It is generally understood that there will need to be reductions in staff, at least temporarily, to address the city’s financial crisis in this time of pandemic. It is the severity of these cuts that most folks are not anticipating.
In the commission form of government the Finance Department is responsible for drafting the city’s budgets.
For years Commissioner Madigan has done an outstanding job of managing the city’s finances. We have had repeated years of budgets with no tax increases while maintaining city services. We have had a bond rating that is the envy of pretty much all the municipalities in New York State and we have had a healthy reserve fund.
All of this predated the COVID-19 pandemic. While Saratoga Springs went into this crisis in better shape than many other municipalities, our city’s economy is rooted in tourism. With the statewide shutdown of stores and restaurants and with the track and SPAC season in question, the income from sales tax is now like a reliable spigot suddenly gone dry. In addition the recently secured VLT money and other state funding is in jeopardy as the Governor looks for ways to deal with the state’s looming deficits. So much of our ongoing income is gone but the expenses for the year have hardly begun.
In presentations to the Council and the press Commissioner Madigan has laid out a multi-faceted approach to dealing with the financial crisis the city is facing. The Commissioner told the Council that one of the immediate steps the city needs to take is to cut three million dollars from the city’s payroll. She is proposing a 90 day furlough program rather than lay offs. Furloughs would allow the city to continue to pay employees’ health benefits. The federal government is paying an additional $600.00 a week for unemployment through July 31 so during the three months the loss of income to furloughed employees would not be as onerous. The Mayor would have to negotiate this plan with the unions.
In order to meet this $3milloin savings goal, the magnitude of the required staff reductions is staggering. The plan assumes that the Mayor’s department, the Finance Department, and the Accounts Department would have to reduce their staff by 20% each. Even more devastating would be the effect on Public Safety and Public Works. They are looking at a staff reduction of 45%. Even then the city is still looking at a $3 million short fall before the end of the year.
Putting aside the most important questions about the risk that such reductions in Public Safety would create, the existing union contracts require a minimum number of persons for each fire crew.
The word draconian seems inadequate to describe the situation.
While Commissioner Madigan has provided some general figures regarding how she arrived at the short fall, some of the information used to assess the situation and to come up with a strategy is not available.
I sent her an email asking a number of questions. She wrote me back indicating that she was not prepared at this time to answer them. They were:
- In terms of the cash flow per month, when would the city run out of money?
- Would the $3,000,000.00 savings from furloughing the employees include the cost to the city of unemployment insurance [See below]?
- What are the projections for the number of furloughed employees in each department to reach the financial savings?
- What is the overall budget number for the city that the $14-$16 million dollar savings is taken from?
- What is the potential risk to the city associated with the layoffs projected in public safety?
[Note: For the private sector unemployment insurance is paid annually by a percentage of a company’s payroll based on a rating. The rating is determined by the history of claims made for unemployment by laid off workers of that company. In the case of municipalities, they are required to reimburse the state for the full and direct cost of claims. Unemployment payments are based on a percentage of a laid off worker’s income up to a certain limit. The limit is very low. ]
There is every reason to believe that the Federal Government will pass legislation providing some relief to state and local governments in spite of Senate majority leader Mitch McConnell’s intransigence on additional spending. As the impact of the economic crisis becomes more evident the pressure on the Senate to act will, in all likelihood become overwhelming. President Trump has asserted that the problem is with states run by spend thrift Democrats but the economic impact on states and local governments across the country will be bi-partisan.
The entire New York Congressional delegation has signed on to a letter calling for additional moneys for states and localities. This includes Democrat Congressman Paul Tonko and Republican Congresswoman Elise Stefanik. Everyone is on board.
Given the crisis there is also the possibility that New York State may modify some requirements that might ease some of the costs of government while the pandemic continues.
This crisis will expose the inequities associated with funding local government through property taxes. The taxable value of a home is a poor indicator of the income of the owner. Many of our older neighbors struggle to pay their taxes. As a short term solution it might be necessary to provide some sort of relief for these people for the inevitable tax increases that will come. This would require action at the state legislature.
The bottom line here is that our city is facing some devastating challenges. Whatever the Federal Government will do, it will not be sufficient to address the radical imbalance between Saratoga Springs’ income and its expenses.
This kind of crisis can bring out the worst in people. It is critical that we see this as not the Department of Finance’s problem but as a problem we must all share. There is no way around the reality that all of us will have to make sacrifices to protect our beautiful city.
In order to do this, the citizens of our city need all the information we can get to find a way forward that we, as a community can live with.