Property Tax Relief Must Come From Local Efficiencies and State Mandate Relief

1

Property Tax Relief Must Come From Local

Efficiencies and State Mandate Relief

submitted by the

New York State Association of Counties

New York State Assembly Joint Public Hearing

Standing Committee on Real Property Taxation Standing Committee on Cities

Wednesday, December 17, 2014 LOB, Roosevelt Hearing Room C

Hon. Anthony J. Picente, Jr., NYSAC President

Stephen J. Acquario, Executive Director

2

I want to thank the Chairs, Ranking Members and Members of the Assembly for holding this hearing today.

Thank you Chairman Magnarelli -- (Committee on Local Governments), Chairwoman Galef -- (Committee on Real Property Taxation), and

Chairman Ortiz -- (Committee on Cities)

The Committee is seeking information on how the 2014-15 State Budget impacted counties, cities, towns and villages, including the Property Tax Freeze Credit and changes to STAR.

I am joined today by NYSAC President Anthony J. Picente Jr., Oneida County Executive. I am Stephen Acquario, Executive Director of NYSAC and I will provide some general opening remarks on the State Budget impact and some important county priorities for the coming year and County Executive Picente will follow up with his experience so far with the Property Tax Freeze Credit and what the tax cap and tax freeze means for the residents of Oneida County.

First let me say how much we appreciate that your committees have

provided this opportunity to gather feedback and these critically important issues.

Counties fund operations through a combination of sales and property taxes. Since 2008, the recession has frozen our sales tax revenue. And since 2012, state lawmakers first capped, then froze, our property tax revenue. Recognizing that New York has some of the highest property taxes in the nation, we applaud your efforts to help our homeowners and businesses. Counties continue to struggle with reductions in state reimbursements implemented during the Great Recession to close budget gaps at the state level. Counties, not including NYC, are receiving nearly $350 million less annually in state reimbursement for programs counties are required under state law to provide in services for these same programs. Those cost shifts have not been reversed or altered.

So on the one hand you have limited our ability to fund our road

construction and 9-1-1 services, and then on the other hand you reduce reimbursement for programs that you require us to provide like safety net,

3

child welfare, and public health. At the same time, many of our counties saw their sales tax numbers take a five year dip in revenue.

You can understand, given this scenario, that many of our members don’t feel like county and state leaders are on the same team. I’m here today to say that we must be on the same team. That’s the only way to effectively tackle the property tax issue. Otherwise, we are working against each other, and not in the best interest of New York.

Impact of the 2014-15 State Budget on Counties

Overall, last year’s state budget, from a funding perspective, was generally a status quo budget for counties. There were no new significant revenue

streams or funding reductions as compared to the prior year.

There were some minor increases in state funding for a few programs that we hope the Legislature will continue to support in the future including a permanent increase in CHIPs funding, as well as a commitment to support 100 percent of the additional costs counties will incur for the state

mandated raises that must be provided to local district attorneys. Additionally, the State has provided minor restorations to community

college per pupil aid, but we still remain below levels achieved several years ago and far below the one-third state financing commitment promised in the original law.

Medicaid

The Medicaid zero percent growth cap remains a fiscal bright spot for counties, and beginning in 2015 county Medicaid costs will not rise for the first time. In the years to come this will provide important program

stabilization. We urge the State Legislature and Governor to do everything in their power to maintain the Medicaid cap.

Unfortunately, there are already signs of this cracking. The NYS

Department of Health has proposed new emergency regulations that would nullify the Medicaid Cap by holding counties 100 percent fiscally

responsible for new Medicaid costs related to “immediate needs for

personal care services.” DOH estimates the first year cost to counties above the state imposed cap could reach $35 million and will likely grow,

thereafter. We have attached NYSAC’s comments related to the regulation for your information. The State Legislature has tried to nullify the court case that this regulation is linked to and that litigation is still working its

4

way through the appeals process and remains in the First Department of New York.

Counties recognize that it is highly premature to draft statewide regulations on a court case when appeals are still pending, but at the same time, the state should not be disregarding the Medicaid cap and imposing new costs on our taxpayers. Instead, we encourage the State to find ways to hold counties harmless for this ruling.

