Comptroller DiNapoli’s Fiscal Stress Initiative Office of the State Comptroller Thomas P. DiNapoli State & Local Government Accountability Local Government & School Accountability Andrew A. SanFilippo Gabriel F. Deyo Executive Deputy Comptroller Deputy Comptroller 1

Nathaalie N. Carey Assistant Comptroller Division of Local Government and School Accountability 2

 Why Focus on Fiscal Stress? ◦ National Challenges for Local Governments ◦ Fiscal Challenges in New York State  Data Collection ◦ Type, Utility, Collection Method  Fiscal Stress System Basics  What We Have Learned ◦ Summary findings, Common Themes  Management Tools & Resources 3

 The Impact of the Great Recession  Long-term Trends  Municipal Bankruptcies  The “New Normal” 4

Impact of the Recession  State and local revenues declined by 4.1% from 2008 to 2009 ◦ Housing market decline puts pressure on property tax revenues ◦ Weak Retail Sales = Loss of Sales Tax Revenues ◦ States feel the pinch and cut aid to municipalities 5

 Impact on the bottom line ◦ Declining surpluses / fund balances ◦ Declining reserves  During a recession there is usually an increase in demand for services but decreased ability and willingness fund them ◦ Social Services ◦ Public Transportation 6

 Long-Term Trends ◦ Cities: populations are older and poorer  Central city share of metropolitan population declined from 56% in 1950 to 32% in 2000  Shrinking tax base ◦ Aging Infrastructure  Average age of capital stock rose from 16 years in 1969 to 23 years in 2009 ◦ Increasing Public Employee Costs  Especially health care and pension-related costs 7

 Municipal Bankruptcy ◦ A few big examples: Detroit, municipalities in California, Rhode Island and Alabama ◦ Causes – Recession and Long-term Issues, Plus:  Poor Management  Unwise Borrowing (Detroit borrowed $1.43 billion to make pension fund payments)  States that were unwilling or unable to intervene 8

 The New Normal ◦ Revenues are growing more steadily  Moody’s projects about 5% growth of local revenues in 2014 and 2015  General economic growth still moderate ◦ Costs have been reduced ◦ Balances have stabilized ◦ Long-term issues (health costs, pensions) still present ◦ Stability? 9

Source: Bureau of Economic Analysis 10

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NY School District Revenue Trends NY School District Revenue Trends 17

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 Part of New York’s “new normal”  Limits growth in property tax levy to lesser of 2 percent or rate of inflation  Complex, 8-step formula  Applies to counties, cities, towns, villages, school districts, independent special districts and libraries  Override provision  Property tax freeze 19

Method & Utility

 Annual Financial Reports:  Revenues  Expenditures  Debt  Balance Sheet  Changes in fund equity  Supplemental schedules (Energy)  Program costs  Budgets  Independent Audits  Tax Levy, Rate and Limits 21

 Collection ◦ Via electronic means whenever possible ◦ Increased use of online services ◦ Self-reported annually ◦ Standard reporting format ◦ Edit checks for quality assurance/consistency  Use ◦ Fiscal Stress Monitoring System ◦ Risk Assessment for Audit Services ◦ Research Reports ◦ Legislative Reform ◦ Transparency Initiatives – Open Data ◦ Information repository for various user groups 22

The Basics

 The inability to generate enough revenues to meet expenditures. (Budgetary Solvency)  Judgment about financial condition. One side of a continuum. Financial Condition Fiscal Health Fiscal Stress 24

 OSC Resources  Research Reports  ICMA Guidance  Systems Used In Other States  Proposed System with Public Comment Period 25

Guiding Principles: Meaningful Manageable in Number Come From Existing Data Create No Additional Reporting Transparent and Easy to Understand Comparable Over Time 26

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 14 Indicators  8 Categories Population Aging Population Poverty Property Value Employment Base Intergovernmental Revenues Constitutional Tax Limit Sales Tax Revenues 28

 6 Indicators  5 Categories Property Value Enrollment Budget Vote Results Graduation Rate Free or Reduced Priced Lunch 29

 Fiscal Stress Categories: Municipalities Schools ◦ Significant Fiscal Stress (>=65% of Points) (>=65% SDs) ◦ Moderate Fiscal Stress ( >=55% of Points) ( >=45% SDs) ◦ Susceptible to Fiscal Stress (>=45% of Points) (>=25% SDs) ◦ No Designation (<45% of Points) (<25% SDs) ◦ Data Inconclusive for FSMS ◦ Have Not Filed  Environmental Stress Categories: MunicipalitiesSchools ◦ ### (>=50% of Points)(>=60% ) ◦ ## (>=40% of Points)(>=45%) ◦ # (>=30% of Points)(>=30%) ◦ No Designation (<30% of Points)(<30%) 30

 Data is Self-Reported  Objective Score Based Upon Certified Annual Financial Reporting ◦ No new reporting  Data Screened for Reliability and Fiscal Condition  Examiner Review ◦ False positives ◦ False negatives 31

 To date, approximately 2,300 local governments reviewed  142 in some level of fiscal stress ◦ 16 out of 57 counties ◦ 5 out of 61 cities ◦ 18 out of 932 towns ◦ 16 out of 551 villages ◦ 87 out of 674 school districts. 32

Recent Findings: Calendar Year Units 2012 FSMS Scores 33

Class Breakout 34

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Recent Findings: School Districts 2013 FSMS 36

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Recent Findings: Villages 2013 FSMS 39

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 Website Enhancements ◦ Fiscal Stress Website  Data, Lists, Quick Reference Guide, FAQs etc.  Interactive Self-Help Suite ◦ Self-Assessment Tool ◦ Capital Planning Template ◦ Multiyear Planning Template 41

Policy Research  Snapshots ◦ Revenue Challenges  Summary Reports ◦ Common Themes  Fiscal profiles 42

Online Demonstration

Enter data for the current year. Get the scores and stress level. Calculate Projected Scores

View Recent Trends for Each Financial Indicator

Peer-Group Comparisons

View Scoring Details

Comptroller DiNapoli’s Fiscal Stress Initiative 49