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The 2008-09 Enacted Budget contains $1.043 billion for the Aid and Incentives for Municipalities (AIM) program, which provides $1.014 billion in direct State aid to cities, towns and villages. Additionally, a $29.4 million Local Government Efficiency Grant initiative is also included to encourage cost savings through consolidation and shared services among all classes of local government.

Municipalities outside of New York City will receive $767 million in total AIM funding, a $67.5 million (9.7 percent) increase from the 2007-08 Budget. This increase includes $50.1 million for the second installment of a four-year, $200 million commitment to target additional State aid primarily to fiscally distressed municipalities. In addition, $5.8 million in new funding will support supplemental increases for distressed municipalities that receive significantly less aid on a per capita basis than their peers. Finally, $11.6 million in new funding will provide 33 cities with additional aid. Most of the increases in AIM funding are tied to accountability requirements that encourage local fiscal improvement.

The Enacted Budget also includes $246 million in AIM funding for the City of New York. This amount reflects a $226 million increase over the 2007-08 aid payment, but three-quarters of the $328 million amount originally scheduled for 2008-09. The Enacted Budget Financial Plan assumes a full $328 million AIM payment to New York City in 2009-10 and each year thereafter.

The Local Government Efficiency Grant program initiative redesigns the current Shared Municipal Services Incentive program based on recommendations of the Commission on Local Government Efficiency and Competitiveness to more effectively encourage local government consolidation and shared services, with a $4.4 million increase in available funding to total $29.4 million.