1. Comptroller DiNapoli’s Fiscal Stress Initiative Office of the State Comptroller Thomas P. DiNapoli State & Local Government Accountability Local Government & School Accountability Andrew A. SanFilippo Gabriel F. Deyo Executive Deputy Comptroller Deputy Comptroller 1

2. Nathaalie N. Carey Assistant Comptroller Division of Local Government and School Accountability 2

3.  Why Focus on Fiscal Stress? ◦ National Challenges for Local Governments ◦ Fiscal Challenges in New York State  Data Collection ◦ Type, Utility, Collection Method  Fiscal Stress System Basics  What We Have Learned ◦ Summary findings, Common Themes  Management Tools & Resources 3

4.  The Impact of the Great Recession  Long-term Trends  Municipal Bankruptcies  The “New Normal” 4

5. Impact of the Recession  State and local revenues declined by 4.1% from 2008 to 2009 ◦ Housing market decline puts pressure on property tax revenues ◦ Weak Retail Sales = Loss of Sales Tax Revenues ◦ States feel the pinch and cut aid to municipalities 5

6.  Impact on the bottom line ◦ Declining surpluses / fund balances ◦ Declining reserves  During a recession there is usually an increase in demand for services but decreased ability and willingness fund them ◦ Social Services ◦ Public Transportation 6

7.  Long-Term Trends ◦ Cities: populations are older and poorer  Central city share of metropolitan population declined from 56% in 1950 to 32% in 2000  Shrinking tax base ◦ Aging Infrastructure  Average age of capital stock rose from 16 years in 1969 to 23 years in 2009 ◦ Increasing Public Employee Costs  Especially health care and pension-related costs 7

8.  Municipal Bankruptcy ◦ A few big examples: Detroit, municipalities in California, Rhode Island and Alabama ◦ Causes – Recession and Long-term Issues, Plus:  Poor Management  Unwise Borrowing (Detroit borrowed $1.43 billion to make pension fund payments)  States that were unwilling or unable to intervene 8

9.  The New Normal ◦ Revenues are growing more steadily  Moody’s projects about 5% growth of local revenues in 2014 and 2015  General economic growth still moderate ◦ Costs have been reduced ◦ Balances have stabilized ◦ Long-term issues (health costs, pensions) still present ◦ Stability? 9

10. Source: Bureau of Economic Analysis 10

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17. NY School District Revenue Trends NY School District Revenue Trends 17

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19.  Part of New York’s “new normal”  Limits growth in property tax levy to lesser of 2 percent or rate of inflation  Complex, 8-step formula  Applies to counties, cities, towns, villages, school districts, independent special districts and libraries  Override provision  Property tax freeze 19

20. Method & Utility

21.  Annual Financial Reports:  Revenues  Expenditures  Debt  Balance Sheet  Changes in fund equity  Supplemental schedules (Energy)  Program costs  Budgets  Independent Audits  Tax Levy, Rate and Limits 21

22.  Collection ◦ Via electronic means whenever possible ◦ Increased use of online services ◦ Self-reported annually ◦ Standard reporting format ◦ Edit checks for quality assurance/consistency  Use ◦ Fiscal Stress Monitoring System ◦ Risk Assessment for Audit Services ◦ Research Reports ◦ Legislative Reform ◦ Transparency Initiatives – Open Data ◦ Information repository for various user groups 22

23. The Basics

24.  The inability to generate enough revenues to meet expenditures. (Budgetary Solvency)  Judgment about financial condition. One side of a continuum. Financial Condition Fiscal Health Fiscal Stress 24

25.  OSC Resources  Research Reports  ICMA Guidance  Systems Used In Other States  Proposed System with Public Comment Period 25

26. Guiding Principles: Meaningful Manageable in Number Come From Existing Data Create No Additional Reporting Transparent and Easy to Understand Comparable Over Time 26

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28.  14 Indicators  8 Categories Population Aging Population Poverty Property Value Employment Base Intergovernmental Revenues Constitutional Tax Limit Sales Tax Revenues 28

29.  6 Indicators  5 Categories Property Value Enrollment Budget Vote Results Graduation Rate Free or Reduced Priced Lunch 29

30.  Fiscal Stress Categories: Municipalities Schools ◦ Significant Fiscal Stress (>=65% of Points) (>=65% SDs) ◦ Moderate Fiscal Stress ( >=55% of Points) ( >=45% SDs) ◦ Susceptible to Fiscal Stress (>=45% of Points) (>=25% SDs) ◦ No Designation (<45% of Points) (<25% SDs) ◦ Data Inconclusive for FSMS ◦ Have Not Filed  Environmental Stress Categories: MunicipalitiesSchools ◦ ### (>=50% of Points)(>=60% ) ◦ ## (>=40% of Points)(>=45%) ◦ # (>=30% of Points)(>=30%) ◦ No Designation (<30% of Points)(<30%) 30

31.  Data is Self-Reported  Objective Score Based Upon Certified Annual Financial Reporting ◦ No new reporting  Data Screened for Reliability and Fiscal Condition  Examiner Review ◦ False positives ◦ False negatives 31

32.  To date, approximately 2,300 local governments reviewed  142 in some level of fiscal stress ◦ 16 out of 57 counties ◦ 5 out of 61 cities ◦ 18 out of 932 towns ◦ 16 out of 551 villages ◦ 87 out of 674 school districts. 32

33. Recent Findings: Calendar Year Units 2012 FSMS Scores 33

34. Class Breakout 34

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36. Recent Findings: School Districts 2013 FSMS 36

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39. Recent Findings: Villages 2013 FSMS 39

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41.  Website Enhancements ◦ Fiscal Stress Website  Data, Lists, Quick Reference Guide, FAQs etc.  Interactive Self-Help Suite ◦ Self-Assessment Tool ◦ Capital Planning Template ◦ Multiyear Planning Template 41

42. Policy Research  Snapshots ◦ Revenue Challenges  Summary Reports ◦ Common Themes  Fiscal profiles 42

43. Online Demonstration

45. Enter data for the current year. Get the scores and stress level. Calculate Projected Scores

46. View Recent Trends for Each Financial Indicator

47. Peer-Group Comparisons

48. View Scoring Details

49. Comptroller DiNapoli’s Fiscal Stress Initiative 49