Safety Net Public Assistance

A few years ago, the State increased the county share of Safety Net funding to 71 percent and reduced the State share to 29 percent. Initially this was offset by fully federalizing both State and local TANF costs. Counties

strongly objected to this change at the time and it is becoming a significant challenge for many counties. Local Departments of Social Services warned that this funding shift would expose counties to huge costs increases in the future because the caseload and costs for Safety Net (which, unlike TANF, have no time limits on eligibility) were growing at much faster rates than TANF caseloads. Over the last five years, Safety Net costs have increased by more than 25 percent, while TANF and Family Assistance costs have

actually declined. This leaves counties paying 71 percent of a fast growing program where nearly all aspects of program eligibility and benefit levels are controlled by the state. Over 40 percent of counties responding to a recent survey (30 responded) are budgeting double digit increases in their Safety Net costs in 2015 compared to 2014, many counties have seen their costs and caseloads increase by double digits in more than one year since the state cost shift occurred.

This Safety Net funding shift is part of a long string of decisions by the State to gradually walk away from its constitutional

responsibility to care for the needy and place most of this

funding responsibility on local property taxpayers. This dates back to federal welfare reforms in the late 1990’s where the state began

leveraging newly flexible and available federal resources to lower state costs on a disproportionately larger scale than historic cost shares up to that point (i.e. the state kept most of the savings for themselves and provided little benefit to counties). Today, we are left with a public assistance

program that is wholly designed by the state, where local taxpayers support 71 percent of nonfederal costs and the state supports only 29 percent. By not sharing these federal resources equally with counties, local taxpayers

5

are forced to cover hundreds of millions of dollars each year in what were historically state costs.

Counties are strongly urging the Legislature and Governor to restore historic funding shares to 50/50 and provide much needed relief to local taxpayers.

Universal Prekindergarten and Preschool Special Education

Counties strongly supported the rollout and 100 percent state financing commitment for universal prekindergarten for all four year olds across New York State. Counties do remain concerned, however, that this state

expansion is leaving behind children with special needs in a separate

program and as a result will further widen New York’s implementation gap with the intent of the federal Individuals with Disabilities Education Act (IDEA) in that children with special needs should be accommodated in the least restrictive setting and alongside their peers. We will continue to work with the Legislature to ensure these two programs are streamlined as much as possible from a program implementation and financing side.

We are also encouraged by reforms to SEIT preschool special education rate-setting that were included as part of last year’s budget to ensure that the state and counties only pay for special education services that are actually delivered. Currently we use a tuition rate methodology for

reimbursement to providers based on an individual education plan for each student, but oftentimes students or providers have unavoidable absences and services in the plan are not delivered. The proposed reforms would help correct this situation.

Indigent Defense

With the recent settlement of the Hurrell-Harring litigation counties encourage the Legislature to support full state funding for the 5 counties involved in the settlement and to begin to lay the groundwork to support similar funding for all counties. The goal should be for the state to gradually takeover all of the costs of indigent criminal defense services as envisioned under federal law and as implemented in most other states. The 2015-16 state budget will be the starting point for fundamentally altering the justice system in New York to ensure fair representation for all individuals.

6

We expect that most counties will satisfy the requirements of year one of the tax freeze initiative enacted last year allowing tax rebate checks from the state to be paid to local homeowners. It remains to be seen how many counties will meet the year two requirements that include staying within the tax cap and also submitting a shared services or government efficiency plan that provides one percent in savings in the tax levy. While we do not know for sure, we do believe most counties will satisfy year two

requirements as well – for counties that do not make it, staying within the tax cap remains the biggest barrier. Counties have had years of difficult budgets and slow economic recovery in some areas.

Shared Services and Government Efficiency

Most counties have been implementing shared services with other local governments for a long time, some of these arrangements go back several decades. Under the current tax freeze law counties are expected to take the lead on developing and expanding new shared services arrangements. Counties strongly support the idea of acting as the lead in aggregating and developing such arrangements but broad participation and cooperation to work jointly on these initiatives has not gained as much traction as we had hoped.

