Report: Nassau faces $40M deficit in '23; $100M shortfall possible after 'one-time' reserves expire

Nassau County Executive Bruce Blakeman's $3.88 billion budget for 2023 could have a "manageable" deficit of up to $39.3 million, but a $100 million-plus shortfall could develop in the future after "one-time" reserves run out, according to the county's financial control board.

In a report released Thursday, the Nassau Interim Finance Authority warned of looming issues such as Nassau's $6.6 billion liability for retiree health care payments and a $1.6 billion backlog of tax refunds for commercial property owners.

"In general, we see that the risks of the upcoming budget are manageable," NIFA chairman Adam Barsky told Newsday.

But the report spotlights "other longer-term concerns we have about all these potential liabilities that could come hitting and exceed … one-time nonrecurring surpluses" the county has compiled from sources including COVID-19 pandemic aid and short-term savings on debt, Barsky said.

The county must correct its "structural imbalance," with expenses exceeding revenues, or "it will continue to create a wider and wider [budget] gap," Barsky said.

When "surplus funds are depleted, it will create a fiscal cliff for the county," he said.

Nassau has $440 million in reserves, largely from surpluses accumulated during the administration of former Democratic County Executive Laura Curran, whom Blakeman defeated last year, the NIFA report said.

For instance, Nassau has $198.4 million of the $385 million it received from the federal American Rescue Plan Act, enacted in 2021 to counter the economic downturn and the COVID-19 crisis, the report said.

But Nassau cannot use that money to cover its "bottom line," NIFA said.

Overall, the reserves are "insufficient to cover the County’s known risks and long-term liabilities," according to the report.

Christopher Boyle, a spokesman for Blakeman, a Republican, did not immediately have a comment Thursday night on NIFA's report. 

The report cited fiscal risks such as:

• The Civil Service Employees Association's $109 million grievance over "hazard pay" it says members are owed for working during the height of the COVID-19 pandemic in 2020.
• Unsettled worker compensation claims that could cost the county $345 million.
• Possible elimination of the county's $355 tax map verification fee. In 2020, a state Supreme Court justice ruled the fee unconstitutional. Nassau is appealing the decision and still collects the fee, which generates about $45 million annually.

The NIFA report includes a letter from Barsky to Blakeman on July 26, containing 17 financial questions.

In one query, Barsky asked how Nassau would respond if the Nassau Health Care Corporation, the public benefit corporation that runs Nassau University Medical Center, were to run out of cash.

Nassau County guarantees $131 million in corporation debt, and would have to pay the money if NHCC were to default.

Barsky said Blakeman has not responded to the letter. 

Boyle did not say why Blakeman did not respond to the letter.

The New York State Legislature created NIFA in 2000, after Nassau County had run significant deficits several years in a row.

It instituted a control period in 2011. State law allows NIFA to institute a control period when the county runs an operating deficit of 1% or more.

During a control period, NIFA can reject county budgets and labor contracts and impose wage freezes.

Nassau Republican elected officials are pressing for an end to the control period.

Elaine Phillips, the Nassau County comptroller, said during a legislative budget hearing on Oct. 12 that NIFA keeps "moving the goalposts. There is no question that years ago, Nassau County needed a little control and oversight. But that is not the current financial condition of Nassau County today."

"Give us the formula, give us the equation" for ending the control period, Phillips said. "We're solid."

The NIFA report indicated oversight still is needed, in part because of the structural budget deficit.

"Naturally, our opinion might change if the economy improves significantly, or if there is a large and unanticipated infusion of recurring revenue or a significant realignment of expenditures," the report says.

But Blakeman's 2023 budget "contains projected deficits that increase" in future years "to more than four times the size of the one percent deficit that requires NIFA to implement" a control period, the report says.

The report continues: "These deficits could be significantly larger depending on the severity of the potential recession and final court rulings on pending litigation."

By Scott Eidler

scott.eidler@newsday.com@ScottEidler

Scott Eidler covers Nassau County government and politics for Newsday. Scott has worked at Newsday since 2012 and previously covered municipal government and education.