Frank C. Moore, State Comptroller
Speech delivered before
Municipal Law Section
New York State Bar Association
New York City
Jamaary 27, 1949
"STATE~LOCAL FISCAL RELATIONSHIPS"
Lest October, the Executive Committee of the Municipal
Law Section, through its able Chairman, invited me to review
at this meeting the fiscal relationshipsbetween the State and
the local units of government. Upon my acceptance, it was
suggested that the Bar ae would be glad to ae F
Se
my talk if a copy were supplied akout the firs
In a letter to Jim Personius, as Sues eae |
"4t is herdly likely that I can predict
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before the last week in January what the
situation will be at that time or, more
importantly, at the adjournment of the
Legislature some time in March."
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It may well be that on tng hey /seedaeeeepamiaadi emeataen I had
special reason to distrust my ability to predict future event
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I anticipated, as probably you did, that in preparing
my remarks for this meeting, I would have before me the annual
legislative program of the Conference of Mayors of Cities and
2.
Villages usually published in December. Not until late
yesterday afternoon was a copy of this report available.
Unfortunately, it was received too late for analysis
and determination of the tremendous cost it proposes to add
to a state budget which undoubtedly will be the lergest in
our history.
Although it is generally known that income taxes must
be increased substantially to finance state purposes and local
assistance in the coming year, the report of the Conference of
Meyors offers no suggestion for the financing of its program
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other then #mexetaaa further increase in income taxes.
If the State is forced to increase income taxes from the
present reduced rates to the so-called normal rates, present
income taxes will be increased 66 2/3 per cent. If we add
to that increase the additional rate proposed by the Conference
of Mayors, present income taxes will be more than doubled. Even
this increase will not finance all of the proposals recommended
yesterday by the Conference of Mayors. No suggestion has been
other proposals.
It is probable that when the Conference of
made as to the sources of revenues required for these
representatives did not anticipate the large increase
Mayors adopted its 1949 legislative program, its
in state aid for education recommended by the
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Governor in his message to the Legislature last Monday evening.
In thet message the Governor announced thet he would include
in his 1949-50 budget, additional state funds for education,
toteling more than $100 million, which amount would include
increased state aid for common schools, approximating
$81,600,000. The Governor further stated in his message that
the local assistance budget for 1949-50 would include
$228, 800,000. for state aid to common schools as compared
with $118, 700,000. appropriated for the same purpose seven
The Legislature of 1946 sharply increased state
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reimbursement for home relief, old age assistance, aid to the
blind end aid to dependent children. The local share of the
eel,
cost of home relief was reduced from 60% to 20% and the state
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share of local expenditures for this purpose was increased from
hO~ to 80%, effective January 1, 1946. The local shere of the
other three welfere services was likewise reduced to 20% by
the State essuming the difference between the federel contribution
end 80% of the local expenditures for old age assistance, aid
to the blind end sid to dependent children.
One of the newspapers in this city published a story l=-st
Sunday that the nation's monthly relief bill has increased
136% in the last three yeers, despite the fact thet national
income is eat a record high level. The number of ceses has
increased 54%. At this moment, I cannot state the amount
included in the next budget for state assistence to the
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localities for welfare purposes; nor can I predict the total
amount which will be expended during the current fiscal year
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ending on March 31st next.
ft cen tell you that in the fisesl year which ended on
March 31, 1948, state assistance to localities for welfsre
nt
purposes increased approximately $61 million over the preceding
fiscal year, or more than 85%. It is interesting to note that
the increase was 95.8% in New York City end 60.2% upstate. In
the seme year, state assistance to the localities for home
relief, rose 107.6%; aid to dependent children increased 98.5%;
old sge assistance, 44.6% and aid to the blind, 56.3%.
By far the lergest portion of the increase in assistance
for home relief and aid to dependent children went to the
City of New York. State assistance to New York City for home
relief increased 123% and upstate 66%. In the case of aid to
dependent children, state payments to New York City increased
101.8% and upstate localities 86.2%.
In that same year, state assistance to New York City and
upstate for old age assistance and aid to the blind rose at a
more nearly equal rate. State aid for old sge assistance
inereased 45.8% in New York City and 42.9% in upstate
localities.
