The Boiling Point

New York Counties Under Extreme Fiscal Pressure
by | February 2005

Budget woes linger in localities everywhere, but few have it as bad as New York's counties. In recent months, Moody's Investors Service, the credit-rating agency, has downgraded the bonds of five counties and told investors to be wary of New York counties as a whole.

The biggest reason is Medicaid. Most states split Medicaid's bills 50- 50 with the federal government. Not in New York. Counties are part of the mix and are expected to pay for 25 percent of most Medicaid services. The counties' local share in New York adds up to $7 billion a year. In recent years, that amount has been growing at an overall clip of 15 percent a year. To make up for that spending increase, most counties have had to raise property and sales taxes substantially or make drastic service cuts.

County executives in New York have never liked paying the local Medicaid share, but lately the anger has come to a boil. Chemung County Executive Tom Santulli has placed a 25-foot-high billboard of a thermometer in front of the county courthouse. The mercury rises a little bit each month until it shows the county's $23 million Medicaid share--up 84 percent in the past four years.

In addition to Medicaid, New York's counties are getting hit hard by rising health care costs for their own employees, as well as higher pension contributions. As a result, in Albany County property taxes have gone up by 17 percent, 23 percent and 28 percent in the past three years. "We need relief," says Albany County Executive Mike Breslin, "or the system is just going to be blown apart."