Governor Cuomo’s proposed two percent cap on interest arbitration awards to police and firefighters unions was stripped from the final Article 7 budget bill dealing with Education, Labor and Family Assistance issues. At the same time, the Senate and Assembly majorities were unable to get the governor to agree to their preference for a straight four-year extender of the arbitration law, which expires June 30.

This is good news: it means there is still a chance that Cuomo will use his legislative leverage on this issue to demand more meaningful changes that could really help localities get control of their public safety compensation costs.

A second small plus in the final budget is that the Legislature also dropped Cuomo’s proposal to eliminate all state-mandated reporting requirements for local governments. On the surface, it may have sounded like a good way to cut red tape, but it also could have jeopardized the continued existence of important accountability tools like the School Property Tax Report Card and state comptroller’s detailed reports on municipal finances.

Carl Schramm, entrepreneurially minded economist and professor at Syracuse University, worries that “economic amnesia” may hinder the long-term recovery prospects of Syracuse — and, by implication, other once-dynamic upstate cities.

Writing in Forbes, Schramm notes that the Syracuse of the 19th and early 20th centuries relied on home-grown talent to become an economic dynamo — a place variously known as the Candle City, the Crafts City, the China City and the Gear City for its innovative methods of producing everything from tapers to motors. Today, Syracuse is afflicted with a heavy tax burden and high poverty rates, which in term threaten the long-term fiscal stability of its city government.

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Syracuse Mayor Stephanie Miner has drawn attention for a New York Times op-ed criticizing Governor Cuomo’s failure to deliver meaningful mandate relief to troubled localities. The mayor, who is also co-chair of the state Democratic Committee, challenged Cuomo to “use his substantial, hard-earned political capital to convene the Legislature, the state comptroller, and union and business leaders for an honest conversation about the multiple fiscal pressures confronting our cities.”

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A sweeping but little-noticed provision in Governor Cuomo’s 2013-14 Executive Budget would, in the words of this Article VII bill memo, “eliminate all local government and school district reporting requirements to state agencies unless the Mandate Relief Council votes to continue them.”

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“Frankenstorm” could easily inundate the tenuously balanced budgets of New York State, New York City and countless other localities in the storm’s path.

Last week, just as forecasters were beginning to warn that Hurricane Sandy would have a big impact on New York, Comptroller Thomas DiNapoli released a mid-year revenue analysis showing that state government tax collections through the first half of the fiscal year were $213 million below the updated July projections–which, in turn, were $223 below the projections at the time the budget was enacted in March.  ”Collections would have to grow 6.4 percent for the remainder of the year to make up for the lower-than-expected revenue thus far,” DiNapoli said.

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“The first casualty of war is always the truth,” Winston Churchill observed. The same might be said of political battles.  Around New York in this campaign season, incumbent state legislators in both parties have been bending facts into pretzels when they discuss their recent records on state taxes, in particular.

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State Comptroller Thomas DiNapoli has announced a “fiscal stress monitoring system” to provide an early warning of problems in local governments and school districts, which can only be a good idea. DiNapoli’s office also issued a report analyzing economic and fiscal trends in cities from 1980 to 2010.

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Asked what the state might do to help fiscally distressed upstate cities, Governor Cuomo today said his administration was “looking at various approaches to help cities more on an individual basis than on a collective basis.”

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The budgetary problems of bigger New York localities, such as Yonkers, tend to dominate the headlines — but contenders for the dubious distinction of most financially troubled municipality in the Empire State would also include Schenectady.

As reported yesterday in the Sunday Gazette, the Capital Region city of 66,135 has been paying interest but little principal on short-term bond anticipation notes (BANs) first issued in 2009 to finance a new $20 million public works building.

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The growing fiscal problems of many local governments in New York State are prompting more talk about consolidation of services and mergers of local governments. Some influential voices in western New York, echoing former Erie County Executive Joel Giambra, continue to push for a regional approach. And Rochester Mayor Tom Richards has spoken frequently about the need to “find a new way to finance cities,” which seems to imply reliance on a broader tax base on either the state or regional level.

However, those who view bigger, broader government as a potential panacea should carefully consider the points in this New Geography post by demographer and policy consultant Wendell Cox.  According to Cox, the data on per-capita local government spending actually suggest the reverse: when it comes to local government smaller is better. His May 2008 study for New York’s Association of Towns, Government Efficiency: The Case for Local Control, is a real keeper in this context.