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Legislators say counties could be on brink of bankruptcy after pandemic if Albany doesn’t shift

Three state legislators who represent the Southern Tier and part of the Finger Lakes are calling on Governor Andrew Cuomo to accept billions in funding from the federal government to help with COVID-19 response across New York State.

State Senator Tom O’Mara (R,C,I-Big Flats), Assemblyman Phil Palmesano (R,C,I-Corning), and Assemblyman Chris Friend (R,C,I) made the joint-announcement on Monday asking the state to not enact a 2020-21 budget, which would require counties to pick up more of the cost of New York’s Medicaid system.

In a joint statement the trio blasted the prospect of local government paying more for services that are mandated by the state government. “Governor Cuomo appears to be teeing up action later this week that will remove the cap on local Medicaid costs. That misguided action would leave our counties and local property taxpayers having to pay millions upon millions of dollars more annually for a Medicaid system that is already overburdening local budgets.”  That’s not fair,” the legislators said. “That’s not responsible. Now is not the time to add to local burdens when this coronavirus pandemic is already shutting down local economies and leaving in its wake a future of fiscal uncertainty, at best, for county governments and local property taxpayers.”

Before the coronavirus crisis, New York was already preparing to deal with a state budget deficit of more than $6 billion. In response, the Governor reconvened a Medicaid Redesign Team (MRT) late last year.  The MRT recently issued recommendations for cost savings in the state’s Medicaid program, which included the removal of a cap on the growth in local Medicaid costs enacted in 2012.

The cap has produced more than $7 billion in savings for local governments.

O’Mara, Palmesano, and Friend said the COVID-19 pandemic is already putting an enormous strain on county budgets and with the inevitable loss of sales tax and other revenue that will result from shuttered economies regionally and statewide. They warn that many local governments could find themselves on the brink of bankruptcy.

The New York State Association of Counties (NYSAC) updated a report today estimating that the pandemic’s economic impact on local governments could be $2 billion.

The recently enacted (Phase III) federal response package is set to deliver approximately $5.2 billion in assistance to the state and local governments.  The governor, however, remains critical of the federal response, contending that accepting the federal aid prevents the state from taking any of the short- and long-term Medicaid cost-saving measures recommended by the state MRT.

According to Cuomo, it is more effective in the long run for New York to reject the one-time federal funding and begin implementing the MRT’s short- and long-term savings actions, including shifting a greater share of the cost of Medicaid back to the local level.

O’Mara, Palmesano, and Friend acknowledged there will need to be even greater federal COVID-19 assistance for New York, the hardest hit state in the nation.  They also agree that the previously approved (Phase II) federal assistance package prevents the state from shifting Medicaid costs to localities, which they believe is a positive move.

They argue that the governor and the Legislature can still accept the $5.2 billion in federal assistance and start moving forward with some of the MRT’s savings recommendations – but not anything that shifts additional costs to county governments and local property taxpayers. Additionally, NYSAC estimates that by rejecting the federal assistance, local governments statewide stand to lose nearly $1.5 billion in federal aid, including $400 million for counties outside of New York City.

The legislators’ statement continued, “It is important for our local governments that the federal stimulus package affords that protection and prevents states from shifting costs to localities during this unprecedented crisis. That doesn’t mean New York State has to walk away from this urgently needed federal support. The federal government will need to step up more for New York State in the months ahead, however we can and should put this initial federal aid to good use, begin moving forward with reasonable and necessary Medicaid cost savings for the long term, which we believe the state can absolutely do, and not pass more of the Medicaid buck back to counties. We need to enact a fair and responsible bare bones budget that addresses the coronavirus response, meets existing obligations, and doesn’t contain any pet projects or politically motivated policy moves unrelated to the deficit or the crisis. Once we have weathered this storm, we can get to work assessing the damage, determining who and what needs repair, and have an open and full discussion on the best way to move forward for the entire state, upstate and downstate.”

The lawmakers pointed to 2009 and the federal response to the Great Recession, when then-Governor David Patterson accepted federal stimulus aid that contained similar restrictions and still moved forward with numerous state-level deficit reduction actions and cost savings.