The Ulster County Budget: What Will Happen When the Other Shoe Drops?
Earlier this month Ulster County Executive Pat Ryan proposed a $333.8 million budget for 2021 that requires neither a property tax levy increase nor employee layoffs, and with a smaller withdrawal from the county’s savings account (the fund balance) than was made in 2020.
At first glance, this seems like an extraordinary achievement during a time that the New York State economy has been devastated by the impact of the coronavirus pandemic. After early speculation that the decline would be much greater, county sales tax revenue is projected to drop next year by $8 million, to $120 million. That matches the actual level for 2018, but is just about 6 percent lower than the pre-Covid projection for the current year.
Ryan’s proposed spending is $9.06 million (2.66%) less than the $342.3 million recommended and approved for his first budget last year (which itself reflected a 4% increase). Significant cuts were made in every major service area except health, mental health and community college aid. Almost two-thirds of the county’s proposed spending reduction ($5.77 million, 63.7%) will be achieved by lowering personnel costs, largely as a result of a retirement incentive offered earlier this year. About 125 county employees, 10% of the workforce, opted in.
New York State’s service delivery system is one of the most decentralized in the nation. Much of county governments’ work, therefore, is to deliver mandated state services, partly paid for with state aid. For 2021 in Ulster, that aid is projected to total $51.792 million, or just under 16% of total revenues. This is where that other shoe may drop. Throughout the Ulster County Budget the following cautionary language is repeated: “The _____Department’s___ proposed budget relies upon $________ in State Aid that may be subject to a 20% reduction at any time during the budget review process or in the implementation of the 2021 budget, at which time the County will take the appropriate actions needed to maintain a balanced budget.”
Just weeks after the adoption of New York’s FY2021 budget this past April, the state Budget Division announced an expected “revenue shortfall of $13.3 billion for the year and a total $61 billion decline through FY2024 as a direct consequence of the COVID-19 pandemic.”
When New York’s 2021 budget was passed, the state legislature gave the executive extraordinary power to alter the budget to keep it in balance during the course of the year. The budget director was charged with periodically determining whether the budget was balanced and, if it was not, developing a plan to restore balance. After informing the legislature of this plan, and giving it ten days to develop an alternative if it chose to do so, the director was authorized to implement his proposal.
By August, the estimated gap for the state’s current year budget had grown to $14.5 billion. The Budget Division reported that the state had cut spending by over $4 billion from previous year levels by “freezing hiring, new contracts and pay raises, and temporarily holding back 20% of payments,” and that further extensive cuts to state aid and agency budgets were under active consideration. But while New York and other heavily impacted states pressed for a federal relief package targeted for state and local governments no concrete plans for this were released. Federal action is now not likely before Election Day. Good government groups, such as Common Cause, NYPIRG, Reinvent New York, and the League of Women Voters recently wrote to the governor that this “leaves schools, localities, non-profits, vendors, and State agencies mired in uncertainty, unable to appropriately plan for and manage potential cuts.” And the more time that passes, the harder it gets, as a diminished portion of the fiscal year of each of these is available in which to absorb any cuts.
Ulster County is among those “mired in uncertainty.” The specific math is not easy. One reason has simply to do with fiscal calendars: one quarter of Ulster County’s 2021 Fiscal Year is in the state’s current (2021) fiscal year and three quarters in the coming (2022) fiscal year, for which a state budget has not yet been adopted, and will not be until at least April (if is it on time, which it has been under Governor Cuomo’s tenure). Cuts would come in both. But suffice it to say that a 20% reduction in state aid would imbalance the county’s 2021 proposed budget by $10.4 million dollars.
The Ulster County charter requires the county executive to propose a balanced budget, and the legislature to adopt one. Because it requires predicting the future, achieving such balance is as much art as it is science. Thousands of choices are required. These are bracketed by legal limits and long established expectations — e.g. containing the property tax levy. Elected policy makers have promises to keep; these cost money. Demands from citizens and organized interests far exceed the capacity to meet them; these cost money too.
Moreover, balance flies out the window on the first minute of the first day that the fiscal year starts. Things change, literally hundreds of them, big and small. There are new expenses — like the cost in FY2020 of early retirement incentives. Or revenue estimates may go badly awry — like for this year’s sales and hotel occupancy taxes.
But truth be told, the executive did not present a fully balanced budget this year. He said, in effect, I have no way of knowing what is going to happen with one of the county’s major revenue sources – state aid – nor do I know whether I will be required to maintain spending levels from local funds if that aid is reduced or eliminated. The crisis we are in is unprecedented. The state is not telling me what to expect. So I am putting this off, and propose that the legislature join me in dealing with it later, when we know more.
In this Ulster County is not alone. Dutchess and Orange County have taken the same path.
Charter requirements have been bent, though with good reason. Extraordinary times require extraordinary measures.
In recent years, Ulster County has very successfully hedged against unpleasant budget surprises, and has assured its ability to contain property tax growth, by regularly under-estimating revenues and over-estimating expenses. In this way the county government built a fund balance that will be vital in carrying it through 2021, austerely but with essential services intact and policy priorities in place. But, as noted, the state anticipates massive fiscal problems through at least 2024. A second wave of the pandemic appears to be building. Downsizing the county workforce reduces the capacity to save on the spending side of the budget, while diminished productivity of key local revenue sources may persist for several years, denying added flexibility on the income side.
Hang on. Pat Ryan has given us a good start, but it’s going to be a long bumpy ride.