Two members of the State University of New York community recently co-authored a policy regarding how the economic crisis will affect local governments in New York state.

The brief focuses on three different economic forces that will affect local governments: sharp declines in sales tax revenue, the necessity for spending cuts because of the deficit and problems with the pension fund for municipal employees.

The brief, entitled “The Economic Crisis and Local Governments in New York State,” was co-written by Michael Hattery, a senior research associate of the College of Community and Public Affairs public administration department at Binghamton University, and Dr. Donald Boyd, senior fellow at the Rockefeller Institute of Government, a division of SUNY.

According to Hattery, it emerged after Boyd made a presentation on the same issue at a local Manager’s Breakfast Quarterly, an event where local Binghamton business managers meet to discuss relevant issues effecting their markets.

Each of these forces impact the local economy in different ways.

“Retail trade has dropped off more significantly than the last three times this country has seen a recession starting in the 1970s,” Hattery said. “Sales tax is the second biggest source of revenue for the local government in New York state, the first being property tax. Everyone had originally anticipated this decline would level out but it seems as though it will continue downward over the next couple of years.”

This essentially means that one of the biggest sources of income in the state is declining instead of stabilizing.

The next portion of the brief, according to Hattery, deals with the state’s projection that over the next three years the deficit will remain unresolved.

Because of this, the state will have to take drastic cuts that will inevitably impact local government, he said.

Finally, Hattery stated that the pension fund for municipal employees took a significant hit in 2008.

“Since the fund took a hit like that, the local governments have to spend more to keep it working,” Hattery said.

According to Hattery, it is projected that the increase in spending will be above 30 cents to the dollar by 2015; by comparison it is currently around 7 cents to the dollar.

The brief states that these conditions will most likely not be aided by the stimulus funds from the federal government.

“The stimulus monies will have a big, but short-lived impact on state budgets, even under an optimistic scenario, after which governments face a ‘cliff,’” the brief states. “A more pessimistic scenario — looking increasingly likely — is for even larger gaps in the [out years].”

Thomas Sinclair, associate professor in the Department of Public Administration at BU, explained how this will affect Binghamton.

According to Sinclair, the major problem stems from the sales tax decline.

Since the state takes the sales tax revenue and gives a portion to the municipalities, these municipalities are getting less of that money and having to cut from other places to make accommodations, Sinclair said.

He added that the state economy might not turn around, even if the national economy does.

“The brief shows very clearly that the state is in a severe financial crisis and that crisis will extend into a period of years into the future,” Sinclair said. “It is to be expected that because the state is having these problems they will pass more of these same problems to municipalities.”

All municipalities, including the city of Binghamton, have three choices of what to do with the current economic situation, according to Sinclair.

He said there can be service cuts for programs, an increase in taxes or a sort of hybrid combination of cuts and tax increases.

Binghamton Mayor Matthew Ryan explains that these problems — the decline in revenue, the budget deficit and most importantly, the pension issues — are affecting Binghamton.

According to Ryan, Binghamton is trying to do what it can to streamline its projects by looking for new ways to reduce cuts, save money and preserve jobs in the area.

Despite, these troubling forecasts, Ryan is still optimistic.

“I am proud of the position that [the Binghamton area] is in to weather this storm,” he said. “We are doing the best we can with the current limitations.”