GOVERNOR PATERSON PROPOSES MANDATE REFORM AGENDA TO EASE BURDEN ON LOCAL GOVERNMENTS AND PROPERTY TAXPAYERS DURING UNPRECEDENTED FISCAL CRISIS

Governor David A. Paterson today proposed a four-year moratorium on unfunded mandates in his 2010-11 Executive Budget to help keep property taxes down and ease the burden on local governments during an unprecedented fiscal crisis. The Governor also proposed long overdue reforms to the Wicks Law to lift contracting restrictions that increase costs for school districts and property taxpayers. In total, the Governor’s mandate reform agenda includes more than 100 mandate reform initiatives that will provide savings to local governments of nearly $1 billion over the next three years, with the potential for billions of dollars in savings in future years. Along with a series of statutory initiatives, many of the Governor’s reforms are the result of the Executive Order No.17 mandate review process led by his Office of Taxpayer Accountability.

“My proposal will eliminate a number of existing burdensome mandates that drive up property taxes for New York’s homeowners, but it also goes a step farther,” Governor Paterson said. “The mandate moratorium I am proposing is especially critical at a time when all levels of government are facing historic budget difficulties. This initiative will ensure that the State won’t take the easy way out when addressing its fiscal problems by pushing mandated costs down onto local governments.”

Four-year Moratorium on Legislatively Enacted Unfunded Mandates

The Governor today advanced legislation with his 2010-11 Executive Budget that would protect local property taxpayers by imposing a four-year moratorium on all new, significant, legislatively enacted unfunded statutory mandates. The moratorium would suspend the implementation of any such mandates that would require local governments or school districts to undertake new programs, increase the level of service for existing programs, or increase the value of any property tax exemptions at a cost of more than $10,000 for an individual municipality or $1 million for local governments statewide.
 
This legislation will also assist local governments and taxpayers by statutorily increasing transparency of the true fiscal impact of proposed legislation on municipalities and school districts and improving existing legislative fiscal note requirements used to identify the estimated costs of mandates. During this four-year moratorium period, the Governor would work with the Legislature to secure approval of a constitutional amendment to protect localities from future unfunded mandates.

Wicks Law Reform

The Wicks Law imposes inefficient multiple contract requirements for the different aspects (electrical, plumbing, etc.) of most public works projects. This mandate has the effect of substantially driving up capital construction costs.

Under current law, New York City, Buffalo and several other school districts have a full exemption from all Wicks law requirements, while remaining school districts are subjected to Wicks-related cost increases for any project above $500,000 upstate and $1.5 million downstate. Governor Paterson’s Executive Budget will end this disparate treatment by advancing a permanent repeal of the Wicks Law for all school districts, saving $200 million annually in capital costs.

Other Mandate Reforms

In total, through the 2010-11 Executive Budget and ongoing administrative actions, Governor Paterson’s mandate reform agenda includes more than 100 mandate reform initiatives, which will provide total local savings of nearly $1 billion over the next three years, as well as billions of dollars in future savings and cost-avoidance.

Other major proposals include:

