A state oversight board voted unanimously Wednesday to take immediate control of Nassau's finances, contending the county's 2011 budget contains a $176 million deficit - more than seven times the 1 percent gap that triggers a takeover under state law.
The Nassau Interim Finance Authority gave County Executive Edward Mangano a Feb. 15 deadline to come up with a financial plan that eliminated risky revenue initiatives, expense cuts and contingencies contained in this year's $2.6 billion budget.
The 6-0 vote, which makes Nassau only the second county in the state to be taken over by a control board, came after months of extremely contentious debate between NIFA and Mangano, and a downgrade of the county's debt rating by one agency. It gives NIFA sweeping power to modify the county's financial plan, approve contracts, and approve all borrowing.
Mangano and the county's other top Republican officials, who did not attend the NIFA public meeting, immediately called a news conference to denounce the oversight board created in 2000 and promised to file suit to stop the control period.
"Their actions are premature, they're unfounded and they are unnecessary," said Mangano, who maintains his budget is balanced. But board member George Marlin, a Conservative who supported Mangano in his run for county executive, said that while Mangano has made "some forward progress," he has concluded that "the county's 2011 budget is built on a foundation of sand."
NIFA chairman Ronald Stack noted that the board had not declared a fiscal emergency - the step required by state law before the agency could use its power to freeze union salaries.
Stack said Mangano and the legislature will continue to run the county, repeating part of the control resolution in which NIFA hopes the county "will work collaboratively and in good faith" to resolve the financial difficulties.
But Presiding Officer Peter Schmitt (R-Massapequa) called the takeover "nothing more than a coup." He said he will schedule hearings and use his subpoena power to determine how NIFA reached its decision.
Although Mangano said "taxpayers should be gravely concerned over NIFA's motivation to raise property taxes," several NIFA members stressed the board cannot increase taxes nor direct the county executive to do so. "We're not going to recommend or suggest that taxes be raised. That's not our job," said member Robert Wild.
Nassau would be the second county to be taken over by a control board in modern times. Erie County had one from 2006-2009.
Mangano campaigned for county executive by using NIFA's criticism of his Democratic predecessor Thomas Suozzi's budgets as risky. After taking office, Mangano punched a $40 million hole in a shaky 2010 budget by repealing a 2 percent home heating tax enacted by Suozzi.
NIFA representatives and county officials have been at odds over several key line items in the 2011 budget. NIFA and other entities, including one of the county's bond-rating agencies, have said the budget risks range from $158 million to $258 million. They include real estate sales that have not closed yet, $61 million in proposed labor concessions and new revenue that require state approval before they could materialize.
NIFA was created in 2000 to deal with the growing fiscal crisis in Nassau County. The county's bond ratings were just above junk status, it faced a $300 million deficit, and had run up close to $3 billion in debt.
Stack rejected allegations that politics played a part in the takeover decision, saying state law requires a control period when NIFA determines the budget has, or is likely to have, a 1 percent deficit. He noted that the vote was unanimous among NIFA's six members, which include three Democrats, a Republican, a Conservative and a member not affiliated with any party.
Asked if Gov. Andrew M. Cuomo had involvement in the decision, Marlin said, "None. Absolutely none."
Stack said the board had yet to receive the agreement Mangano reached this week with the Civil Service Employees Association, which he said would save money by changing new employees' pay schedules and end the practice of paying employees for an additional half-day when they give blood. The new deal would extend the CSEA contract by two years and would include 3.25 percent cost-of-living raises in those last two years.
Sources said the deal raised eyebrows among NIFA members, who thought it wouldn't help to achieve cost savings in the first critical years of the contract. And some experts said the CSEA deal may have sealed the county's fate.
"It's like sending an engraved note to NIFA begging them to take the county out of their hands," said E.J. McMahon, a senior fellow with the Manhattan Institute, a conservative think tank. "Any attempt they made to fend off NIFA is undercut by this contract."
With Randi F. Marshall