We think the Governor has identified a good option in providing additional incentives through a $500 million matching grant to help lower property taxes for homeowners. While details are still forthcoming on this initiative counties would like state leaders to consider:

 Setting aside a portion of this funding as cash incentives that would

flow directly to local governments that enter into highly vertically integrated shared services arrangements (the more jurisdictions involved the better with matching grant funding being provided to each of the local governments involved in the arrangement).

 Creating incentive pools under which grants would be provided to

counties to help them finance shared services arrangements that require an upfront investment in order to encourage broader municipal cooperation.

 Provide a grant program to counties that would provide seed funding

to municipalities to pursue shared services or consolidations. Some counties have created their own grant programs that provide funding to municipalities to help them implement shared services programs and even consolidations.

7

Improve the Property Tax Cap upon Reauthorization

The Tax Freeze and Property Tax Cap are closely linked and we believe some modifications are necessary to the tax cap law upon reauthorization.

As enacted the property tax cap law did not foresee several unanticipated consequences that have been exposed over the years during

implementation that should be clarified and will improve the law.

 Municipalities should be able to exempt capital debt from the

formula, just as schools are allowed to do. It is not uncommon for a large share of new county debt to be the result of State requirements. (expanding/upgrading a jail or courthouse).

 Increases in PILOT revenue should not be included in the tax cap

formula. One of the major benefits of new development in a

community is increased revenue to improve government services. The current law limits the constructive utilization of such revenue increases by forcing most new PILOT revenue to be used to artificially lower property taxes (all of which pay for the state's costs anyway).

 The court ordered expense exemption should be extended to refunds

ordered as a result of tax certiorari proceedings. Because of the way reserving works under the tax cap law, taxpayers could end up paying for such refunds twice -- taxpayers would be refunding money to the plaintiff, then paying that money again into a reserve when the tax levy limit is recalculated retroactively by the State Comptroller (we believe this is an unintended consequence of the current law).

One-Time Surplus Funds

Numerous ideas are being floated regarding the use of these one-time funds. Counties agree with the Governor that these funds should be used for one-time expenditures. Counties strongly support:

 Public Infrastructure – roads, bridges, culverts, water and sewer systems, mandated structures (local jail, courthouse or environmental upgrades), remediating brownfield sites. This could come in the form of one-time (or a multi-year increases) to existing programs such as CHIP, aviation grant programs (AIR’99 & AIP, etc.)

8  Create an Emergency Preparedness Loan Fund – This could involve

the creation of a $100 million permanent fund that would cover immediate cash outlays in very broad state and/or federally declared natural disasters or emergencies to help cover immediate costs. Large cash outlays are often necessary to mobilize the necessary response to a disaster involving a large influx of personnel, equipment and

specialized teams to an area (fuel, lodging, medical supplies, etc.)

 Infrastructure Bank – Consider the creation of a permanent

infrastructure bank that offers very low and/or no interest loans for local public infrastructure projects under a certain dollar value ($30 million). Specific criteria could be established to ensure it does not become a replacement for normal capital needs locally (i.e., the project meets an urgent public health or safety need, the project is mandated by a state or federal agency, the project meets a certain regional need, etc.). The goal would be to help smaller jurisdictions meet important capital and public infrastructure needs and lower borrowing costs for local taxpayers.

 Statewide Broadband – Counties strongly support the Governor’s proposal for access to high speed broadband Internet access in remote, rural and underserved areas of the state. Surplus monies could be set aside for local governments to leverage for important expansion efforts to connect unserved and underserved areas of the state.

Overall, counties are encouraged by the Legislature’s recent efforts to limit the expansion of current mandates and also not impose new unfunded mandates. We will continue to work with the Legislature on ideas to

improve government efficiency and to develop a long term plan to actually lower property taxes from current levels, which we believe is a shared goal of local elected officials and our state elected officials.

A fundamental requirement is to control spending at all levels. We must also recognize that while we compare our levels of local property taxation to other states, we are not comparing apples to apples. Counties in New York fund and provide a broader array of services using local property tax

dollars, when compared to other states. Too often, New York State

9

states do. That must be addressed as we move forward, if we are to effectively address high property taxes in our state.

