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Zack Hutchins
Director of Communications

September 6, 2005

Annual report on New York local governments finds increasing reliance on debt and above-inflation spending increases

New York’s local governments are experiencing slow revenue growth while expanding their reliance on debt and increasing spending at more than twice the rate of inflation, according to state Comptroller Alan Hevesi’s Annual Report on Local Government.

Local government expenditures totaled $118.4 billion in 2003, a 3.7 percent increase over 2002 and a 30 percent increase from 1998 to 2003—twice the rate of inflation for this five year period, a release on the report from the Comptroller’s office said. “The upward pressure on spending was primarily caused by Medicaid and health care costs, wages and salaries and employee benefits.”

“New York’s local governments continue to face difficult fiscal challenges,” said Comptroller Hevesi. “While underlying fiscal conditions facing local government vary drastically based on geography and by type of government, the majority of local governments are struggling to contain costs and grow their revenue base. Alarmingly, many are increasing their reliance on debt."

The report found that new debt grew “substantially” in 2003 compared to 2002, “increasing by 12.6 percent in a single year,” the release said. The release said the bulk of the new debt can be attributed to school districts.

“School district spending totaled $41.4 billion in 2003, reflecting an increase of 38.7 percent since 1998—a rate of growth far exceeding both inflation and that in any other class of government,” the release said. “Total outstanding debt for districts increased by 125 percent (18 percent annually) from 1998 to 2003.”

The report noted that the fastest growing source of local revenue was property taxes, which increased 26 percent between 1998 and 2003.

“Real property tax revenue accounted for 30 percent of all revenue, and was the fastest growing source of revenue in 2003,” the release said. The report also noted that Downstate areas have experienced a substantial growth in property values while “stagnant property values in some Upstate communities have led to increased tax rates to support levy increases, pushing them towards their tax limits.”

Property tax increases ranged from 6 to 9 percent in 2004, much higher than the average increase between 1995 and 2003, the report found.

The report also found that many localities are increasing their dependency on sales tax revenues. “Forty-nine of 57 counties now have sales tax rates that exceed 3 percent, with eight counties exceeding four percent,” the release said.

The report found that Medicaid spending continued to increase, but noted the state Legislature has approved a cap on county Medicaid costs.

The release from the Comptroller's office, and a link to the full report, can be found at www.osc.state.ny.us/press/releases/sept05/090205.htm.