in May.

But it’s not in unions’ interests. The needed reforms require them to give something up permanently, and experience has shown time and again that they just refuse. (And, again, thanks to Triborough, they don’t have to.)

Cuomo can help broke cities and towns — but only if he’s willing to alienate labor.

Albany should grant relief to all municipalities — by repealing the Triborough Amendment so that bad contracts can die natural deaths.

And for places where it’s too late, like Nasssau, he should invest financial-oversight boards with the option of declaring municipal bankruptcy so they can restructure big obligations, like retiree health care.

But under Cuomo’s “reform,” no one has reason to give up anything. Only taxpayers and citizens suffer.

Original Source: http://www.nypost.com/p/news/opinion/opedcolumnists/gov_unhelpful_help_EFvWVLa44dk5n2we5R7r9K

 

 
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