Fiscal Stress Rankings: Good Idea In Theory

In theory, state Comptroller Thomas DiNapoli’s fiscal stress rankings are a great idea.

DiNapoli’s office reviewed 2012 financial information for the state’s 1,607 municipalities and then ranked them in four categories – no designation, which means the municipality is facing no fiscal stress; significant, meaning that there’s a problem now; moderate, meaning that there is some trouble now and could be more; and susceptible, meaning that there could be a problem depending on what happens, including things out of the government’s control.

The higher a municipality’s score on DiNapoli’s scale, the more likely it was the municipality would have financial problems. State officials plan to use the rankings as a guide to help muncipalities before they are too far gone to save.

If only DiNapoli’s system worked as well as he had hoped.

Only 24 of New York’s 1,607 local governments, a whopping 1.5 percent, are classified as facing any sort of fiscal stress. Six municipalities are listed as significant, with six more listed as facing moderate stress and 12 listed as susceptible to fiscal stress. Only two Chautauqua County municipalities are listed on DiNapoli’s rankings. The town of Ellicott is considered to be under moderate stress with a score of 64.2 percent on DiNapoli’s scale while the town of Chautauqua is considered to be susceptible to fiscal stress with a score of 45.8 percent.

What? How can that be?

There is one fatal flaw in DiNapoli’s system – it doesn’t take a muncipality’s tax burden into consideration. The fiscal stress rankings consider a municipality’s year-end fund balance, operating deficits, cash position, use of short-term debt and fixed costs. Consideration of taxation is only included in an environmental rating that considers issues beyond the control of local leaders, such as population, age, poverty, property values, employment base, intergovermental revenues, constitutional tax limit and sales tax revenue.

You see, as long as governments run a surplus each year and show they can pay their bills, they won’t be considered to be under fiscal stress. A municipality’s taxes and fees can increase 5 percent a year and the population can drop every year, but that community won’t show signs of stress in DiNapoli’s rankings. Never mind that taxpayers are being taxed out of their homes or businesses are fleeing New York state because it costs too much to do business here.

An outsider who knows nothing about New York would look at DiNapoli’s fiscal stress rankings and think everything was fine.

Those of us who live in the real world know differently.