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ERIE COUNTY'S NEXT WAVE
HOW THE FISCAL CRISIS GIVES LOCAL GOVERNMENT A CHANCE TO GET IT RIGHT FOR THE FUTURE

Crisis has a close cousin: opportunity.

In the wreckage of Erie County's budget, there is a chance for change that could help this region build the future it wants. As bad as the county fiscal mess has been, the collapse has exposed flaws and weaknesses that can be corrected. The challenge is to find the right corrections, and the courage to make them. The depth of this crisis, coupled to the City of Buffalo's financial woes, is sign enough that changes must be far-reaching, far-sighted and fundamental.

To create opportunity from crisis, Erie County needs to do four things:

* Take a long, hard look at the way the county does business, from the political structure of its government to the top-down way it tries to champion regionalism.

* Decide, as a community and not just as a government, what it wants to be in 10, 15 or 20 years -- commercial center, government hub, tourism mecca, creative community -- and then pick the best paths to follow to get there.

* Turn a divisively partisan political culture into a cooperative alliance aimed at finding solutions by refocusing on the basic function of government -- the delivery of services to residents -- instead of the political turf of who gets to deliver them and who gets to control the jobs involved.

* Keep constant and significant pressure on New York State lawmakers for mandate and regulatory relief, because unless the costs of Medicaid and other mandates are controlled, neither Erie nor any other county in the state can avoid financial chaos.

As important as that state role is, Erie County made its own mess. The condition of county government today stems from major and repeated failures of leadership and from irresponsible fiscal policies, as well as from the pressure of escalating costs beyond county control.

Erie County dodged a bullet for years, relying on one-shot fixes such as selling the Erie County Medical Center to a public benefit corporation and using the money to balance the budget, and withdrawals from the county's reserves until they were depleted. Ignoring warnings, the County Legislature routinely approved County Executive Joel Giambra's budgets despite their lack of recurring revenues to pay recurring costs.

Now, the reserves are gone, and the county finds itself with revenues that can't support traditional government spending. Draconian cuts have restored some balance, but at the cost of parks, long waits at the Auto Bureau, possible reductions in state and federal assistance -- and national publicity for being unable to afford toilet paper.

County government needs immediate attention, but it's not the only issue for county residents. Buffalo -- the indispensable cultural, business and historic heart of the county, and its best hope for future recovery -- needs continuing attention as it climbs back from its own disaster with help from a financial control board. And long-term discussions of regionalism -- consolidations and mergers -- still need to happen in a region that has to find greater cost efficiencies if it wants to maintain quality services.

And New York State must change. By passing along mandates without the funding to pay for them, it cripples local governments. The county's share of Medicaid costs is greater than its entire property tax levy now. But cost-passing also makes it easier for state lawmakers to adopt expensive programs without worrying much about how to pay for them. Burdening Albany with more of the costs would help encourage more spending restraint -- and cost cutting that would mean real savings for taxpayers, not just a shift in billing from local property taxes to state income taxes.

Governmental reform also is key, because with greater voter accountability, lawmakers would be more likely to take those steps. Redistricting overseen by an independent panel, instead of the current political map-drawing aimed solely at protecting incumbents, could make state legislators more loyal to their constituencies than to the political party leadership in each house -- and more cost-conscious than influence-conscious.

But the current tax revolt centers on a county that tried to play the cards it wished it had -- anticipated state program reforms -- and not the cards it held. Think of it as a kind of financial tsunami.

Before a tsunami, before even the earthquake that triggers a tsunami, there is the long, slow build-up of pressure along cracks in the Earth's crust. In the political fundament, those cracks formed during years of decisions based more on politics than sound finance. Giambra and the Legislature continued to spend more and more, and revenue remained stagnant. Worse, they refused to make the difficult decisions that involved cuts in spending, increasing revenue or both.

Then came the earthquake, triggered by Giambra's political decision to try to force the state's hand on Medicaid reform. In addition to submitting a status quo budget that raised the sales tax by a penny to 9.25 percent, and made virtually no effort to cut expenses, he also sent the County Legislature a budget that contained no tax increase but decimated county services. That all-or-nothing approach proved unwise. Faced with the possibility of a sales tax that would be among the highest in the nation, taxpayers made their displeasure known loudly and clearly.

With that strain, the system snapped along its pre-existing political fault lines -- and a fiscal tsunami engulfed county services as the Legislature went through waves of public protests, reversals of positions by legislators and back-room discussions between Giambra and Legislature leaders aimed more at protecting patronage than promoting good government.

Leadership? Hardly. Voters in November will decide which county lawmakers still are capable of leadership despite last winter's performance, but some of them have to start demonstrating that skill now. By November, the 2006 budget will be looming overhead. There are several steps the county can take.

It can find more ways to take partisan or personality politics out of the system, or at least reduce that influence so good and cooperative governance stands a greater chance.

It can order a deeper and more comprehensive study of county operations than anyone, from the state comptroller to the "Who Does What? Commission," has done so far. It can add value to that study -- which could cost from $700,000 to $1 million, if done properly by non-political outside experts -- by making it not just a county study but a countywide study, inviting meaningful participation by all the lower levels of government here and focusing not on who provides services but how efficiently they are delivered to the residents of this county.

It can review and rethink whether its current and politically polarizing system of strong county executive/oversight Legislature is really the best way to run Erie County.

A sound alternative is worth exploring. A county manager/policy-setting council system would reduce the political power centers from two to one, retaining the more broadly representative legislature to set policies and hiring a non-political chief executive officer, experienced in management instead of politics, to hire, fire, submit budgets and oversee departments. A county manager would not be elected by the public, but would not be locked into set terms and would serve a revokable appointment by the elected council or legislature.

That form of government is slowly gaining ground throughout the United States, according to the International City/County Management Association, and already is used in New York, largely in non-urban areas. It deserves at least consideration here.

It's also worth noting, though, that one large urban area with a strong county executive form of government already has managed to claw its way back from a worse crisis than that faced by Erie County. Downstate, Nassau County is continuing a financial recovery from a crisis that spurred creation of a control board in 2000, the Nassau Interim Finance Authority, that retains oversight powers until 2007.

But under County Executive Thomas Suozzi, who like Giambra is a leader in the push for state Medicaid spending reform, Nassau County rediscovered financial discipline. Its cash-flow borrowing has dropped from a peak of $469.4 million in 2000 to zero in 2004 and 2005. Its reserves have grown from $27.8 million in 2001 to $90 million now. It ended Fiscal Year 2004 with a $75 million operating surplus, most of that diverted into reserves and investments. And Wall Street credit rating agencies have raised its investment grade eight times.

According to the county finance chief, the turnaround stemmed not just from a combination of tax hikes and spending cuts but from better financial management. The county charter was amended to call for multiyear financial plans and quarterly budget and cash-flow reports.

Nassau County also created a "County Stats" program to monitor operational indicators, on the generally accepted theory that you can't manage what you can't measure. Performance measurements gave managers a needed tool for evaluating programs and jobs. And that, in turn, helped the county create a budget that expresses spending in terms of programs and service, not just departments.

Third, Nassau County sought a benchmark measure by participating in the Center for Performance Management, which compares such performance indicators with those of other governments across the nation. And it's putting all the financial information it can on its publicly accessible Web site.

There are models, in short, for recovery. Following them, or crafting new ones, requires political courage as well as fiscal expertise. It requires leadership backed by the full community, private and public sectors alike.

The county crisis and the taxpayer revolt it spawned are a push for change. Today's chaos can deepen in 2006, or this year can mark the start of recovery. This county now faces a real test of will -- and leadership.