A state watchdog has imposed a Thursday deadline for Nassau County Executive Edward Mangano to show his $2.6-billion budget for 2011 is balanced.
If the Nassau County Interim Finance Authority decides the spending plan is out of whack, it has the power to take control of the county's finances and freeze union contracts.
A takeover still is uncertain: It probably would face court challenges and the NIFA board members are said to be divided over whether the move is warranted.
However, if NIFA decides to take control, here are key ways the move could impact Nassau residents:
In a takeover, NIFA's biggest hammer over Mangano and the county legislature would be the power to stop short-term borrowing. Like most counties, Nassau takes out loans to pay bills and then repays the loans, in a few weeks or months, once tax payments are received.
Former Nassau Comptroller Howard Weitzman, a Democrat, said, "Withholding approval on borrowing would be like a knife at the heart of the county and would force county leaders to address the budget or otherwise they would run out of money."
Weitzman and others predicted the fiscal crisis caused by NIFA's suspension of borrowing would compel Mangano, a Republican, and lawmakers to consider tax hikes. Some experts doubt sufficient savings could be wrung from agency consolidations, firing nonunion workers and spending cuts.
Still, Mangano vowed in an interview not to increase taxes, saying this year's budget is balanced and next year's will be as well, assuming concessions from employee unions.
Deriding NIFA as a "shadow government," he said, "if they block borrowing it means increased taxes to residents and commercial property owners who are already stretched thin. . . . Nassau County is in good shape. . . . We don't need a takeover."
NIFA board member George Marlin, a Conservative Party activist, said he opposed tax hikes. He added that none of his colleagues have suggested taxes as a remedy for the county's fiscal woes.
Wages and contracts
The nearly 8,000 unionized county workers probably would be the first to feel the effects of a state takeover. Experts said NIFA, after declaring a fiscal emergency, would move quickly to block salary increases set for April 1, the months of June and July, and Nov. 1. The wage freeze would save Nassau about $10 million this year, and could not be recouped later, once the state relinquishes control of county finances, according to a source familiar with the matter.
"Workers would take a hit before homeowners," the source said. But no layoffs would occur "because the contracts forbid layoffs throughout this year."
Mangano aide Brian Nevin noted the total savings from a wage freeze would be determined by when it kicked in, because once scheduled raises occur, they can't be rescinded. He said NIFA's expenses for outside lawyers and accountants also would reduce the savings.
Low-income families, children, seniors and the disabled who rely on Nassau for social services could be affected if service providers don't have their contracts renewed by NIFA, according to county Comptroller George Maragos, a Republican. Most of the agreements expire annually, and while the state board cannot void them, it can push for better terms during the renewal period.
Nassau has saved hundreds of millions of dollars in interest payments since 2000 because NIFA, backed by the state's high credit rating, borrowed money on the county's behalf.
Additional borrowing could reduce the magnitude of any tax increases and service cuts. However, NIFA cannot take on more debt without permission from Gov. Andrew M. Cuomo and state lawmakers because it has reached its $800-million limit.
Facing their own $10 billion budget deficit, Cuomo and the State Legislature aren't likely to be receptive to assuming more debt for Nassau or repeating the $105 million in grants given to Nassau over five years, beginning in 2000.
Should NIFA decide to take over, it faces a major obstacle: lawsuits
Legis. Peter Schmitt (R-Massapequa), the presiding officer, has promised a legal war against NIFA. He has said the threshold for a control board - an operating deficit of 1 percent or more - will not take place during the life of the 2011 budget.
Employee unions, contractors and other groups also are expected to challenge a takeover.
State Comptroller Thomas DiNapoli said legal challenges were to be expected, in part because the law establishing NIFA hasn't been tested. "We're in uncharted territory here. . . . The goal of the law was to ensure NIFA wouldn't have to take over," said the Democrat from Great Neck Plaza.
If the legal wrangling drags on for months, Nassau's credit rating would probably be further downgraded, increasing the cost of borrowing. The county could eventually be shut out of the bond markets altogether and face default if no resolution is achieved.
And if there's no takeover? Muddling through
The NIFA board is expected to meet some time after Thursday's deadline for the county to provide more information about how the 2011 budget is balanced. The six board members are divided over whether a takeover is warranted, according to two sources who have spoken with them.
If NIFA doesn't seize control, that doesn't automatically mean Nassau's budget will spiral into deficit. One source, who works at a credit-rating agency, said the county could limp through the year with one-time revenues and by postponing some bill paying until next year - as state government did under Gov. David A. Paterson in late 2009.
"The key issue is going to be whether Mangano can get something from the unions," said the source who requested anonymity.
The county executive agreed that lower employee costs are crucial to boosting Nassau's finances. Citing next year's end of the no-layoffs provision in the largest union contract, Mangano said he hoped to win cost savings that would help balance the 2012 budget and future ones.
"In 2012, we will have another balanced budget and do so without increasing property taxes," he said. "We have a plan to return the county to fiscal strength over the next several years."