• Establish SED Regulatory Review Process: Require SED to implement a regulatory review process similar to Executive Order No.17 (the mandate review process imposed on executive State agencies), which is intended to prevent the imposition of unfunded mandates on school districts. Includes preparation of local fiscal impact statements on all new regulations and a review of existing regulations to eliminate unnecessary mandates.
• Establish Office of Court Administration (OCA) Regulatory Review Process: Require OCA to implement a regulatory review process similar to Executive Order No.17 that is intended to prevent the imposition of unfunded mandates on local governments.
• Preschool Special Education: Counties are required to share in the cost of a rapidly growing preschool special education program, even though county officials have little authority to determine how these services are provided. To provide relief from growing preschool special education costs, county financial exposure would be capped at a two percent annual growth rate with school districts, which currently have no cost share in this program, assuming responsibility for any spending over this level. In addition, program costs would be better managed through statutory changes to encourage the placement of children with nearby providers and by requiring the State Education Department to respond to county audits of preschool special education providers in a timely manner.
• Local Procurement Flexibility: School districts and other local governments would be given significant additional procurement flexibility by: increasing bidding thresholds; allowing local governments to piggyback on other State and local government contracts, as well as certain federal contracts; allowing reverse auctions; providing local governments with the option of requiring bids to be submitted electronically; giving local governments the ability to award contracts based on best value; and providing local governments with the option of publishing bid notifications in the statewide electronic Contract Reporter. In addition, the current statute requiring contractors to include a surcharge on the purchase price charged to entities utilizing State contracts would be eliminated.
• Pension Amortization/Pension Reform: Local governments and the State will face substantial pension contribution increases over the next five years due to investment losses experienced by the Common Retirement Fund. Building on the Tier V pension reform law enacted in the December 2009 special session, this proposal would give local governments and the State the option to amortize a portion of their pension costs from 2010-11 through 2015-16. Local governments and the State, if they choose to participate, would be permitted to amortize the portion of their respective pension costs exceeding a contribution rate of 9.5 percent for the New York State and Local Employees’ Retirement System and 17.5 percent for the New York State and Local Police and Fire Retirement System in 2010-11. The contribution rate above which future amortizations are allowed would be increased by one percentage point each year through 2015-16. Repayment of the amortized amounts will be made over a ten-year period at an interest rate to be determined by the State Comptroller.
• Early Intervention: A package of reforms is advanced to address the growing costs in this program and provide counties with fiscal relief. These include: requiring insurance companies to pay for services covered under the terms of their policy; instituting a parental fee on services that would vary based on income; and revising rates for home- and facility- based care to encourage the use of less costly facility-based care.
• Medicaid: In addition to continuing the State’s cap on the local Medicaid share and Family Health local share pick-up at a cost of $1.3 billion, the 2010-11 Executive Budget will authorize a new demonstration program to give counties that are closing or downsizing nursing homes the option to redirect savings to enhance community-based long term care services and enable the placement of “hard to place” individuals in private nursing homes.
• Local Jails/Probation: In addition to regulatory changes advanced by the State Commission of Correction, the 2010-11 Executive Budget provides several statutory changes to reduce the mandated cost burden on county jails, including expanding the use of videoconferencing for certain court appearances and services to inmates and providing additional flexibility in housing inmates. County probation offices would also benefit from initiatives that streamline the presentencing investigation process, address funding-specific mandates for aid, and provide additional flexibility in the day-to-day operations of probation departments.
• Special District Commissioner Compensation, Other Reforms: A number of reforms would be advanced to help rein in special taxing district costs. Special district commissioners would be prohibited from receiving compensation for their services, bringing them in line with school board members and fire district commissioners, who are also barred from receiving compensation. However, such commissioners may still receive reimbursement for any actual and necessary expenses they incur in the performance of their official duties. Additionally, this proposal would transfer to town boards most of management responsibilities for town special districts providing sanitary, refuse, or garbage services, but allow elected special district commissioners to continue to hold referenda on whether the level of services provided to district residents should be changed.
• Other School District Mandate Reforms: In addition to the substantial relief that will be provided by repealing the Wicks Law for school districts, and by requiring the State Education Department to implement an Executive Order No. 17 mandate review process, the 2010-11 Executive Budget advances a number of other mandate reforms for school districts. It lessens the administrative paperwork burden by streamlining and eliminating unnecessary reporting and planning requirements and by allowing school districts to file reports with the State Education Department electronically. School districts will also be given additional fiscal flexibility with additional transportation savings options and through the use of reserve funds.
• Procurement Flexibility: School districts and other local governments would be given significant additional procurement flexibility by: increasing bidding thresholds; allowing local governments to piggyback on other states’ and local governments’ contracts, as well as certain federal contracts; authorizing electronic bidding and reverse auctions; giving local governments the ability to award contracts based on best value; and providing local governments with the option of publishing bid notifications in the statewide procurement opportunities newsletter. In addition, the fee imposed by the Office of General Services for use of State contracts will be eliminated.

A full listing of the more than 100 mandate reform initiatives is available online at http://www.budget.state.ny.us/pubs/press/2010/MandateReformInitiatives.pdf.

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