Column: Unfunded mandates: Enough is enough

Mayor-MarvinI have been asked to join a panel of New York State mayors to set the state legislative priorities for the upcoming legislative session for our parent organization, the New York State Conference of Mayors and Municipal Officials.

Though, at times, I have felt it an exercise in futility of late due to inaction on the part of the legislature, the voice of those in the trenches is critical to the conversation.

Number one–pension reform–will always be the number one priority because the current system is unsustainable and it is the single most expensive state mandate in terms of local property tax dollars.

Just since 2010, the average contribution rates charged to local governments have increased by 91 percent for police and fire personnel and 182 percent for non-uniformed staff. These devastating increases have already led to property tax increases coupled with a diminution of local services and the work force necessary to deliver them.

In an effort to curry favor for his gubernatorial run, then New York State Comptroller Carl McCall rescinded the small 3 percent contribution to the pension program by some state workers, costing taxpayers billions of dollars in the years since that election. The 3 percent contribution for Tier 3 and 4 employees needs to be reinstated, at a minimum, while the entire system is overhauled.

The state’s current “defined benefit” system is virtually non-existent in the private sector and the average retirement benefit for retirees in New York State is more than twice the average company or union pension benefit.

There has been a perennial unwillingness for state elected officials to address the pension issue. In some cases, it is a fear of not being re-elected and not staying in office long enough to avail themselves of this same generous benefit.

I would argue that these legislators, because of their inaction, are the real enemies of the state worker. The system is simply unsustainable and, without changes, will go bankrupt and then all is lost.

State mayors are also united in supporting legislation to constitutionally prohibit the enactment of laws that impose an unfunded mandate or fiscal burden on local communities. All current unfunded mandates should also be required to sunset in two years unless it can be demonstrated that the mandate is essential and a funding source found to offset the cost to local governments. Currently, there are more than 200 state unfunded mandates.

One particularly onerous unfunded mandate is the Wicks Law dating back to 1912 and affecting both village and school construction projects. Under the current law, separate plumbing, heating, electrical, etc.—virtually all contracts on a construction project—must be separately bid. The coordination issues involved often lead to costly delays, increased administration costs and lawsuits, raising the cost of projects anywhere from 8 percent to 30 percent.

Other smaller, but costly, mandates are found in the myriad of state tort laws. Their impact amplifies the financial exposure a local government faces from lawsuits and increases the incentive to commence frivolous lawsuits against municipalities. Under current state law, private defendants are allowed to offset the amount of any damage awards by the amount a plaintiff receives from collateral sources such as insurance. Municipal defendants do not receive the same benefit and, in addition, must pay interest on judgments at a rate of 9 percent regardless of the prevailing rate.

Because of the myriad of unfunded mandates, municipalities are desperate for additional sources of non-property tax revenue. NYCOM urges an increase in the rate and to expand the scope of the utility Gross Receipts Tax. Currently, cities and villages have the option of imposing a GRT on the gross operating income of utility companies at a rate of 1 percent. Bronxville exercises this option. I, along with my colleagues, support a rate increase to 3 percent that is already enjoyed by Buffalo, Rochester and Yonkers. Additionally, in recognition of the predominance of wireless technology and to achieve equity in the tax treatment for all telecommunication providers, cellular service should be subject to the local GRT. Both the state and New York City have already made changes to their respective statutes to include cellular service as taxable for the state’s excise tax and New York City’s gross receipts tax.

I am hopeful that some of the initiatives above can be accomplished via a true partnership between state and local governments because one can certainly make the argument that local officials represent the biggest special interest group of all—the New York State taxpayers.