State assistance for aid to the blind, which is much
smaller in dollar amount than the other three welfare services,
rose 53.6% in New York City, compared with 65.4% upstate.
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It is noteworthy that of the $132,401,431. paid by
the State to the localities to assist them in financing
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- local welfare purposes, 74.5% wes paid to the City of New York
and 25.5% to upstate localities.
It is also important that you note that the total
emount of state assistance to all locelities for welfare
purposes, for the fiscal year ending March 31, 1946, was
$33,024,840.71 and that in the fiscal year ending March 31, 1948,
it wes $132,401,431.11, or more than four times as much.
it is also interesting to note that the total of all
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kinds of state assistance to the localities increased in the
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two year period (1945-46 to 1947-48) from approximately $273 million
rn to approximately $416 million, or more than 50%.
en Even at a time when the Federal Government proposes
a
netional budget of more than $42 billion, this increase in
state assistance to the locelities is important in doller
amount and, in appraising the burden of increased state
assistance upon the taxpayers of this State, it should not be
forgotten that they will contribute aporoximately one-fifth
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of the revenues required to finance the federal budget.
If we assume thet New York Stete has 14 million
inhabitants, one-fifth of the federal budget for the next year
- would mean $600 for each man, woman and child. We all know that
the cost of the federal government +e ne apportioned on @ per
capita basis, but it is surprising how few people realize that
in vurchasing shoes and clothing, bread and milk, they are con-
tributing towards the payment of a vast multitude of taxes.
I need not remind you that the taxpayers of this State
support not only the federal and state governments but more
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than 9,800 subdivisions. of local government. a ee for all
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governmental services is startling.
This nation is engaged in a new type of conflict. It
has been called a "cold war", On a world-wide front, we are
fighting for our very existences amt Gur munitions of war are
cold cash.
Just a few days ago, the Commender-in-Chief acknowledged
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that our supply of these munitions apg not inexhaustible.
The enemy is using a toslly different weapon -- ideas
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and ideologies -- and there is no evidence that his supply is
exheustible nor that his munitions are less effective than
ours. We simply cannot afford governmental waste or extrave-
gance.
the
Burke, Lincoln and Brandeis were/great liberals of their
day.
Edmund Burke said:
"Government is a contrivance of human
wisdom to provide for human wants."
Abraham Lincoln seid:
"The legitimate object of government
is to do for a community of people whatever
they need to have done, but can not do at
all or can not do so well, for themselves,
in their separete and individuel capacities.
In all that the peovle can individually do
as well for themselves, government ought
not to interfere."
Mr. Justice Brandeis pointed out that
"Experience should teech us to be most on
our guard to protect liberty when the
government's purposes ere beneficent."
Rerrene
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If our local government is to survive as a vigorous,
importent member of our family of governments, it must soon
find the right answers to some questions it has long avoided.
What shall be the relationship between local government
end the federal and state governments? Shall it be a partner-
ship of cooperating but indevendent equals, or shall local
government, by increasing reliance upon the other two, become
a dependent, escaping responsibility but surrendéring authority?
Shall we attempt to meet the expanding needs of our
people with the local government methods we have inherited
from the past or shall we modernize them to keep vace with our
scientific and social progress?
Shall we be content with the lessening interest of
our citizens in, and respect for, their government, or shall
we endeavor to awaken e civic patriotism as vigorous as our
defense of the nation in time of war?
The decisions of our local governments upon these and
related questions should be bold.
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Local government should insist uvon the allocation to
it of an area of authority within which it shall exercise’
power and accept responsibility equal to that of the federal
and state governments within their respective zones.
In all that our local governments can individually
do as well for themselves, the federal and state governments
ought not to interfere.
Local government should be granted the full measure of
power essential to the successful performance of its share of
the total governmental job.
To insure local responsibility, the state should refuse
to legislate in areas where the localities have the power,
but sometimes not the courage, to make decisions.
Local government becomes strong, not by mere possession
of the powers of self-government, but by the exercise of these
powers.
New York State's assistance to the localities includes
more than vast sums of money.
