ALBANY, NY (release) - Two dozen communities in New York have been designated as fiscally stressed under State Comptroller Thomas P. DiNapoli’s new Fiscal Stress Monitoring System. The list includes eight counties, three cities and 13 towns.
“The challenges facing local governments have reached a critical point and these fiscal stress scores should serve as a wakeup call,” said DiNapoli. “Taxpayers, local officials and state policymakers need an objective analysis to help them understand the economic and budgetary challenges facing our communities. My office’s monitoring system was designed to do just that. We have identified local governments from every region of this state that are facing some level of fiscal stress and presented them with a realistic picture of their financial condition.
“I am confident this new early warning system will motivate elected leaders and their constituents to work together to help their municipality become more efficient, more creative, more forward-thinking and more effective with the resources that are available. It should also educate state leaders on the systemic challenges that our local communities are struggling to overcome.”
DiNapoli began shining a spotlight on fiscal stress in 2012 after his office noticed a number of alarming trends among local governments. For instance, his auditors found that nearly 300 local governments had deficits in recent years, and more than 100 had inadequate cash on hand to pay their current bills. DiNapoli’s office drafted the ‘early warning’ monitoring system last September and shared details of the proposal with all of the state’s local governments and school districts for their review during a 60-day comment period. More than 100 local government and school district officials, as well as a number of affiliated organizations, provided feedback.
The initial fiscal stress list was based on financial information provided to DiNapoli’s office by local communities as of May 31, 2013 and includes only municipalities with fiscal years ending on Dec. 31, 2012. In New York, all counties and towns, 44 cities and 10 villages have a Dec. 31 fiscal year end – a total of 1,043 communities.
DiNapoli’s monitoring system evaluates local governments on 23 financial and environmental indicators and creates an overall fiscal condition score. Indicators include cash-on-hand and patterns of operating deficits, together with broader demographic information like population trends and tax assessment growth. The scores are used to classify whether a community is in “significant fiscal stress,” “moderate fiscal stress,” “susceptible to fiscal stress,” or “no designation.”
The municipalities found to be in stress share a number of common characteristics, such as low fund balance, a continued pattern of operating deficits and inadequate cash on hand to pay their bills.
In addition to the 24 fiscally stressed municipalities, DiNapoli said 18 communities have been listed as “under review” and continue to have their information vetted. There are also 124 local entities that have been designated as “have not filed,” meaning they have yet to submit necessary financial information due to the Comptroller’s office. The remaining communities have been classified as “no designation.” This system measures the level of fiscal stress a municipality is facing. A municipality’s absence from the top three categories should not be viewed as substantiation of good financial condition by the Comptroller’s office.
Also today, DiNapoli released a report examining fiscal stress drivers and how municipalities can address fiscal stress. The report details the primary factors that could jeopardize local government finances, such as operating deficits, increasing fixed costs, poor economic conditions and long-term demographic shifts. It also identifies which classes and types of government are most likely to be designated as fiscally stressed. Additionally, the report reviews many of the steps local officials can take to avoid fiscal stress, which includes utilizing a number of resources provided by the Comptroller’s office.
Later this year, DiNapoli will provide updated information on the monitoring system for those municipalities that are under review or have yet to file. He will also release a separate scoring list for school districts and those cities and villages whose fiscal years end at various periods throughout the year.
As part of the fiscal stress initiative, DiNapoli’s staff has created a new local government support program – Avoid Crisis Tomorrow with Fiscal Awareness Strategies Today or ACT FAST. This program can be initiated by a joint request from a local government’s chief executive officer and governing board. The Comptroller’s office would then complete an accelerated risk assessment to determine what level of service would be most beneficial to the requesting municipality or school district.
DiNapoli has also created a new dedicated webpage where local officials can find a number of valuable resources. For example, each local government will have access to a self-assessment tool that will allow them to determine potential fiscal stress scores in future years. In addition, there are multiyear financial planning resources, capital planning templates, best practice guides and information on how to register for training events.