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January 6, 2011

 

Comptroller Maragos’ Statement on Nassau County’s Finances

The Comptroller’s Office projected in November that the County will end 2010 with a small surplus and with over $65 million in unreserved fund balance. The Comptroller also reviewed the adopted 2011 budget and, in consultation with outside auditors, concluded that it is balanced under governmental accounting standards. Our assessment that the 2011 budget is balanced was further bolstered by the County Executive’s written commitment to order additional budgetary cuts if required plus the $98 million in itemized contingencies that the Administration proposed.

The 2011 budget, although balanced, contains above average risks that will present the Mangano Administration with significant challenges to end the year in balance. The most difficult challenges will be in realizing the $61.3 million in labor concessions and in controlling labor overtime costs. We urge the County Executive and the Legislature to vigorously pursue these labor concessions. The structural fiscal reforms promised in the 2011 budget and beyond cannot happen without these concessions.

The total amount in budgetary risk items are in line with those of previous years which were deemed manageable by the Nassau Interim Finance Authority (NIFA). Exhibit 1 shows the amounts of budgetary items classified at risk for the years 2006-2010 compared to the major 2011 budgetary risks cited by the Moody’s report.

The County was able to manage its risk items in previous years, and we fully expect that the County Executive will manage the 2011 risks using available contingencies, if necessary.

Furthermore, the 2011 budget has made significant progress to improve certain key financial fundamentals and set the County towards improved long term financial health:

 

  • Improving Structural Budget Gap: A key fundamental parameter used historically to measure the County’s fiscal health is the structural gap, which is the difference between recurring expenses and recurring revenues. Exhibit 2 shows the significant projected shrinking in the structural gap by 30% in just two years. This is being achieved by the departmental expense cuts implemented in 2010 and further cuts in the 2011 budget.
  • Controlled Spending: The growth in spending has essentially been stopped as shown in Exhibit 3. This is a remarkable achievement by the Mangano Administration given the cost pressures from onerous labor agreements and double digit increases in employee health benefit costs and pension contributions.

  • Reduced Borrowing: Exhibit 4 illustrates the past addiction of the County to borrow culminating at $362 million in 2010. This addiction is ending in 2011 with the significant decline in borrowing planned for 2011 and beyond. The first decline in 5 years.

In summary;

 

  • The 2011 budget is balanced as adopted by the County Legislature and according to Governmental Accounting Standards.
  • The budgetary items at risk are similar to the previous administration and not out of line with budgetary principles.
  • The structural budget gap has been reduced by 30% from its peak in 2009 under the previous administration.
  • The growth in spending has essentially been stopped as compared to the steady growth by the previous administration.
  • The amount of borrowing (bonding for new money) is less than during the previous administration.

Nassau County’s finances are stable in an environment where national and state deficits have skyrocketed. The federal government is projecting a deficit of over 30% of its 2010 budget while New York State is confronting a nearly 7% deficit for fiscal 2011.  Nassau County’s 2010 budget will end with a projected small surplus and the County’s finances will further strengthen in 2011 as summarized above if the Mangano Administration delivers on the adopted budget.

The Comptroller’s office will monitor the 2011 budget performance and objectively report progress. The past practices of budget gimmicks, borrowing for current expenses and expense deferrals will not be condoned and will be called out.

 

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The Comptroller’s amount identified “at-risk” is $258 million; this amount is greater than Moody’s, NIFA’s, and the County OMB. The Moody’s number was chosen for comparative purposes as an outside independent and objective source.