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Challenges Persist For Many New York Counties

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New York County Operating Paradigm. On average 75% of costs are fixed or mandated. Strong unions ... NY Counties have a poor turning radius, limiting ability ... – PowerPoint PPT presentation

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Title: Challenges Persist For Many New York Counties


1
Challenges Persist For Many New York Counties
  • Presented by
  • Robyn Kapiloff
  • Vice President/Senior Analyst

March 30, 2005
2
New York County Operating Paradigm
  • On average 75 of costs are fixed or mandated
  • Strong unions
  • Pay 25 of most Medicaid services
  • Dependence on economically sensitive sales tax
    ranges from 20-40
  • Contribute to a fully funded pension system
  • Decreasing revenue raising flexibility

3
As a result of the high percent of fixed and
mandated costs (75 on average)
NY Counties have a poor turning radius,
limiting ability to respond to revenue
constraints or expenditure pressures
4
Strong Unions
  • Public Safety unions generally have, and often
    use, binding arbitration
  • More discretion with non-public safety employees
  • Relative to other states, considered very strong
    in NY

5
Medicaid
  • NY Counties pay 25 of most Medicaid services
  • By far the largest local share in the nation
  • Annual growth has averaged 15 over last 3 years
    for counties as a result of both expanded
    eligibility and growth in the cost of
    prescription drugs
  • Movement to cap county cost appears to have
    momentum in current state budget negotiations
    state did pick up one program in SFY2006
    providing limited budgetary relief

6
Sales Tax Dependence
  • Revenue stream impacted by economic downturn
    exacerbating expenditure pressures
  • State ability to adjust payments retroactively
    detracts from cash flow predictability
  • 23 (of 57, excluding NYC) counties have increased
    rate and relative dependence over last 3 years
  • Average rate now 3.8 vs 3.45 3 yrs ago 5
    counties now exceed 4 local share, long
    considered the max

7
NYS Pension System
  • Pension payments tied to stock market performance
  • Due to system losses, exponential growth in
    system contributions
  • State froze rate (4.5 of payroll) to ease in
    increases in 2004 2005 rate averaged 12.5--not
    expected to decline markedly in near term
  • State allowed bonding of a decreasing percent of
    expense in FY2005-2007 changed payment due date
  • FY2005 costs to decline modestly those who
    bonded in 2004 will not benefit from cost decrease

8
Deteriorating Revenue Raising Ability
  • Property taxes are limited by NY State in a
    manner that favors those with taxbase growth
  • Counties with limited, or negative, growth have
    begun to approach their legal limit-with 5
    counties very close to exhausting this taxing
    margin
  • Counties have raised various other fees and taxes
    to the max limiting future flexibility

9
Counties have fared differently
Depending upon a number of factors
  • How early/aggressively they responded to
    expenditure pressures and slow-down in revenue
    growth
  • Political ability/willingness to pursue
    additional revenues
  • Reliance on one-shots

10
Rating Changes Last 2 Years
  • 16 Downgrades
  • 4 counties currently on Watchlist for potential
    downgrade
  • 15 counties currently have a negative outlook
  • 7 Upgrades
  • Largely Reflecting Story Credits (includes 3
    Nassau County Upgrades)
  • 1 county currently on Watchlist for potential
    upgrade

11
Where are we now?
  • Other counties continue to face challenges to
    structural balance and financial flexibility
  • Structural imbalance depleted reserves
  • Mounting losses reduced liquidity
  • Reliance on one-shot revenues and aggressive
    budget assumption
  • Some counties have turned a corner as a result
    of
  • Increases in recurring revenue
  • Reduction in force
  • Vacancy management
  • Expenditure reductions
  • Conservative budgeting and strong budget
    management
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