540 Broadway, 5th _{Floor, Albany, New York 12207 Phone: (518) 465-1473 Fax: (518) 465-0506 www.nysac.org} President: Mark Alger, Steuben County Executive Director: Stephen J. Acquario, Esq.

September 2, 2014 Katherine Ceroalo, Esq.

New York State Department of Health

Bureau of House Counsel, Regulatory Affairs Unit Corning Tower Building, Rm 2438

Empire State Plaza Albany NY 12237

Re: Proposed Rulemaking “Immediate Needs for Personal Care Services” Dear Ms. Ceroalo:

Thank you for the notification to comment on Department of Health proposed rulemaking that will impact county government. The proposed rulemaking is in regards to amending Sections 360-3.7 and 505.14 of Title 18 NYCRR, published July 16, 2014.

The proposed regulations are of paramount concern to county government and local taxpayers as they would undermine several of the Governor’s key legislative priorities including:

 Bypassing the local Medicaid zero growth cap;

 Severely compromising counties’ ability to maintain the state imposed property tax cap;

 Undermining the state transition to mandatory Medicaid managed care for long term care services; and

 Contradicting the Governor’s priority of streamlining state government operations and improving government efficiency by devolving certain aspects (retrospectively in many cases as the State has already taken administrative responsibility for implementing mandatory managed care for long term services in most counties and New York City) of the State’s takeover of local social service district’s Medicaid administrative responsibilities.

NYSAC also believes it is premature to draft statewide regulations for a court case that is still being

appealed and has never left the First Department of New York. Additionally, NYSAC does not agree that the judge’s initial and subsequent ruling prohibits the state from providing the necessary funds to cover these costs. The State has the ability to amend regulations to absorb 100 percent of these costs during the eligibility determination period and should do so in order to maintain the Governor’s legislative priorities and the intent of the Medicaid Cap statute of 2005, as amended in 2012. We believe DOH is drafting the regulation under the incorrect assumption that the state is somehow not allowed to pay for these costs.

It is within a judge’s power to interpret state laws, but not to create new law. We believe that by setting statewide regulations based off of court decisions that only occurred in the 1st _{Judicial Department (and is}

still on appeal), you are surpassing the power vested in the State Legislature. Additionally, the State Legislature has spoken on this matter and their intent is clear that county and New York City fiscal liabilities for Medicaid are now capped.

The Executive is undermining one of its signature mandate relief initiatives by drafting this rule in such a way as to breach the current Medicaid cap, especially before all legal options have been pursued (the State has not tried to stay the judge’s initial ruling). It could also set a precedent that any future judge could change the definition of immediate need for services to include any and all health related services. There are significant questions about whether it is appropriate to make counties responsible for this

expense, as state law has changed since the judge’s initial ruling. The State is now implementing a takeover of local Medicaid administrative expenses and also implementing mandatory Medicaid managed care for long term care services. The environment has changed. In most counties, managed care health insurance plans are responsible for enrolling and providing services to the exact clients that might be subject to this court ruling and the State has taken over administrative responsibility for this component of the Medicaid program. By the end of 2014 most counties may no longer have staff available to perform this “immediate need” determination. In counties where the transition has already occurred, the current business practice as directed by the State is to refer any Medicaid applicants to managed care companies for this type of service—not the social service district. The goal of the state through the Medicaid administrative takeover is to provide more uniformity in Medicaid program management and to reduce costs through centralization. This rule as drafted contradicts that objective.

NYSAC also urges the Department of Health to provide full and thoughtful consideration to the dozens, if not hundreds, of individual comments and recommendations for amending the draft regulation (although NYSAC questions the current need for a statewide regulation at all). The proposed regulation lacks clarity in defining certain elements, presents implausible timelines for eligibility determinations (5 days is just not feasible given staffing constraints and collecting and verifying appropriate information from applicants), creates new loopholes to the five-year look-back period for long term care coverage, is inconsistent with current regulations related to presumptive eligibility (these regulations should parallel existing

presumptive eligibility programs), does not require applicants to sign a repayment agreement, is silent on State’s role in running eligibility data against the federal data hub before referring the case to local districts, provides no clear guidance on who is responsible for such ineligible costs when the state completes its takeover of local districts Medicaid administrative costs by 2018 as required under state law, includes no maximum presumptive eligibility period (the regulation should state clearly that this presumptive eligibility period ends after 60 days), offers no guidance as to what happens when the application is made to the New York State Health Benefit Exchange, and is unclear whether the state will cover additional local district administrative costs under the proposed regulation, among the many other issues submitted by counties. Thank you for your time and consideration and the opportunity to comment.

