The New York Times ran an article last week about how state governments all across the country are passing their financial troubles down to local municipalities. Among their findings:
[R]eductions in state aid, along with falling property tax revenues that are finally catching up with lower home values, are major sources of fiscal stress for many cities. Ben S. Bernanke, the Federal Reserve chairman, said in a speech this month that “many localities have been hard hit by reductions in state aid, which in 2008 accounted for about 30 percent of local revenues.” And Moody’s Investors Service, the ratings agency, said in a report last week that many states “are increasingly pushing down their problems to their local governments.” The Moody’s report warned that this would be “the toughest year for local governments since the economic downturn began.”
Not all of these conditions and challenges apply to New York and to New Rochelle. For example, year-to-year cuts in the AIM program (the primary source of State municipal aid) have been fairly modest — we take a much bigger hit from State-mandated contributions to the retirement system. Nonetheless, the article does illustrate the inter-relationship between difference levels of government, and the degree to which solving problems in one arena may simply push those problems into another.