June 18, 2013
Albany, NY

Governor Cuomo Announces Agreement on Legislation to Establish Financial Restructuring Board for Local Governments; Reform Binding Arbitration Process

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Governor Andrew M. Cuomo, Senate Majority Coalition Co-Leaders Dean Skelos and Jeff Klein, and Assembly Speaker Sheldon Silver today announced an agreement on legislation that will create a Financial Restructuring Board for Local Governments as well as reform the binding arbitration process to help eligible municipalities manage their finances and provide public services in a more cost-effective manner. The legislation includes an alternative binding arbitration process that municipalities and unions could voluntarily opt for to resolve contract issues in an expedited process.


Localities across the state are facing a growing financial crisis of soaring retirement costs while their populations stagnate and property values drop, Governor Cuomo said. The only options for struggling municipalities cannot be bankruptcy or being subject to a financial control board. This legislation would create a Financial Restructuring Board for fiscally distressed cities to turn to in difficult times. By helping localities to make tough decisions and manage their finances now, the State as a whole will benefit in the long term because we simply cannot afford to kick the can down the road any longer. I thank my partners in the Legislature for reaching an agreement on this critical legislation for our communities.


Senate Majority Coalition Co-Leader Dean G. Skelos said, I am pleased that we have reached an agreement with the Governor and Assembly to offer new tools to allow municipalities to put themselves on firmer fiscal footing for the future. The agreement establishes clear ability to pay standards that arbitration panels must follow and gives eligible cities the option to have their finances reviewed by a board of fiscal experts, who will provide recommendations that can leverage state efficiency grants. By doing so, we have strengthened the hand of cities and extended additional protection to hardworking taxpayers.


Senate Majority Coalition Co-Leader and Independent Democratic Conference Leader Jeffrey D. Klein said, Its important that we help struggling cities shore up their finances in the long term. This is a fair, meaningful, and fiscally sound way of providing doing exactly that.


Assembly Speaker Sheldon Silver said, Todays agreement would ensure collective bargaining binding arbitration agreements are resolved in a fair and balanced manner, based on both a municipalitys ability to pay and the merits of the employees involved.


Senator Jack M. Martins said, At a time when many of our municipalities are struggling through this difficult time, it is incumbent on us to do anything we can do to assist them in continuing to provide vital services to our residents.


Peter A. Baynes, Executive Director of the New York State Conference of Mayors said, Since 1974, the expensive mandate known as binding arbitration which was originally enacted as a two-year experiment but has been deemed a sacred cow ever since has blindly ignored the fiscal ability-to-pay of local taxpayers and arbitrarily inflated the cost of police and fire contracts in every region of this state. Thanks to Governor Cuomos leadership, for the first time this inequity will begin to change as arbitrators, in most instances, will be obligated to give taxpayer ability-to-pay the highest consideration, and also take into account the fiscal constraints of the 2% tax cap. Mayors urge the Governor and State Legislature to make this the first of many important steps toward overdue relief from state mandates.


Onondaga County Executive Joanie Mahoney said, "Today's agreement to create a financial restructuring board provides another tool to help local governments make long term changes for the better. I commend Governor Cuomo and the State Legislature for continuing to provide real options for local government reform without any new mandates. I would also like to thank the Governor for including binding arbitration in the agreement. For years, local taxpayers have been forced to pay for expensive arbitration awards which were made without regard for the community's ability to pay and Governor Cuomo's proposal fixes that."


Albany County Executive Daniel McCoy said, Governor Cuomos Financial Restructuring Board is an important asset to local governments seeking to balance their finances in the most growth-oriented ways possible. The Governor has made great strides in expanding cooperation between state and local governments in his three years in office, and I look forward to continued collaboration in the pursuit of creating a more robust regional economy. This legislation needs to be passed before the legislative session ends.


Albany Mayor Jerry Jennings said, Over the course of the last three years Governor Cuomo has proven that he is in sync with the needs and challenges of cities like Albany. It is relieving to have leadership from a Governor that understands the needs of New Yorks local governments and the solutions which work best for their issues. No two New York localities are exactly alike and neither are their unique financial circumstances. This notion is what makes the establishment of a Financial Restructuring Board with input from multiple leading voices on government financing so essential.


Glens Falls Mayor Jack Diamond said, Governor Cuomos Financial Restructuring Board will be a tremendous asset to upstate localities seeking to balance their finances and develop growth-oriented fiscal planning strategies. Rather than having to face the challenges associated with burdensome deficits alone, upstate communities like Glens Falls can look forward to hands-on collaboration from leading state and private sector individuals with experience in managing public debt. The Restructuring Board will save economically distressed communities across the state and help them set a new course toward solvency.


Village of Catskill Board Member Vincent Seeley said, I want to thank Governor Cuomo for his dedication to ensuring the financial security of New York States towns and villages. With this bill, the Governor is delivering long overdue reforms to the states laws governing binding arbitration, as well as instituting a procedure for state officials to deliver targeted restructuring strategies and funding for some of our most fiscally distressed communities. The state legislature should join the Governor in standing up for communities like the Village of Catskill by passing this bill.


The legislation to offer assistance to fiscally eligible municipalities includes the following details:


Financial Restructuring Board for Local Governments


The legislation will establish a new, 10-member Financial Restructuring Board that would be available year round to offer assistance to eligible localities. Membership will include the Budget Director who will serve as Chair, the State Comptroller, the Attorney General, the Secretary of State, and six other members appointed by the Governor. Of these six appointees, one will be recommended by the Temporary President of the Senate, and one will be recommended by the Speaker of the Assembly. At least one of the Governors appointees will have significant municipal financial and restructuring experience.


Any locality, not including New York City, deemed a fiscally eligible municipality by the Board would be eligible to request review by and assistance from the Board. The Board will have discretion to provide such review and assistance. The Board would be authorized to make recommendations to these municipalities on improving fiscal stability, management and the delivery of public services and to provide awards of up to $5 million per municipality through the Local Government Performance Efficiency Program, which makes up to $80 million in total available this year. If a municipality agrees to the Boards proposals, it would be contractually bound to fulfill those terms.


The Board would also serve as an alternative arbitration panel to the binding arbitration process for police, fire, or deputy sheriff unions, if the municipalities and unions agree. The Board would render an arbitration ruling within six months.


Binding Arbitration Process


Under this legislation, the statute authorizing binding arbitration will be extended for a three year period. For fiscally eligible municipalities, the statute will establish clear ability to pay standards that arbitration panels will be obligated to follow, giving far greater weight to a municipalitys ability to pay for services than under current law. For these localities, arbitration panels must give 70% of the weight of their decision to ability to pay, and must specifically consider the requirements and limitations of the States historic real property tax cap. The remaining 30% weight would be afforded to the other statutory criteria such as wage comparison, prior contracts, and public interest. Under current law, there are no assigned weights to the four measures, and there is no obligation to consider the real property tax cap.


A local government would be deemed a fiscally eligible municipality for arbitration purposes if they meet one of the following two fiscal tests: 1) If the local government's average full value property tax rate is above the 75th percentile for all municipalities statewide, as averaged over the most recent five fiscal years, or 2) If the local government's five year average general fund balance equals less than five percent of its budget, and the government has received certification from the State comptroller verifying total fund balance availability.


To view the bill, click here (memo here).