I am struck by the economic situation faced by Utica’s mayor. Thirty-seven percent of the city’s property is tax-exempt and over 20 percent is vacant. Unemployment is higher than the state’s average, and they’ve borrowed all they can legally borrow. They’ve cut until it hurts.
The mayor has concluded their only way out of this death spiral is to rebrand the city and pursue economic development. That scenario sounds very familiar. Except for the debt limit, it could be Otego, Oneonta or Otsego County.
An economy needs three sectors to be in balance: the public sector, retail sector and manufacturing sector. All three need to work together for the economy to prosper. This area had a stable public-sector economy. The region has become dependent upon the health care industry, educational institutions and various government agencies which provide good paying jobs and benefits.
However, public-sector growth by itself has resulted in an unbalanced economy. In order to regain balance, we must recognize all components of our economy need to be vibrant and work together for mutual benefit. The colleges and hospitals need the retail and manufacturing sectors, and the retail and manufacturing sectors need them. For example, when the college’s students need jobs or places to intern, who will provide them? The private and manufacturing sectors.
The public sector provides “services” for a community. They include education, health care, public safety, infrastructure like roads and other government services. These services are paid for through taxes such as state and federal income taxes; corporate taxes; school taxes; town, city and county property taxes; state and county sales taxes; highway taxes; truck-mileage taxes and various other taxes. There are also many fees, including the purchase of lottery tickets, which support education. These taxes and fees are paid by you and me, as citizens, and by the retail and manufacturing businesses.
The public sector is generally exempt from paying any taxes or fees. This works if an economy is in balance, but if the public sector’s tax exemptions aren’t offset by a growing population and growth in the retail and manufacturing sectors, both of which do pay taxes, the tax base doesn’t keep pace with the cost of public services. Our area suffers because high taxes do not attract new business or encourage population growth — both of which are needed to meet the ever-increasing cost of the services provided by the public sector.
According to a recent article in our local newspaper, about 9 percent of New York’s schools face the possibility of becoming insolvent — broke. Schools in the Mohawk Valley are in the process of merging. Our local schools are partially funded by property taxes and we have a shrinking property tax base. State aid also helps fund the cost of operating our schools. Those state dollars come from taxes and fees. The state’s budget, like ours, is facing a deficit. That means sate aid dollars are shrinking. Indeed, Gov. Andrew Cuomo recently stated that he would not provide new aid to upstate cities facing financial crisis.
On top of that, the state puts strings on the dollars it gives our community. Those strings are called “mandates” and school administrators refer to them as “unfunded mandates.” They are called unfunded for three reasons. First, there may not be an increase in state aid to cover the cost of implementing them. Second, there may not be an annual increase in state aid to cover the ongoing cost of implementing them. Third, the state aid may be cut but the unfunded mandate remains.
The problem with mandates has grown in the last four years because the public schools have seen stagnant or reduced funding as costs have skyrocketed. For example, we are mandated by the state, to pay into the Employees’ Retirement System (ERS) and the Teachers’ Retirement System (TRS). As the returns on the investments that are used to fund these programs have fallen off, local costs have risen over the last four years without a corresponding increase in state aid. Schools, facing about a $600,000 deficit in 2013, are forced to cut positions and programs to balance budgets.
Our hospitals are facing the same financial woes. They rely heavily upon reimbursement from private health insurers and federal reimbursement programs like Medicare and Medicaid. Just like with state mandates in education, the insurers impose mandates on the health care industry.
As Congress debated how to avoid the fiscal cliff, two things were clear: Obamacare is here and will be costly to implement; and Medicare and Medicaid will be subject to reform. What that means to our healthcare providers isn’t certain, but it’s unlikely to be a boon to them or us. The local health care providers face another issue — recruitment and retention of doctors. Not only is there a lack of suitable housing in the area, there also is a lack of opportunity for spouses.
These are challenging economic times, and our elected leaders have a responsibility to make decisions based upon fact and not emotion. There will be times when those decisions won’t make everyone happy, but they must be for the long-term good of the community they represent. One of those is the decision about whether or not to privatize the Otsego Manor nursing home. It’s time to shift our focus from cutting to growing revenue. The “right” decisions will start us on the road to recovery, while the wrong decisions will force even more difficulties upon us in the future.
Mike Zagata is a member of Citizen Voices. The group can be reached at email@example.com.