State budget official comment stuns Albany officials

ALBANY — Public criticism from the state Budget Division has many occupants of City Hall scratching their heads after years of dialogue between Albany officials and the state.

Budget Division spokesman Morris Peters said in an April 5 radio report on WAMC that a state-funded report provided recommendations for improved efficiencies in the capital city that could have reduced the need for additional state aid in 2018 to $9.8 million, but Albany officials still sought $12.5 million.

The city ended up receiving $12 million in state aid in the just-enacted state spending plan.

“The new state budget strikes a balance by making $12 million available, if needed, while ensuring that Albany pursues efficiencies,” Peters said in the WAMC report. “Last year, state money helped Albany achieve a surprise $6 million surplus, and that’s not fair to state taxpayers.”

His use of the words "if needed" suggested that the city would receive that amount from the state this year only if that's how much is needed to balance the budget.

"If (the Budget Division's) position is that the city of Albany shouldn't be building up a fund balance, and this aid isn't fair because of that, we disagree," said Brian Shea, Mayor Kathy Sheehan's chief of staff. "We're building from having a completely depleted fund balance. To penalize us as we try to build one is unfair."

Albany has been working with the state budget office for several years, consulting with the state financial restructuring board and, most recently, going through another more in-depth report ordered by the state and conducted by the PFM Group.

City officials say Peters' comment runs counter to everything they’ve discussed and worked on, and they were stunned by the remark.

“It’s a little out of touch,” said Rachel McEneny, commissioner of administrative services. “The statement is very damaging to what we’ve worked hand-in-glove with the budget office on.”

Peters referenced a one-time savings Albany saw in its 2016 budget due to reductions in workers compensation, health care costs and snow removal.

At the time, city Treasurer Darius Shahinfar emphasized this shouldn’t be misconstrued as “permanent savings.” The announcement of the savings was made in June 2017 — after the city received $12.5 million in additional state funding.

In 2016, Albany received that year's budget-gap-closing $12.5 million as a "spin-up" or advance on payments the state owes for the Empire State Plaza being off the city tax rolls, which typically has been the case.

Final figures for 2017 are not yet available, Shahinfar said.

Credit rating agencies want localities to have healthy fund balances, and state Comptroller Thomas DiNapoli has dinged Albany for its past shortcomings in that regard. Albany continues to be categorized as under significant fiscal stress in part due to its lack of savings.

The state budget office on Tuesday provided a chart that suggested the state aid Albany receives as Aid to Municipalities (AIM) funds, plus the $15 million it receives in payment for Empire State Plaza being off the tax rolls, and the additional $12 million it received in the budget deal brings Albany more in line with other upstate cities.

The plaza payments were established through a state public lands law that allows any city with 75,000 residents or more to seek payments from the state for property it takes off the tax rolls.

However, the state's chart shows only $161.3 million going to Buffalo, while Buffalo's own 2017-18 budget shows $194.4 million coming from the state.

Albany officials often lament that the capital city is held to a more rigorous standard than others — that if Albany has a surplus, or increases its tax base, it should therefore receive less state funding.

City officials have beat the drum on the need for $12.5 million in permanent increased state aid to Albany in the state budget, and claimed to Albany receives less state aid than other comparable upstate cities because of its many tax-exempt properties – roughly 64 percent of the city’s assessed value is exempt — and the need to provide services to a population that doubles in size each day due to the influx of public employees.

State budget officials say the PFM Group report provided recommendations to address these obstacles and wean the city off additional state funding. Those included cutting police and fire departments, raising taxes, consolidating departments and improving internal efficiencies as well as exploring shared services.

“The state applauds localities that manage their finances in a way that produces operating surpluses, and many municipalities across the state do so without extraordinary aid from the state,” Peters said in a statement Tuesday.

Albany has implemented or is in the process of implementing many of the recommendations the state report lauded — but it can’t be done overnight, McEneny said.

City officials further emphasized looming cost items that were not considered in the PFM report, like the city’s Rapp Road landfill closing – a large revenue source from outside commercial dumping – and settling union contracts.

“We can manage to our growth, but walking in the door is that $12.5 million structural gap,” Shea said. “We don’t begrudge other cities what they have now. What we’re asking for the city of Albany is something a little closer to parity, and we appreciate that Gov. Andrew Cuomo delivered that two years in a row.”