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Goldmark: Suffolk, seek the big remedy

Left to right : Suffolk County Executive Steve

Left to right : Suffolk County Executive Steve Bellone and Suffolk County Comptroller Joseph Sawicki listen in the audience as the Blue Ribbon Fiscal Analysis Task Force members report their findings on the size of the county budget deficit to the Suffolk legislature at the William H. Rogers Legislature building in Smithtown. (March 6, 2012) Credit: Newsday/Karen Wiles Stabile

We have a new budget train wreck here in New York State, and it's right on Long Island.

The independent panel reviewing Suffolk County's fiscal situation reported on Tuesday that things are bad and pointed toward getting worse. The deficit for 2013 is anticipated to be about $350 million, or a negative margin of about 14 percent against revenue. That's higher than the negative operating margin New York City was running in the city's fiscal crisis of 1975-77.

The Suffolk train wreck appears to be the result of a perfect financial storm: overestimated revenues, the financial aftershocks from 2008, and use of "one-shots" and reserve funds to meet short-term needs rather than as elements of a serious program leading to fiscal balance.

Two things are true:

First, there are going to have to be severe cuts and service reorganizations in Suffolk. If the local government cannot or will not do this, an external financial control board like the one in Nassau may be necessary to monitor and enforce budget discipline.

Second, the problem is solvable -- if decisive measures commensurate with the size of the problem are put in place.

There are a few crude but simple rules about dealing with a public-sector fiscal crisis. I'm an old budget director (for the state, under Gov. Hugh Carey during the 1970s), and I'm sure the International League of Budget Directors will want my scalp if I make them public. But here they are:

Rule 1: Cut where the big dollars are. (This is a variation on Willie Sutton's remark that he robbed banks "because that's where the money is.") Sixty percent of Suffolk's budget is employee expenses: salaries, pensions and other benefits. Reducing that by 5 percent in 2013 will require pay freezes or even givebacks by employees, as well as selective layoffs. A 5 percent reduction in social service expenditures -- including the county shares of welfare and Medicaid -- is a tough but necessary target. The state can help enormously here by providing waivers and easing the way for these tough measures.

Rule 2: You usually can't close a really big deficit by cuts alone; part of it will have to be done on the revenue side. My guess is that a combined increase of as much as 10 percent in the sales and real property taxes may be needed; this too will require state approval and help. For Suffolk, Gov. Andrew M. Cuomo's 2 percent ceiling on property tax increases is going to go right out the window.

Rule 3: Make sure you cut enough to achieve recurrent balance. This means don't nibble the budget to death slowly, but cut once -- and deeply enough -- so that recurring revenue equals or exceeds recurring expenses and is likely to do so for several years.

Rule 4: Compress the pain from employee layoffs or furloughs and service cutbacks so that it's concentrated in a period of a few months. This will allow people to focus on recovery and resumed service delivery under the new financial constraints, rather than being paralyzed by uncertainty and the threat of further cuts.

Rule 5: Wherever possible, make the cuts in large amounts and ask the institution or department involved, such as a hospital or police department, to work out the specific details. The institutions will know best where the real fat is, and will have the on-the-ground knowledge to spare operations so critical that they should not be touched.

All this is enormously difficult.

All this has been done by other places, at other times, in similar circumstances.

And none of it can be done without strong political leadership to describe the problem, spell out the alternatives, and mobilize support for the most sensible path forward.

Peter Goldmark, a former budget director of New York State and former publisher of the International Herald Tribune, headed the climate program at the Environmental Defense Fund.