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, “It’s 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, “Today’s agreement would ensure collective bargaining binding arbitration agreements are resolved in a fair and balanced manner, based on both a municipality’s 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.”

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 Governor’s 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 Board’s 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 municipality’s 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 State’s 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:

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