Engaging deliberative democracy at the grassroots: prioritizing the effects of the fiscal crisis in New York at the local government level.

• Author: Salkin, Patricia E.
• Position: Introduction through I. Key Contributors to the Current Fiscal Crisis, p. 727-754

Introduction I. Key Contributors to the Current Fiscal Crisis A. Typical Municipal Expenditures in New York B. Fiscal Federalism: The Federal Fiscal Relationship with Local Governments 1. The Decline of Federal and Local Municipal Revenue Sharing Programs 2. Decrease in Federal Support Creates a Strain on Local Governments to Balance Their Budgets C. New York State's Fiscal Relationship with Local Governments 1. State Aid to Municipalities 2. Municipal Power to Tax a. The Property Tax Cap of 2011 3. New York's Unfunded Mandate Problem 4. The Modern State Response to the Unfunded Mandate Challenge II. Deliberative Democracy: Participatory Governance and Vehicles for Civil Discourse as an Alternative for Municipal Fiscal Decision Making A. Deliberative Democracy 1. Methods of Deliberative Democracy 2. Civil Discourse B. Participatory Budgeting 1. Toronto, Canada C. Models of Collaboration: Lessons from Land Use and Environmental Law 1. Community Advisory Groups D. Deliberative Polling E. On-line Dialogue F. Consensus Conferences and Planning Cells G. Citizen Juries H. New England Town Meetings I. Initiative and Referenda Conclusion INTRODUCTION

Local governments are facing unprecedented fiscal challenges across the country. These challenges have forced many municipalities to examine insolvency (1) and have subjected others to state-initiated fiscal control boards. (2) In March 2011, The New York Times reported that states across the nation were planning severe budget cuts in aid to cities and other local governments. (3) These cuts were expected to lead to more lay-offs, cuts in services, and increases in local taxes. (4) New York's roughly 1600 municipalities and 10,000 special improvement districts are no exception to these trends. (5) For example, in the summer of 2011, Nassau County reported fiscal problems that were exacerbated by $43 million in increased labor costs for a county already under the watchful eye of a state fiscal oversight agency. (6)

In 2006, then-State Comptroller Alan Hevesi began his annual report on local governments with the ominous warning, "[l]ocal governments across New York operate amid evidence of mounting fiscal stress...." (7) A year later, Comptroller Thomas DiNapoli warned,

Recent economic developments at the national, state and regional levels make this year's annual report on the state of New York's local governments a cautionary tale.... These signs point to slower revenue growth for local governments, potentially less State aid, and increased pressures on the revenue of last resort--the property tax.... This sobering news comes at a time when local governments already face a host of other fiscal pressures: growing debt burdens, new federal and state mandates, rising health care costs for active employees and retirees, and (particularly for schools) higher expectations for performance. (8) Another piece of legislation that further exacerbates the grim local fiscal situation in New York is the recently enacted local property tax cap. (9) Some view the cap as a way to control local spending or as a method of ensuring that local residents do not have to fear tax bills out of line with inflation. Others consider the tax cap a significant burden on local officials who must balance the paradigm of paying for federally and state mandated programs with the expectations for locally developed and delivered programs and services unique to each community. In his 2010 Report on Local Governments, Comptroller DiNapoli cautioned generally:

The road to recovery for State and local government finances will likely be a long and difficult one. In particular, school districts and counties face the expiration of federal stimulus funds at a time when State and local revenue growth will not be adequate to make up for the loss of federal dollars. Difficult decisions regarding spending and program levels loom ahead. (10) Exactly how to accomplish this feat in a political system where local elected officials often desire to be re-elected and where the laws do not require meaningful public engagement in local fiscal decision making, presents a major challenge.

Part I of this Article discusses many of the factors contributing to the fiscal crisis at the local level in New York including historic decreases in federal and state revenue sharing, the imposition of a new property tax cap, the failure of New York to address meaningfully the subject of unfunded mandates on local governments, and the dependency of some local jurisdictions on the timely adoption of a state budget. Part II discusses concepts of deliberative democracy and how local residents might be engaged to become partners with local officials in making difficult fiscal decisions that impact all community residents. Public polling, participatory budgeting, collaborative decision making, and citizen advisory committees are all examples of models promoted as methods for enhancing civil discourse and public engagement in helping to set local fiscal priorities. The Article concludes in Part III with a recognition that "business as usual" in New York is simply not sustainable and that while the state must do its part to ease some of the fiscal burdens, local government officials must return to the people who put them in office to seek more frequent input in an organized and methodical manner by employing one or more of the deliberative democracy techniques discussed in Part II.

1. KEY CONTRIBUTORS TO THE CURRENT FISCAL CRISIS

Local governments in fiscal crises are not new in New York. (11) In the 1970s, the State intervened to rescue New York City, (12) which was on the brink of disastrous bankruptcy. (13) Since then, six municipalities in the state have been subject to state fiscal control boards. (14) The power to tax is vested in the State Legislature, and the Legislature may grant to counties and cities the limited power to raise revenue through taxation. (15) Many believe that the fiscal crisis is due to a combination of factors: rising municipal costs and limited ability to raise revenue to pay for these costs. (16) The structure of local government in New York has also been under attack as being too complex, overlapping, inefficient, and costly. (17) At the core of these problems, however, rests the roots of federalism. Should the federal and state governments continue to mandate cost-sharing by local governments for services and programs that are developed and controlled at the federal and state levels, and can and should local governments count on fiscal assistance from the federal and state governments to meet their obligations to support local residents (including funding mandated programs and services)?

1. Typical Municipal Expenditures in New York

   One cause of local fiscal stress is the long list of expected services on which a locality must expend its resources to maintain a well-functioning local government. The Office of the New York State Comptroller has identified eight function service categories of local government expenditures (not including New York City). (18) In 2008, the largest service expenditure was for education, which amounted to 30% of local government spending. (19) The second largest categories were general government services and employee benefits, each of which accounted for 16% of local government spending. (20) Other services, in the order of resources spent, included public safety, debt service, transportation, and sanitation and utilities. (21)

   Data from the State Comptroller's Office reveals that from 1998 to 2008 expenditures for counties increased on an annual basis by 4.55%. (22) From 2004 to 2009 the total amount of county expenditures increased by $4,422,239,080. (23) Social services have been identified as the major expenditures for county governments, representing 26% of local spending...