State Comptroller Thomas P. DiNapoli is sounding the alarm that the impact of the coronavirus on businesses has "decimated" local sales-tax revenue this year and is "blowing holes in the budgets of municipalities" across the state.
"Just as our Main Street small businesses can't rebuild alone, our local governments don't have the means to do this themselves," he stated in an Oct. 6 report documenting the deterioration of municipal finances across the state. "Direct aid from the federal government is needed to help our communities recover," he added.
Trump: Ice the Stimulus
That same day, President Trump tweeted that congressional Republicans should discontinue negotiations on stimulus aid to state and local governments until after the Nov. 3 elections.
In a wide-ranging phone interview, the state's chief fiscal officer said both Democrats and Republicans in Congress should extend localities a lifeline in the form of the slimmed-down HEROES Act being advanced by House Speaker Nancy Pelosi.
"From my perspective, I thought this would have been resolved at the beginning of the summer," Mr. DiNapoli said. "It is mind-boggling that we are into the fall and it is still not resolved."
The city's and state's bond ratings were recently downgraded to reflect their fiscal struggles.
"Anytime you get a downgrade, it makes the cost of borrowing potentially higher, and it just underscores the need for this help from Washington," the Democratic Comptroller said. "The situation is not going to get better on its own, and clearly what the rating agencies are looking at is the fact that we have been managing through this with some short-term decisions on budgeting without any long-term plan because so much of the planning is tied to what we do or don't get from Washington."
Fed Chairman's Warning
His concerns were echoed in a speech made by Federal Reserve Chairman Jerome Powell Oct. 6 which warned that failure by Congress to pass a robust stimulus "would lead to a weak recovery, creating unnecessary hardship for households and businesses. Over time, household insolvencies and business bankruptcies would rise, harming productive capacity of the economy, and holding back wage growth."
Mr. DiNapoli said, "The shortfall is so significant from the economy being on stop and then on slow recovery all these months, there is no way we can make up for that revenue loss without additional Federal aid. Even if you do a combination of borrowing, tax increases, cuts, [those solutions] are all bleak and would come at a time when we really need to stimulate the economy. And, by the way, that's at a time when we are still supposed to be spending a lot of time on our public health emergency. It's not like COVID is behind us so that we can focus on these issues of government services and the economy—we are still in the middle of COVID as well."
He said the fiscal crisis was further complicated by how "totally intertwined" the budgets of the state, city and the Metropolitan Transportation Authority are.
"If no one entity gets through this without additional Federal help...what happens at the state level is we end up ...implementing the kind of cuts the Governor outlined earlier in the year: over eight billion dollars in cuts to local assistance, which transfers our shortfall to local governments including New York City," he said.
Villages Hit Hard
The squeeze is being felt most at the village and county level around the state, with those localities already "in rougher shape and [with] fewer revenue sources" to offset state cuts, Mr. DiNapoli said, forcing them to begin furloughing workers in advance.
He said that if no additional Federal support was provided, workforce cuts would be next even though "a lot of state agencies are...already very lean."
And while the Comptroller favors an early-retirement incentive to reduce layoffs, that was no "panacea" because "in the short run you may not save a lot of money, and depending on how you structure it, the people that retire are not necessarily the ones, from a succession planning point of view, you wanted to retire."
Above photo courtesy of Brecht Bug, via Flickr
We depend on the support of readers like you to help keep our publication strong and independent. Join us.