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Overly optimistic sales tax projections ends Suffolk’s 2015 budget with deficit

A new audit shows Suffolk County ended 2015 with a budget deficit of $47.8 million, largely caused by overly optimistic sales tax projections, Comptroller John Kennedy said.

The outside audit, conducted by Deloitte & Touche, showed a $38.3 million deficit in the general fund and $9.5 million in the police district, according to Kennedy.

The final numbers are higher than the nearly $12.4 million deficit for 2105 that was included in the 2016 county budget. In May the executive and legislative fiscal aides said the deficit was $18.4 million higher than when they presented an updated three year fiscal projections to the legislature’s finance committee.

According to the audit, Suffolk’s largest hit came from sales tax that came in $68 million below the 4.87 percent growth forecast in the 2015 budget. Suffolk’s sales tax grew by less than one percent or $1.7 million for the year.

Robert Lipp, director of budget review, said county lawmakers last fall already rectified the 2015 sales tax shortfalls with amendments to the 2016 budget. He added the 3.55 percent growth estimate for this year was reduced in the May presentation to 2.7 percent, and even that may be too high.

While outside auditors said the drop was due to “sustained low fuel prices,” Kennedy added that increased internet sales also hurt sales tax receipts. “At chamber of commerce meetings people talk about how a customer sees a pair of jeans, but then goes to their phone to check the price and pushes the button to make an on line purchase,” he said.

“It emphasizes the challenging environment we’re facing,” said Deputy County Executive Jon Schneider, “But we’ve mitigated tens of millions of dollars through attrition and embargoing funds.” He added the county has cut more than 100 jobs since the beginning of the year.

Earlier this spring, Nassau Comptroller George Maragos found that Nassau ended 2015 with a $58.87 million surplus, but mainly because the county borrowed to pay property tax refunds and payments to retiring police for unused vacation and sick time. He warned, however, the funds borrowed means the county has a deficit of $105.3 million in 2015.

Suffolk budget aides in May not only disclosed a $30.8 million 2015 deficit, but also projected an additional $38.4 million shortfall for 2016 and a $129.4 million hole for 2017.

A large part of the Suffolk’s ongoing fiscal woes involve a nearly $100 million structural deficit — in which ongoing expenses exceed recurring revenues, said Lipp. Wall Street’s Fitch Ratings last month downgraded Suffolk County from an “A” to “A-“ rating because it has failed cut costs or increase revenues to keep up with expected higher expenses or boost reserves.

However, budget aides say the county could continue to deal with much of its shortfalls in next year’s budget by borrowing as much as $34.2 million from the state for pension costs, and another $38.2 million from the sewer fund.

While the county has declared a fiscal emergency for the past five years, Kennedy said the county has not taken enough steps to resolve the problem. “The county has to do a better job at controlling expenditures,” said Kennedy. “We’re spending more than we take in, so we have to spend less.”

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