Budget Hikes for County, Town, Village and School:
Insurance and Pension Costs on the Rise

by Judy Silberstein

( October 31, 2002 ) Larchmont and Mamaroneck taxpayers take note: officials in our county, town, village and school district are wrestling with unusually large budget items that are largely out of their control, such as New York State pension charges and insurance premiums. The budgets they are developing will determine next year's property tax rates and the size of your tax bills. For property taxpayers in 10538, about half of the property tax is for the schools, a quarter is for the County, and the remainder is for the Town or Village government

Warned County Legislator George Latimer, the budget woes are universal and non-partisan. “Governments at all levels face difficult choices for the foreseeable future. The problems belong to all of us – Republicans, Democrats, or whatever party.”

Westchester County is attempting to digest a 21% increase in state-mandated costs for the Medicaid program, a 14% increase in costs for services to handicapped children, and a 223% increase in State Retirement Fund charges for employee pension benefits. (Check the County website for more details.)

With the County budget due by the end of the year, Latimer points out, “Over the next months, we have some very difficult choices to make. Do we cut services that people want, like parks or buses? Or do we raise sales taxes, which people don’t want? Or do we raise property taxes, which people really don’t want?

In Latimer’s view, “the responsible choice will require a little in each of these areas.”

Closer to home, the Town of Mamaroneck budget is also due by the end of the year and Town Administrator Steven Altieri has proposed a preliminary budget that would require a tax rate hike of 6.2%, double last year’s. The Board has until Wednesday, December 20 to adopt the final budget, and is going over the budget line-by-line looking for savings.

Underlying the budget hike, however, are some major increases for insurance and pensions which the Board cannot avoid.

Town liability insurance premiums are expected to rise by at 25- 30%. Clearly concerned, Town of Mamaroneck and Village of Larchmont Treasurer Carmine DeLuca declared, “I don’t know what the coverage will be like. Insurance companies don’t even want to cover municipalities anymore.”

We’ve gone out into the market to find better coverage,” said Supervisor Valerie O’Keeffe, “but the insurance companies are calling the tune. We have to pay, we have no choice.”

There’s a similar picture with health insurance costs, part of the fringe benefit package for Town employees. Insurance costs have risen significantly for the past two years, about 14%. “ I don’t expect they will be any lower,” said DeLuca.

A different but dismal scenario concerns Town contributions to The New York State Retirement Fund, which administers pensions for most local employees. During the stock market boom years of the last decade, local governments’ contributions to the Fund shrank. For example, in 1994 the Town shipped off 13.9% of a police officers salary to the Fund. By 2001, the Town sent off only 1.6%. (Policy aficionados can click here for more percentages.) Now, the rates are rising again.

Two years ago, the state was talking about the municipalities not having to pay anything at all to the retirement funds. “Not any more,” said DeLuca.

The Village of Larchmont and Mamaroneck School district budgets are not due until spring, but some of the same conditions prevail. The Village faces the same high insurance costs and increased pension liabilities as the Town, according to DeLuca.

The Schools’ Assistant Superintendent for Operations Sarah Tate also anticipates hikes, “However, our change in general liability will be less than the Town and Village while our increase in health will be closer to the Town and Village projections.” It is too early to tell how large the hit will be in the retirement system or for other staff costs. The district will be negotiating new contracts with teachers, administrators and staff this year, which are likely to result in increased personnel costs.

The budgets are still in development, so the actual effect on taxpayers is not yet clear. Increases in areas like health insurance can be offset by decreases in other areas. For example, the Town is attempting to limit most new budgets to a level at or below their current budgets. “We’re looking at areas to cut,” said O’Keeffe. We’re asking, should we slow down our sidewalk paving program and our regular schedule of replacing vehicles? Can we reduce overtime costs? Can we take advantage of the very low borrowing rates for capital improvements?”

The County, having already cut 200 positions, plans additional cuts.

Another approach is to increase fees and taxes other than the property tax. County executive Andy Spano is supporting a 1% sales tax increase as a way to fund mandated cost increases. The Larchmont Village Board recently voted to increase parking permit fees by about 5%. The Town Board may ask the Recreation Commission to consider increasing summer camp fees. “But there’s just so much fee raising you can do without needlessly burdening the residents,” points out O’Keeffe. The Board is also looking to cut costs, for example, by attracting more underwriting for its popular summer concert and movie series.

Local governments may also dip into reserves – their "rainy day funds" - to cushion effects of increases in a particular year. The County had saved up a $40 million fund, but used most of it to soften last year’s tax increase, so there is only $7.9 million left. Reserves are "one-time" sources. It’s the taxpayer, not the reserve that chips in more the next year, even if there are no further increases.

This year, it looks like all taxpayers will be chipping in more than usual to keep our local governments and schools running.

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