Gov. Andrew Cuomo's property tax freeze proposal assumes the cause of high local property taxes in New York is high local government spending — hence his proposal to freeze taxes, and force local governments to consolidate and share services.
The proposal, however, misses the mark. This high level of local government spending is largely driven by mandates from the state.
New York is the fifth most decentralized state in terms of government expenditures, with local governments picking up 64 percent of state and local spending, according to the U.S. Census of Government Data. That figure is only about 50 percent in neighboring states.
This creates a huge fiscal burden for local governments.
The governor sees service sharing as an important way to save money. But research shows that service sharing is of limited reach in addressing cost reductions. This is for several reasons:
Economies of scale in service delivery are limited. Most local government services are labor intensive so per unit costs do not drop with sharing. Services that offer the greatest potential for cost savings from sharing are back office services, such as information technology and joint purchasing. Statewide purchasing contracts and state investment in the up front costs of new equipment and operating systems could go a long way toward helping local governments reduce their costs.
Service sharing is already widely practiced, so room for more sharing is limited. A 2013 survey of all local governments in New York found on average 27 percent of services are provided via sharing arrangements.
State rules restrict service sharing between local governments and other entities like fire and school districts. Liability, accountability concerns and state restrictions were the three most commonly listed obstacles to service sharing by municipalities responding to the 2013 survey.
Service sharing is simply not the panacea that the governor suggests. A 2013 Cornell survey found that even where municipalities shared services, cost savings were achieved only half the time. And the savings occurs only in certain areas — roads and highways, police, solid waste, libraries and water.
New York needs government reform. But a partnership with the state is critical, and it needs to be based on solid research. The research clearly shows that the state pushes more of the costs of government onto municipalities than neighboring states do, and that local governments are already sharing services a great deal.
Last week, Cornell's Community and Regional Development Institute hosted a conference on "Creative Responses to Fiscal Stress." Profiling the cities of Buffalo, Rochester, Syracuse and Utica, we found that local government spending was flat and property taxes were dropping even before the state imposed a tax cap. The only expenditures that are rising are state-mandated local expenditures, but state aid to local governments has dropped in real terms since the Great Recession.
Local governments cannot solve this problem on their own. The state must step up to its obligation to fund critical services the citizens of New York require. The governor's original reform proposal had three parts: tax cap, tax rebates for homeowners and mandate relief. Of these three, mandate relief would go the furthest to reduce the property tax burden.
Mildred Warner is a professor of city and regional planning at Cornell University. http://www.mildredwarner.org/restructuring/fiscal-stress