The State and the City
In chapter one, the role of the state Public Authorities Board in rejecting the Jets/Olympic Stadium and approving the Nets basketball arena was discussed. In chapter two, the state's role in assisting the city with economic development was examined further. The state is involved in every aspect of city governance. Dillon's Rule, discussed in chapter one, gives the state the ability to intervene in, if not control, most of the activities of its local governments. State laws affect how the city raises revenue and delivers services. The state gives the city the ability to structure its political system but still mandates, regulates, and monitors how democratic accountability will be achieved. And finally, state policies influence the city's ability to maintain civil harmony.
There may be no better illustration of Dillon's Rule than New York State-New York City relations during and after the city's fiscal crisis of the mid-1970s. This work will not attempt to offer an in-depth analysis of the New York City fiscal crisis. There have been several studies (Bailey 1984; Shefter 1988) that have exhaustively examined the crisis and its implications for New York City politics and fiscal relations.
In the mid-1970s, New York City faced fiscal problems similar to many other U.S. cities. During the 1950s and 1960s, a large percentage of the city's middle class left for the suburbs, leaving a growing concentration of low-income residents, primarily minorities, who needed city services but did not significantly contribute to its tax base. This problem was exacerbated by state requirements that the city share substantially in the cost of services, primarily welfare and Medicaid, going to low-income New Yorkers. The resulting financial burden that New York State placed on the city was much greater than any other state placed on its cities. The problem was also exacerbated by the city's own fiscal practices.