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November 3, 2005

Spending by local governments, schools rising by twice inflation, comptroller's report finds

Local governments and school districts in New York increased spending at more than twice the inflation rate from 1998 through 2003, a new report from the Office of the State Comptroller shows.

Property taxes also jumped by more than twice the inflation rate, and further tax increases are likely, according to the comptroller's 2005 Annual Report on Local Governments.

Upward pressure on spending is caused by wages and salaries, Medicaid and healthcare costs, and employee benefits, the report says.

School districts increased spending by 38.7 percent over the five-year period – a rate of growth far exceeding both inflation and that observed in any other class of government, according to the report.

More recent data suggest that this trend has accelerated – with school tax levies increasing by roughly 7 percent annually from 2000 to 2005. According to New York State Education Department data, this trend is continuing with school district budgeted tax levies projected to increase by another 7 percent from 2005 to 2006.

Such spending and tax increases by school districts are creating growing taxpayer resistance, the report adds.

Towns across the state added new spending at a rate of 30 percent from 1998 through 2003, while average increases in cities, villages and counties were lower but still above inflation.

In general, local governments did an outstanding job controlling tax levy increases during the late 1990s, with counties, cities, villages and towns keeping annual increases below the inflation rate. School districts were an exception to this trend, the report says.

However, all classes of local governments have shown acceleration in overall levy increases in recent years, and all classes continue to exceed inflationary increases.

Spending on employee health care rose for all types of local government, but increases varied noticeably. County governments increased spending on such benefits by 36 percent from 1999 to 2003, while spending by cities and towns rose 50 percent, according to the comptroller's office.

This year's state budget provides some help for localities, including an increase in general revenue-sharing aid and a state takeover of new Medicaid costs. But fiscal stress remains, the report says.

Many counties will have to rely on additional taxpayer support, it says. Moreover, some counties (especially upstate counties) will have to manage these demands against a backdrop of continued underperformance on employment measures and persistent population loss.

The report also paints a troubling picture of many upstate cities. Some have been so debilitated by population losses and economic decline that they are losing the ability to support basic governmental functions, it says.

The report is available at www.osc.state.ny.us/localgov/annualreport905.pdf.