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Nassau Is Sinking Under the Waves

(Howard Weitzman is the former Nassau County Comptroller.)

No matter who won the last county election it was clear the County would be going down a tough financial road. A difficult economy, falling tax receipts, an increasing structural gap along with the political difficulty in raising additional revenues have combined to create a perfect storm for all local governments. But the new Mangano administration seems to be drowning in a fiscal tsunami, without a tree to climb. His rescue plan is based on an old copy of Tom Gullota’s guide to County government – borrow, over estimate revenues, under estimate expenses, sell property, and if that’s not enough borrow more.

The budget press release heralds a no-tax increase budget without the use of one shots – and then, in a shocking and frightening return to the past, proceeds to call for the biggest revenue one shot of all - $350 million in new borrowing for real estate tax refunds. When added to the $86 million borrowed for early retirements and the 2010 capital plan, the County Executive will have borrowed or proposed to borrow close to $500 million – a half a BILLION in new borrowing in his first nine months in office, over 85 percent of which is for operating expenses. This is like borrowing on your credit card to pay for your living expenses. Even for Nassau County this is a huge amount to be repaid by our children and grandchildren, and will certainly earn a negative reaction from the rating agencies, increasing Nassau’s cost of borrowings by millions.

When he was first elected County Executive Ed Mangano said he was going to fix the broken assessment system, saving $100 million per year. But then his team found out the system wasn’t as broken as they thought (Newsday said the same), so now his latest solution is to rescind the law which requires Nassau county, alone among New York counties, to refund school and town taxes, saving Nassau $80 million per year, while borrowing $350 million for a “transition”.

But Nassau County cannot unilaterally change this law. Even if the county legislature were to vote to do so, Albany action is required. Nassau County executives have been trying to change this law forever. Lawsuits have failed as well. Albany legislators have never shown any interest in alienating the school constituency by changing this law and there is little such interest now. Believing the county legislature acting alone can unilaterally overturn this 70-year-old law is just wishful thinking.

In order to insure “shared sacrifice” and save $60 million, Mangano is proposing legislation to roll back union salaries and benefits after he gave back $40 million in energy taxes and boasted that sales tax receipts are on the rise. Just as his tax refund proposal, this cannot be done without action from Albany which would be unprecedented. Claiming the “county cannot afford it” may fly politically, but not legally. Upsetting the sanctity of union contracts, especially in New York, is just not going to happen and will prove to be a waste of legal fees.

The budget also proposes to cut $100 million in “wasteful spending” without any specifics. When he was in the legislature, Mangano voted against the 2010 budget when it was adopted in 2009. He has been County Executive for nine months now. If there was $100 million in wasteful spending in the budget why didn’t he eliminate it after the election instead of whining about the Suozzi administration and now floating fantasies like selling off the future rents from Mitchell Field, having the taxpayers pay for the refurbishment of the Coliseum instead of the Islanders, and opening a major casino on Hempstead turnpike? The only “savings” realized by the administration in 2010 are made up of monies borrowed to pay for operating expenses and savings built into the budget by the prior administration. After eight years of expense reductions by the Suozzi administration, it is doubtful that cuts of this magnitude could be made without significantly reducing services. The fact that these cuts haven’t been made already or detailed, make them seem all the more dubious.

Just this cursory review of the budget has uncovered hundreds of millions in shortfalls. If the Democrats vote against this huge borrowing (as they should, and as the Republicans said they would do when they were in the minority) Mangano will be facing a deficit of $50-70 million in 2010 (according to the Republican Comptroller) and hundreds of millions in 2011.

Of course, a detailed review will undoubtedly produce more questions as the devil is always in the details. Other questionable items, such as asking Albany permission for $25 million more in red light cameras, overestimating State reimbursements, sales taxes and non-tax revenues are just retreads of old, failed budget gimmicks. The hole in this budget could approach the $400 million hole in the 1999 budget that led to the creation of the Nassau Interim Finance Authority (NIFA) by New York State. This would represent a budget risk of over 15 percent of the County’s $2.7 billion budget. A risk of this magnitude is unprecedented. At this point the only question remaining is what can and will NIFA do as this crisis unfolds?