COMPTROLLER RELEASES MID-YEAR FORECAST OF
2003 NASSAU COUNTY FINANCIAL RESULTS

$15.3 Million Surplus Expected,
But Budget Gaps and Negative Net Worth Still a Concern

Nassau County is likely to end Fiscal Year 2003 with a small budget surplus of $15.3 million, attributable primarily to conservative budgeting by the Suozzi administration and an unanticipated one-time pension relief plan implemented by the New York State Comptroller, according to a report issued today by Comptroller Howard S. Weitzman. The Comptroller's report, a mid-year financial forecast of the county's year-end financial results, is required by the County Charter.

The year-end surplus is expected despite a projected shortfall in county sales taxes of as much as $27 million and an accelerated payment by the county of $40 million of retirement-related debt. While noting that the Suozzi administration has made much progress toward improving Nassau's financial condition, Mr. Weitzman cautioned that the county continues to suffer from a structural deficit, which is projected at $150 million in 2004 and $300 million in 2005.

Mr. Weitzman said, "This projected surplus is certainly no cause for celebration. Even with all of the sound management techniques implemented by the current administration, the FY 2003 structural gap would not have been closed without $55 million of continued transitional state aid and debt restructuring from the Nassau Interim Finance Authority (NIFA)."

Weitzman added, "We are pleased that this year's financial plan includes a number of measures aimed at increasing the county's long-term fiscal health and decreasing debt. Those measures will help close projected budget gaps in 2004 and beyond by using available 2003 funds to pay down certain non-recurring obligations. They include $21 million to pay for the county employee 2002 early retirement incentive program and $19.3 million to pay the balance of debt related to retirement.

"By paying these one-time retirement obligations this year," Mr. Weitzman said, "the administration is reducing the heavy deficits projected for 2004 and 2005. The county's decision to provide budgetary relief in future years by paying these obligations down now is prudent and sensible."

Mr. Weitzman repeated earlier warnings that failure to achieve the administration's plan for reducing the structural deficit, including the creation of a Nassau Sewer and Storm Water Authority and additional labor concessions, will likely trigger the need for layoffs and service cuts that the county can ill afford, and which county residents are unlikely to find acceptable. The Sewer and Storm Water Authority, which had been expected to save the county a recurring $25 million each year, is currently stalled in the state legislature. "The county must achieve those savings in order to avoid more dire budget and service cuts," said Mr. Weitzman. "The only way to permanently close a structural deficit is to cut recurring expenses and/or to raise revenues.

"I am equally concerned about the county's negative net worth, which is likely to grow to $1.2 billion by the end of the year." The calculation of net worth, newly required by the Government Accounting Standards Board (GASB), is contained this year in the county's 2002 audited financial statements, recently released by the Comptroller. These financial statements revealed the county's negative net worth to be $1 billion. "The primary villain in this financial saga is the continued high cost to the county of property tax refunds to support a tax assessment system that has been seriously out of kilter for years," said Comptroller Weitzman. "We expect this situation to improve only as the county begins in 2006 to pay for these obligations out of its annual operating budgets.

"If the county does not achieve its goal of reducing the annual level of property tax refunds from $150 million to $57 million by 2006 alternative plans will need to be developed. The actual dollar amount of the negative net worth is less significant than the trend, which is symptomatic of past poor borrowing practices. We look forward to the day when we can report the actual net worth of the county is increasing."

The forecast report also includes cautions about the tenuous financial position of the Nassau Health Care Corporation, the public benefit corporation that runs Nassau University Medical Center as well as the A. Holly Patterson Geriatric Center and various health clinics. Nassau County is the guarantor of $256 million in debt, issued to finance the creation of the corporation. On top of incurring net losses totaling $78.5 million from its inception in 1999 through December 31, 2002, and after losses of $9.0 million for the first six months of 2003, it appears that the final year-end loss for 2003 may exceed the budgeted net loss of $8.8 million, the report says.
Continued losses are likely to take their toll on the Corporation's ability to provide health care to the patient populations being served by these facilities, the report adds. The county is obtaining the assistance of health care experts to examine the county's current and future role in meeting the health care needs of its residents.

"Overall," concluded Comptroller Weitzman, "although there has been a sea change in the last eighteen months, there are still troubled waters ahead."

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2003 Mid-Year Financial Forecast ( ~ 360kB .pdf file - 14 pages)