Meeting the Challenge: Mandate Relief

Rockefeller Institute and the League of Women Voters of NYS

October 2, 2012

The Projected County Fiscal Gap (AS OF SEPTEMBER 2011)

20092011

20132015

20172019

$24,000,000,000

$26,000,000,000

$28,000,000,000

$30,000,000,000

$32,000,000,000

$34,000,000,000

$36,000,000,000

$38,000,000,000

$40,000,000,000

Revenues

Expenditure

Annual Fiscal Gap = $6B

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State and County Budget Actions

• The State Budget Included:• A hard cap on the growth of annual county Medicaid Costs• Establishment of a Tier 6 in the Retirement System• Creation of a statewide fiscal agent in Early Intervention• Procurement Reforms

• County officials enacted significant spending cuts, workforce and revenue actions to lower the trajectory of spending and help close the fiscal gap.

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The Projected County Fiscal Gap

(After 2012-13 State and County Budget Actions)

$24,000,000,000

$26,000,000,000

$28,000,000,000

$30,000,000,000

$32,000,000,000

$34,000,000,000

$36,000,000,000

$38,000,000,000

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Revenues

Expenditure

2020 Annual Fiscal Gap = $4.2B

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Defining “Mandate”• A mandate occurs when the State or Federal

government directs a county to: Implement a program or provide a service (Medicaid,

welfare, child support collections, etc.) created and defined by the State/Federal,

Meet an environmental or labor standard, Construct/upgrade a facility (courthouse, jail, etc.) subject to

prevailing wage and Wick’s Law requirements, Provide a tax break or exemption, etc. In a typical county

anywhere from 15% to 30% of the value of all property is exempt from property taxes.

• A mandate usually requires a county to strictly adhere to rules set by the Federal/State government that defines the scope, eligibility, frequency of service, amount of benefit, etc. Counties have virtually no ability to control the costs of these mandates.

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Mandates Come in Two Forms

• Funded – On some occasions the State or federal government will provided all financial resources necessary to carry out the mandate (Food Stamp Benefits -100% federal reimbursement).

• Unfunded/Underfunded – usually, a mandate comes with partial reimbursement from the State or no reimbursement at all, leaving the cost of supporting the State mandate on local taxpayers (administering Food Stamps). Counties lost more than $300 million annually in

State administrative funding as part of State Budget cuts.

Annual Growth in Many of These State Mandates Has Exceeded Inflation

*State Budget Shifted 71% of SN cost to counties vs. 50%, while fully federalizing the cost of TANF which reduced costs to the State and Counties.** Excludes New York City pension costs of nearly $9 billion.

• Medicaid 2.5% (0% in 2015 and beyond)

• Pension Costs 31.0% (from 2009-13) • TANF/ Safety Net* 5.6%• Child Welfare 2.0%• Special Ed. Pre-K 8.0% • Early Intervention 7.7%• Indigent Defense 5.5%• Probation 6.2%• Youth Detention 6.9%

Eventually the math overwhelms any budget

• $7.5 Billion • $1 Billion** • $1 Billion • $825 Million • $640 Million • $330 Million • $300 Million • $390 Million • $90 Million

2012 Local Cost Annual Growth TrendsState Mandate

2013 Tax Cap Growth Limit vs.Cost Growth of 9 Mandates

$244M Cost Increase vs. Tax Cap $-

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$135,195,330

$43,790,541

$17,752,000

$17,582,400

Child Welfare ($5M)

Probation ($8M)

Special Education Pre-K ($17M)

Early Intervention ($5M)

Indigent Defense ($8M)

Youth Detention ($2M)

TANF/Safety Net ($18M)

Medicaid ($44M)

Pensions ($135M)

2013 Tax Cap Limit ($114M)

The 2012 Cost of the 9 Major Mandates

• In 2012 nearly $12 billion in local taxes (County and NYC) will be sent to Albany to support spending in the State Budget for 9 major mandates (does not include estimated NYC pension costs of $9 billion).

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Other Mandates Impacting the County Budget

• Some of the other mandates counties provide and fund include:

- Foster Care - Adoption Services - Domestic Violence Assistance- Adult Protective Services - County Jails - District Attorney - PINS- Community College Costs - Public Health - Elections - Rabies Control - Mental Health Service Coordination - Consumer Protection- Substance Abuse - Veteran’s Services - Supported Employment- Child Support Enforcement - Emergency Assistance for Families- Personal Care Assistance - Court Security

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The “Kitchen Table Math” Behind the County Property Tax Levy

The amount necessary to operate county government, including the total cost of locally defined services, plus those mandated by the State and Federal government

- Minus all revenues collected by the county including state and federal reimbursements (or direct aid), local fees, mortgage and sales tax, etc.

= This Equals the TAX LEVY, the amount that will be collected by property taxes largely to make up the shortfall in reimbursement from the State/Federal government.

The County Budget is:

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The Property Tax Levy in First Year of Tax Cap

• 50 counties met the cap

• 7 did not meet the cap

• 14 voted to override (7 as a precaution)

• How long can this trend continue? As mandates continue to grow and our revenues are restricted.

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Governing by Triage…

It’s what to cut and when. Counties are privatizing major assets and services, including:• County Nursing Facilities (3 closed or sold in

2012, 17 in jeopardy) • Certified Home Health Agencies (nearly 50

closed or sold in the last decade) • Mental Health Agencies (privatizing)

• Land, buildings, equipment.

What does it mean locally?

Rensselaer County (past five years)

State MandatedSpending

54%

Local Spending

11%

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A Reduced County Workforce

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 76,000

78,000

80,000

82,000

84,000

86,000

88,000

90,000

92,000

94,000

County Workforce

12 P e r c e n t D e c l i n e

*

* Does not include mid-year actions.

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…Triage Continues

• Depleting Reserves• Some counties will completely deplete available

reserves, others are close behind. Some at constitutional tax limit.

• Delay or Reduce Capital Construction and Maintenance

• Borrowing for operating expenses/pension costs• Reducing Payments to Not-for-Profits, Cultural

Institutions• Closing facilities

• Clinics, nursing homes, museums, parks, etc.

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Critical Relief by the State • The enacted State Budget provided some

positive first steps in County mandate relief: Takeover of the growth in county

Medicaid cost ($1.2 billion over 5 years) Pension Reforms – creation of Tier 6

($7.2 billion over 30 years) Early Intervention – statewide fiscal agent

reforms ($52 million over 5 years)

• Important, but this needs to be placed in context

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County Mandate Relief – In Perspective

Medicaid Payments

$1.2B in Lower Payments

Next states’ highest county contributions:California: $5 billion over five yearsArizona: $1.7 billion over five yearsFlorida: $1.1 billion over five years

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County Mandate Relief – In PerspectivePension Payments

The Challenge of Mandate Relief

• The need to avoid cost shifting among governmental units and enable local governments to provide local services under the tax cap.

• Mandate/program reforms must benefit all levels of government—state and local.

• There is a constituency behind every mandate.• We must engage these constituencies.