New York's political class has been wrestling with what to do since Detroit filed for federal bankruptcy protection. Finger-pointing and more debt have been the response. The higher you go in the hierarchy, the easier it is to see the fear and denial.
The problem, it is said, is the result of local mismanagement and overspending. Mayors need to restructure and stop asking for handouts. And the state will step in and lend them money to cover current operating expenses — or "pension smoothing" and "spin-ups" in Albanyspeak).
This is just plain wrong, and will worsen the eventual municipal crisises. But it's understandable. No one in power wants to take ownership of a problem that will require layoffs, school closures, tax increases, service cuts and angry constituents. No one runs for statewide office hoping to oversee the unraveling of our system of municipal finance.
But finger-pointing and borrowing are prescriptions for disaster. Local governments have indeed run their finances badly, with dishonest budgets and labor policies and tax giveaways to business. But you could fix all that and still face a huge chasm between the absolute needs of schools, police, fire, sanitation, parks, senior citizens and others and the ability of local governments to pay for them.
When the property tax base of our cities collapsed, so did their ability to pay for services. Until that problem is addressed the tidal wave will build. And this is a problem created by state laws, not by mayors or county executives.
In the past, New York responded by creating what are known as control boards. I know. In my first term as state assemblyman, I wrote the control board law for Yonkers. It did what control boards do — raised local taxes, increased state aid, cut services and laid off workers. It didn't touch the broken economic model and it didn't touch payments to banks and Wall Street.
Detroit's bankruptcy filing changed that. For the first time, lenders and Wall Street could confront a court-ordered reduction in debt payments. That's changing the national conversation.
We're willing to reduce payments to retirees trying to live on annual pensions of $20,000, and to close schools and firehouses and parks. But try to spread the pain to everyone owed money by a bankrupt city, and watch the fireworks.
In New York, the problem has been raised by a courageous trio of upstate big city mayors — Syracuse's Stephanie Miner, Yonkers' Mike Spano and Rochester's Tom Richards. But I suspect that we first will experience Detroit-style bankruptcy in a small village or school district that we've never heard of.
Two reporters at the Utica Observer-Dispatch, Steve Hughes and Elizabeth Cooper, have focused on the finances of the city of Utica and the tiny village of Prospect. Utica is finally trying to openly deal with a structural gap — so far cuts and borrowing only, again. Prospect is publicly talking about bankruptcy to avoid workers compensation payments that it simply doesn't have the money to pay.
With annual property tax revenues totaling just $28,000, it can't afford big lawyers and long court battles. But Prospect may be the place where banks, unions, creditors, citizens and yes, New York State, finally come to terms with years of neglect and willful indifference.
This is no way to run a state. The test of real leadership comes when a crisis is thrust upon us, when pain and sacrifice are the tools of recovery. This problem will not go away. If we don't step forward now, a federal bankruptcy judge, trying to protect the 1,100 people of Prospect may do the job without us.
Richard Brodsky, formerly a state assemblyman, is a fellow at the Demos think tank in New York City and at the Wagner School at New York University.