Restore State Revenue Sharing to End City Fiscal Crisis

The city's fiscal crisis would end immediately if the state provided the state revenue sharing it previously promised. We face a fiscal crisis today for the same underlying reason we faced in 1970 when Syracuse Mayor Lee Alexander, New York City Mayor John Lindsay, and the other Big 6 mayors successfully campaigned for revenue sharing.

The underlying reason for central city fiscal stress was that the property tax-paying manufacturers in multi-story central city factories had left for sprawling one-story facilities in the suburbs (which have since largely been outsourced abroad with misnamed "free trade" pacts). The property tax-paying manufacturers were largely replaced by tax-exempt universities, hospitals, and the agencies of four levels of government that served as the major employers and economic base of the metropolitan region. That's the same problem Syracuse faces today.

Here is is a good summary of the origins of and need to restore revenue sharing from page 28 of the November 2006 discussion paper by the Fiscal Policy Institute in Albany, "One New York: An Agenda for Prosperity." 

Restore “revenue sharing”

In 1971, New York State took a giant step forward in combating high property taxes and bringing stability to local budgets by beginning to share 18 percent of its income tax revenues with its general purpose local governments on a formula basis that took need, tax effort and ability-to-pay into consideration. This program was enacted into law following a very effective multi-year lobbying campaign by the mayors of the state's six largest cities (New York City, Buffalo, Rochester, Syracuse, Yonkers and Albany). This campaign succeeded in calling attention to the "overburden" faced by the state's cities, which were home to most of the large tax-exempt institutions (such as hospitals, museums, and libraries) that served the residents of entire metropolitan areas but which depended on city services without making a commensurate tax contribution.

In announcing the compromise that implemented Revenue Sharing, Governor Rockefeller referred to it as Urban Aid because of its "rough justice" bias in favor of the cities—half of the Revenue Sharing pool was to be shared with all general purpose local governments including the cities, while the other half was to be shared just with the cities.

In 1979, Governor Carey changed the sharing formula from 18 percent of personal income tax revenue to eight percent of all tax revenue. That change would have been fine, but the following year he got the legislature to cut the allocation and the following year to freeze it. Over the course of the next quarter century there have been some occasional increases in revenue sharing but more often there have been cuts or freezes. The result is that the state has fallen further and further behind the eight percent standard and the amounts that individual cities receive are the product of year-to-year percentage increases and decreases (and occasional efforts to address some glaring inequities by giving greater increases to some cities) rather than a rational formula.

The upstate cities have been hurt the most by the state’s abandonment of this important approach to intergovernmental fiscal relations. While New York City has 52 percent of the state’s poverty population, it also has a significant concentration of wealthy individuals and a local income tax, thus buffering it from the impact of cuts in revenue sharing in ways not available to the upstate cities.

State "revenue sharing" with counties, cities, towns and villages should be increased, gradually but steadily over the next 10 to 15 years, until it is restored to the statutory level of eight percent of state tax revenues. In addition, a new and transparent needs-based formula for the allocation of “revenue sharing” among the state’s general purpose local governments should be enacted and honored. 


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