That’s the sound of Suffolk’s Wall Street bond rating dropping by a notch, for the second time in less than two years.
The move by Standard & Poor’s Global Rating occurred June 12, several hours after budget aides for the Suffolk County Legislature and County Executive Steve Bellone forecast that Suffolk faced a shortfall of up to $165.4 million heading into discussions about the 2018 budget.
At the start of his first term in 2012, Bellone declared a fiscal crisis in Suffolk. While the county, according to S & P’s analysis, has made progress, there’s a heck of a lot still to be addressed before Suffolk is fiscally in the clear.
Budgets are like microorganisms, with various parts contracting and expanding as need requires. The best are essentially balanced, limiting the need for constant, unexpected adjustment.
But Suffolk still is having to make unanticipated adjustments.
The county’s budget flexibility “is very weak,” according to S & P, in part because Suffolk has very little left in rainy day funds. That’s because the county has had to dip into them to balance expenditures and revenues.
For instance, Suffolk is expected to close the books on 2016 with a net operating surplus of 1 percent. But only because Peter plans on taking money from Paul by tapping Suffolk’s Assessment Stabilization Reserve Fund in higher amounts than usual.
Without that transfer, Suffolk likely would end 2016 with a slight deficit.
It’s hard to imagine that lawmakers and Bellone had zero inkling that the county’s bond rating was about to drop as aides discussed anticipated shortfalls during a legislative meeting on June 12.
Elected officials tend to be sensitive about bond rating dips — nobody wants to be tagged with a precipitous drop that could make it more expensive to borrow money..
But elected officials remain even more sensitive about implementing a reliable way to steady budgets: Raising taxes.
“Negatively affecting budgetary flexibility, in our view, is limited capacity to raise revenues due to ongoing political resistance,” S & P said.
“ . . . We believe the county has shown a lack of political willingness to raise property taxes above the [state-set 2 percent] levy cap, which remains an impediment to bringing revenues in line with expenditures,” according to the report. “In our view, this is a negative credit factor.”
Over the past two years, Suffolk has attempted to tap new revenue streams, primarily by raising fees. But earlier this year, lawmakers balked at enacting more and more of them. Bellone later pitched the idea of freezing some salaries and having nonunion employees help pay for health care benefits. Those also went nowhere.
But the bond-rating drop this month, from A to A-, adds urgency for officials to find cuts, raise revenues — or reconfigure Suffolk government to make things work. The trick will be to get it done — or, as has happened in Nassau, face the prospect of a decadelong crawl up from insolvency.