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The Division of Municipal Affairs in the Comptroller's
office is charged with something more than the negative job
of pointing out the mistakes of its local officials. It has
the affirmative responsibility of helping the localities to
the successful accomplishment of their governmental objectives.
Government must not lag behind industry in its search
for a better product. Accordingly, we have established in the
Municipal Affairs Division an agency for research in local
government. Reservoirs of suthentic up-to-date information on
pertinent subjects have been built up and are being maintained.
They are available not only to locel officials but to everyone
interested in our local government.
We have almost completed the compilation of up-to-date
copies of the charters of all of our cities. Within two or
three months, we shall complete the indexing of e211 of these
charters and of the local lews of the cities and of the
special acts of the Legislature applicable thereto.
We have initiated a similar study for all of the chartered
villages.
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Within the last year, we have completed an analysis
of the laws pertaining to the fiscal relationship between
cities and their school districts.
For more than a year, a committee of eighteen represen-
tative citizens has sought out opportunities to improve the
fiscal relationships between cities and their school administra-
tion. It has recommended important changes in the constitutional
debt and tax limitations applicable to the municipalities of
this State.
The constitutional amendments proposed have been
approved by the Legislature of 198. If approved by the
Legislature of 1949, they will be submitted to the voters of
the State at the General Election next November for their
approval.
The present constitutional tax limit is applic able
to all cities, all villages, and to counties containing a city
having a population of more than 100,000. The limit is now based
upon the five year average of the assessed valuation of the
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taxable real estate of the municipality, but taxes for
Gebt service are excluded in every municipality.
The limit does not now apply to all cities alike.
The City of New York is restricted to 2% for all purposes of
local government, including county, city and school.
The otner cities having a population of more than
100,000 (Buffalo, Rochester, Syracuse, Yonkers ard Albany)
are restricted to 2% for city purposes, including schools,
but the counties within which such cities are located may also
levy taxes upon real estate in such county (including the real
property within the city) up to 2% of the five year average
assessed valuation of th€county.
There is also a 2% limit in the smaller cities, but
the Constitution provides two devices by which they may exclude
taxes levied for schools, in computing the amount they may
raise for city purposes under the tax limit.
These distinctions have produced a variety of situations.
One city (New York) has a 2% tax limit for county, city and
school purposes. Five cities (Buffalo, Rochester, Syracuse,
Yonkers and Albany) have a 2% limit for city, including
school, purposes. The real property in these five cities,
however, is subject to additional taxation for county purposes
up to 2% of the five year average assessed valuation.
In forty-seven of the fifty-six cities having a
population of less than 100,000, all school taxes =
DeNRoat tees ane.
oxeludea)
n the other meet Forty-seven of the fifty-six
co saan
cities are situated in counties Waiich may levy taxes upon
real estate without constitutional restriction while the
other nine are situated in counties subject to bg 2% pit
Under the proposed paenememe gazes levied for
debt service will also be excluded. The constitutional 2%
tax limit, however, would be based upon the five year average
of the full value (instead of the assessed valuation) of the
municipalities, as determined
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by the state equalization rete. While at first glance this
would seem to increase the constitutional texing pnower of the
municipelities, it merely gives the municipalities the same
taxing power they would now have if they essessed property
et full value, as they sare required to do by statute and as
their assessors annually certify they have done.
Some municipalities have been discouraged from increasing
their assessed veluations to 100% because of the uncertainty
of the county eaualization retes. The Amendment permits all
municipalities to utilize their full taxing power without
running the risk of assuming too large 2 proportion of the
cost of county government because of Unt ehe oqtestssy ton rates.
The provosed Amendment restricts the amount of taxes
which all counties, and all school districts including real
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property in cities, may levy upon real estate for current
purposes, exclusive of debt service, but the limitation is
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somewhat different from that applicable to cities Oy;
The proposed constitutional debt limit makes no a a
——or
—, \
in the present base -- the five yesr average of the assessed
———— ee,
valuation of the taxable real property of the municipelity.
In the case of revenue producing improvements, however, it
permits the partial exemption of indebtedness to the extent
that the improvement produces revenues sufficient to pey
opereting costs, plus debt service.
