Nassau fiscal crisis expected to worsen

Nassau County Executive Edward Mangano (Jan. 13, 2011) Nassau County Executive Edward Mangano (Jan. 13, 2011) Photo Credit: Charles Eckert

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It's going to get worse.

As the debate over the viability of Nassau County's 2011 budget comes to a head, officials and experts say the biggest concern is next year, when the county may need big cuts and layoffs to close spending gaps.

The worries about next year come as the Nassau County Interim Finance Authority, a state watchdog agency, has raised questions about whether the 2011 budget is balanced and is threatening to take over Nassau's finances.

NIFA has given the county a Thursday deadline to submit budget details.

County Executive Edward Mangano and other officials insist this year's $2.6 billion budget is balanced - even without tax increases - but agree with experts that tougher questions about county finances lie ahead.

"Nassau County, unfortunately, has pretty much run out of room for error," said Robert Ward, a deputy director with the Rockefeller Institute for Government, an Albany-based think tank. "Perhaps more than anything, that's the message that NIFA is sending."

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Without long-term solutions, the budget could have a gaping structural imbalance - where recurring revenues won't cover growing expenses and holes must be constantly plugged with quick fixes. That's not sustainable, experts say.

"Getting on a long-term, fiscally sustainable path is the challenge of government right now," said Daniel L. Smith, an assistant professor of public budgeting and financial management at New York University's graduate school for public service.

Mangano, a Republican, admits concerns about next year. "We're going to have additional hurdles" he said. "I am working on '12 today."

Mangano: Givebacks needed

Mangano last week announced a push for a Taxpayer Relief Act that he says would allow him to order union givebacks - and that unions say is unconstitutional. Without those concessions, he said, layoffs are likely. Even if the bill doesn't pass, Mangano may have leverage in future negotiations, because a no-layoff provision in the contract for the county's largest union, the Civil Service Employees Association, expires at the end of this year.

But some fiscal experts say the county's plans and strategies may not be enough. In November, Moody's Investor Services downgraded Nassau's bond rating, said its outlook for the county going forward remains negative, and suggested that the proposed fixes for next year "may be difficult to achieve."

Impending increases in labor costs, including salaries, health care and pensions, could total about $200 million, said Tim Sullivan, deputy county executive for finance and budget.

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If Mangano doesn't get labor concessions this year, the county will have to rely on $55 million in "one-shot" revenues - items that will help balance the 2011 budget, but have no positive effect in the years to come. What's more, some of those quick hits - especially the planned sales of leases on county land at Mitchel Field - will depress revenue in future years, as annual rents disappear from county coffers.

"Sometimes, they're all you can do to get through the fiscal year," said NYU's Smith.

Nicholas Johnson, the director of the State Fiscal Project at the Center on Budget and Policy Priorities in Washington, D.C., said that while short-term fixes can be tricky, the alternatives can be "very painful," because they often include layoffs and diminishing health benefits.

"I have some sympathy for state and local governments that are using one-time fixes," Johnson said.

But even Nassau County officials recognize that they won't be able to sustain a balanced budget in the future using land sales and other similar deals.

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"You can't do one-shots every year," Sullivan said.

However, Nassau probably will face big threats to its 2012 budget, including state aid cuts, payouts for tax-challenge settlements and uncertain sales tax revenues. And Nassau still will be out the $40 million in annual revenues from the home energy tax, repealed earlier this year.

Some experts also warn about projected revenues that might not materialize or might come in short - including those from efforts to privatize or develop public-private partnerships for the county's sewer district.

Fixes may come up short

The available fixes may not be easy, and may not be enough.

"We can see the future looks bad and, unfortunately, we can also see there doesn't seem to be a realistic policy focused on making it better," said Carol O'Cleireacain, a Manhattan-based senior fellow with the Brookings Institution and the head of New York Mayor David Dinkins' Office of Management and Budget.

With Kathleen Kerr

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