Sincerely,

Stephen J. Acquario, Esq.

2015 NYSAC

Legislative Program

Medicaid and Human Services

■ Preserve the state’s cap on local Medicaid costs

■ Restore historic 50/50 state/county share for

the cost of the safety net program

■ Avoid cost shifts as the state takes over local Medicaid administrative functions

■ Ensure the state fully funds social programs

necessary for raising the criminal age to 18 Taxation and Finance

■ Lower the costs for counties as a way to provide permanent and meaningful property tax reductions

■ Honor county home rule revenue requests

Judicial

■ Develop a state-funded indigent defense

system

■ Ensure full state funding for any increase to arraignment/first appearance attorney services Public Safety

■ Increase state funding for probation and

alternatives to incarceration ■ Equitably allocate Statewide 9-1-1

Interoperable Communications Grants funding

■ Oppose FCC actions that increase cost on

local jails for inmate phone calls

■ Promote best practices for photo identification

and interrogation techniques

■ Increase telecommunication equipment

funding for county jails

■ Require updated drivers’ license photos to

increase safety for residents and officers charged with identifying individuals

This Legislative Program was developed by county delegates, and reflects the need for specific state or federal action. These priority issues have a direct impact on local governments, our businesses and

the New Yorkers who live in our communities. We appreciate your active support for this initiatives.

Details can be accessed at www.nysac.org/legislative-action/NYSACLegislativePlatform2015.php.

Priorities By Issue Area:

Key Priorities:

1. Preserve the cap on local Medicaid expenses

2. Restore historic 50/50 state/county share for cost of the safety net program 3. Avoid measures that shift costs to local governments and property taxpayers

4. Enact an ombinus sales tax rate renewal bill 5. Honor home rule requests

Children and Families

■ Establish stronger audit program integrity

protocols in the early intervention program

■ Reform preschool and summer school special

education programs Public Employee Relations

■ Allow creation of municipal health insurance

consortiums

■ Implement cap on payments adapted in 2007

workers’ compensation reforms

■ Oppose efforts to create new public employee

benefit mandates

■ Reform the Scaffold Law

Economic Development

■ Expand efforts to create venture capital funding

in all regions of the state

■ Encourage tourism by allowing RTVs on local

trails

■ Support the use of land banks, incentives for asbestos remediation and funding for brownfields cleanup and using state settlements to invest in economic improvement opportunities for distressed properties

■ Protect the ability of IDAs to promote local economic development

Gaming

■ Ensure casino revenue streams flow to county

governments

540 Broadway, 5

_{Floor, Albany, NY 12207}

518•465•1473 www.nysac.org

Additional details and supporting documents can be accessed at: www.nysac.org/legislative-action/NYSACLegislativePlatform2015.php.

Public Health and Mental Health

■ Reinstate article 6 revenue offset reimbursement

for mandated public health programs

■ Foster collaboration and information sharing as

the State OPWDD transforms the developmental disabilities system in communities across the state Transportation

■ Secure federal highway funding for locally owned

roads, bridges and culverts

■ Target state investments in strengthening locally owned roads, bridges and culverts with recent settlement monies received by the state

■ Increase investments in airports

Agriculture, the Environment, and Energy

■ Oppose proposed federal rules that would

redefine “waters of the US” and expand the reach of the Clean Water Act

■ Support statewide policies and programs that help

manage and combat the spread of invasive species

■ Help connect counties with renewable energy

options to help reduce energy costs for local governments and improve energy independence and resiliency across the state

Telecommunications

■ Promote broadband expansion and formalize

local government participation in the proposed merger between Comcast and Time Warner