Connecting the Dots
As 2012 came to a close, members of “Citizen Voices” put together a series of articles about our community. Those articles were intended to provide insight into where we are in terms of our fiscal circumstance and to make a case for the need for economic and population growth. Even after providing valid information, there is still resistance to the need for economic growth within our community.
According to an annual report released today by State Comptroller Thomas P. DiNapoli, many local governments have nearly exhausted their resources in an effort to avoid severe fiscal stress. “For the past five years, the financial trends in our municipalities and school districts have become of heightened concern,” said DiNapoli. “Years of decreasing, stagnant or slow economic growth have led local governments to cut vital services and tap their rainy day funds to balance budgets, a practice that is not sustainable in the long term.”
DiNapoli’s report noted that the growing disparity between revenues and expenditures was increasing. From 2006 through 2011, total local government expenditures grew by 17.4 percent (an average growth of 3.3 percent per year). Meanwhile, revenues only grew by 15 percent (an annual average of 2.8 percent per year). More specifically, county expenditures jumped 17.2 percent, while revenues climbed 13.4 percent. Total city expenditures (excluding New York City) increased 8.4 percent during this time frame, but revenues only increased 6.4 percent. And town expenditures grew 12.9 percent, but revenues increased only 7.1 percent.
We’re hoping that this article will help connect the dots and thus provide a more clear picture of where we are and what must be done to prepare now for what is, and will continue, facing us. Otsego County, with an area of about 1,100 square miles, had a population of about 50,200 in 1860. By the mid-1900s, our population hovered around 50,000. In1990 the population was 60,517. It increased slightly between 2000 and 2005 and then showed a downward trend in 2006, 2007 and 2008. In 2010 the population had rebounded to 62,259, but by 2011 it had declined to 61,917 – about where we were in 2000.
We have fewer people 18 and younger and more people 65 and older than the State as a whole. The percentage of people with a high school diploma, 88.3%, is greater than the state as a whole, but our drop-out rate is growing. About 26.2% of our population has a Bachelor’s degree or higher which is slightly less than the State as a whole.
The median value of owner occupied housing, $131,000 is about 30% of what it is for the State as a whole and contributes to our lack of ability to use property taxation to raise the revenue to cover growing costs (education, health care, highways, retirements, etc.). The per-capita income is $23,176, and about 16.4% of our citizens fall at or below the poverty level – a number higher than that for the State as a whole. In the 2005-2007 census, the number of people in the county at or below the poverty level was12.8%. Thus the percentage has grown by about 4% since the last census.
According to the most recent census data, the county issued 37 building permits in 2011 – this compares to 22,575 for the state as a whole. Unemployment has risen from 4.5% in 2006 to about 8% today. Neither of these indicators encourages optimism.
So there we have it. Fewer people with lower incomes and relatively low property values are being asked to pay for an increasing tax burden. As a result, people are leaving and that places an even greater tax burden on those that remain. As a result, the schools and city, towns and county governments are facing budget shortfalls. In order to remain within tax caps and political reality they have begun to cut programs, defer repair and maintenance and close schools – the beginning of a fiscal death spiral.
Does the future look brighter? According to census information, the population of central NY is expected to decline 9.2% from 2006 to 2030.The population aged 65 and older is expected in increase by 36% during that same time. The cost of caring for the elderly will dramatically increase as health care costs and services rise. As the size of households continues to decline and young people continue to leave the area in search of jobs, the burden of caring for the elderly will increasingly fall upon the public sector and not-for-profits. The isolation of the elderly in villages and outlying areas, increased infirmity, increased dependence on provision of nutritional meals and homecare and transportation will translate into more budget conflicts.
It is the citizens of the county that will be expected to pay for the care for the elderly in the form of tax increases and it is the citizens of the county that fund the not-for-profits via donations. If people continue to leave, those remaining will not only have to cover the cost of existing services but also for the increasing health care costs for the elderly.
Is it becoming easier to connect the dots? Either we grow our economy and population base or we perish. That is economic reality. There is, however, a solution that has not yet been explored. Those of us who, like Warren Buffet, feel we’re not paying enough in taxes could volunteer to come forward and offer to pay more. Such an offer would be very much appreciated by those who feel they’re paying too much in taxes.
Right now about 33% of our residents are employed by the public sector (education comprises 17% of that percentage and healthcare/social assistance about 83%. Those employers are tax exempt and thus their growth, without a commensurate growth in the private sector, could result in an increase in the tax burden imposed on the private sector and our population. The retail trade (12.6%), manufacturing (7.8%), construction (7.1%), arts, entertainment and food (9.9%), public administration and other services (7.9%) and everything else (21.3%) make up our economy.
If the retail side is going to grow, people need jobs so they have money to spend. If those jobs come from the public sector, tax revenue will continue to lag and thus cause budgetary shortfalls. Those who oppose economic growth might do so because they feel comfortable with their economic situation. In many cases their income comes from retirement plans or investments. Those investments generally consist of a mix of individual stocks and mutual funds and the mutual funds often have a mix of stocks – including stocks in energy companies. The holders of those stocks expect them to perform well and be profitable. If it’s OK to own energy companies, why is it not OK to have them located here?
Now that we’re beginning to connect the dots, support for doing what it takes to grow our economy and population base will broaden and thus the picture created when the dots are connected will be brighter. We can, we must, do this together.