State Aid to New York's Cities and Villages is Underfunded
Unrestricted state aid to local governments - formerly known as revenue sharing, now known as Aid and Incentive for Municipalities, or AIM - is state aid provided to all of New York's cities (outside of New York City), towns and villages. For decades, the original revenue sharing formula - intended to redistribute state tax revenues to municipalities that do not have the tax base or the taxing authority to generate these revenues on their own - has been annually disregarded and various constraints have been imposed on the overall level of state aid to local governments.
In 1988-89, revenue sharing peaked at $1.1 billion. Faced with large deficits in the late 1980s and early 1990s, the state reduced revenue sharing by approximately 50% between 1988-89 and 1992-93 when it hit a low of $532 million. Revenue sharing to cities (excluding New York City) fell from $294 million in 1989 to $163 million in 1992. These sharp decreases forced local officials to turn to the property tax for additional revenue to support essential municipal services.
Unrestricted aid in 2014-15 totals approximately $715 million. The last increase in AIM funding came in 2008-09 and since that time, AIM funding to cities (outside NYC), villages and towns has decreased by $50 million, or 7%. New York City's AIM funding - totaling $328 million - was completely eliminated in SFY 2010-11.
NYCOM has argued time and time again that AIM is a property tax relief program works. This is obvious from the data that illustrates when AIM funding was increased, the growth in property tax levies remained under the cost-of-living. In years when AIM was cut, tax levies increased at levels unaffordable to local taxpayers. In 2014-15, the amount of the school aid increase alone exceeded the entire amount allocated to the AIM program. A mere 10% of that school aid increase – $80 million – would go a long way toward not only achieving government efficiency but also lowering property taxes.
A strong and growing state-local fiscal partnership is essential to ensuring economic vitality at all levels of government. Predictable growth in state aid is a critical component of this partnership. Municipal governments remain under tremendous fiscal stress. The combined expense of pensions, health insurance and other employee benefits is largely out of local officials' control and is consuming a rapidly increasing percentage of municipal budgets. It is these expenses that are the driving force behind local property tax increases. And just like the state must be able to rely on the federal government in tough fiscal times, local communities must be able to rely on the state government to assist them as well. To invest in the AIM program now is a better and less expensive option for the state than to bail out municipalities in fiscal crisis later.