It is noteworthy thet the proposed amendments recuire
a municipality, in the cese of revenue producing improvements
constructed hereeftery (except water) y to apply the revenues
of the improvement, first to operating expenses and then to
debt service.
There is real need for further study of the existing
constitutional debt limit. For example, whether or not school
district debt must be included in computing the city's power
to borrow, depends upon the reletionship of the school district
bounderies to the city's boundsries on January 1, 1939. hes Yio
ches toposes, sspraltiy fg QregemeS dy mee
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There is an inconsistency between our existing con-
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stitutional debt and tax limits which seems to have escaped
notice since the date of their birth in 1884.
—_—_
The constitutional tax limit does not restrict tne acon S
expenditures of a municipality for current purposes but only
the portion thereof to be financed from revenues derived by
ee
taxes on real estate. The constitutional debt limit, however,
Goes not restrict the amount of taxes thet may be levied on
———e
real estate for debt service but rather the total amount thet
—_—
may be borrowed. When our municipalities derived substantially
ell of their revenues from taxes on real estate, the distinction
between the two amendments was not importent, but it becomes
important as municipal revenues from sources other than real
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property taxes increase.
Expenditures for current purposes may rise as such
revenues expand, but the amount that the city may borrow is
still controlled by the assessed valuation of its real estate
)
despite the fact that its revenues from other sources far
exceed its revenues from real property taxes.
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New York City, for example, now derives less than half
of its revenues from reel property taxes. These additional
revenues vermit it to expand its expnenditures for current
purposes; but, in the amount that it can borrow, it is still
controlled by the value of its taxable real estate.
The present constitutional debt limit should be
reviewed to aporaise the need for gearing it into the changes
now occurring in sources of municipal revenues.
Local government needs and is entitled to a system of
financial suvoport which will give it the dignity of fiscal
indevendence and responsibility.
Heretofore, substantial federal aic to the localities
has been limited to periods of emergency, but there are
indications that it may be extended hereafter upon a continuing
basis in aid of certain local services. The pattern for this
new assistance is yet to be determined. There is a danger
that local government in its eagerness for additional revenues
to counteract the influence of inflation may surrender more than
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it receives in exchange. A system of federal aid which diminishes
the independence and responsibility of local government is
not worth its cost.
Experience in other states as well as this demonstretes
that local non-proverty taxes are not only here to stay but
that they will be used increasingly hereefter. There is
need, however, for expansion of local taxing powers not only
. but
to enable more municipalities to use them/to provide a broader
choice.
There has long been a need for a division of the field
of taxation between our federel, state and local governments.
As a member of the family of governments, local government is
entitled to a fair share in the family income from sources other
than the real property tex.
But all the difficulties of local governments are not
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found in their relationship nee the federal and state
governments. The localities should take a good look et them-
selves, both collectively and individually.
Municipalities have some of the characteristics of
individuals. One may be in good physical shape, but another
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run down. We have our alert, up-and-coming communities and
élso those that are drifting aimlessly.
Luther Gulick said last year that: |
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"the shame of the American city today is \ |
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found in three things: first, lazy
citizenship with low standards; second,
leck of city pride; and third, failure.
to look ahead and make great plans for
the future."
Meny of our communities do lack pride. Certainly
all of them should look ahead and plan for their futures,
not only for their needs, but for the means of financing them.
The starting point for greater citizen responsibility
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is greeter citizen understanding of our government.
Becesuse local government provides so many of the
day-to-day services which mean so much to the happiness and
comfort of the citizen, local government has the greatest
opportunity to aid his understanding.
With greater understanding will come increased awareness
of the services provided and appreciation of their value.
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= Bed.
The prestige of the oublic service will be reised to
the high level it deserves.
The citizen who now shuns politics will then recall
that Elihu Root said thet:
"Politics is the practical exercise of
the art of self-government."
He will be proud to be known as a politician as wes Lincoln.
Our people will be inspired with as great a zeal for
service in their country in time of peace as in war.
If local government does its part, we shall immeasurebly
strengthen the foundation upon which we heve built our nation.
With that strength, we need not feer the future.
