Nassau County's proposed 2005 budget is balanced and incorporates conservative revenue and expense growth rates, according to a report issued today by Nassau County Comptroller Howard S. Weitzman. Comptroller Weitzman cautioned, however, that contingency plans in the county's multi-year financial plan propose borrowing to finance county pension contributions, a practice the Comptroller calls "unacceptable."
The county expects 2004 savings of $76 million to result from pension relief legislation recently enacted in New York State, and the savings are reflected in the proposed budget and 2005-2008 financial plan. The benefits of the legislation, however, may be threatened by the possibility of changing guidance in this area from the Governmental Accounting Standards Board (GASB). In the event it is not possible to realize the 2004 pension savings, the county proposes borrowing to make up for lost benefits.
"We consider borrowing for pension expenses an unacceptable fiscal practice and cannot support it," Mr. Weitzman said. "Long-term financing should not be used to fund pension costs, since these costs are clearly operating expenses, and, as such, should be paid from the operating budget.
"The practice of borrowing for operating expenses is largely to blame for the county's fiscal calamities in the 1990s, and has, up to now, been rejected by the current administration. We urge that, in the absence of extraordinary extenuating circumstances, operating expenses continue to be paid by means other than borrowing," he said.
The pension legislation changed the date by which municipalities are required to make their yearly New York State & Local Retirement System contributions, from December 15th to February 1st of the following year.
The Governmental Accounting Standards Board (GASB) has informed the Comptroller that it intends to clarify its existing guidance regarding the state legislation, and the correct accounting treatment of the pension expense. GASB's guidance in this matter may conflict with the plans of Nassau and other New York State counties to realize a benefit in 2004 from the pension relief passed by the state.
If the county cannot achieve budgetary relief and establish the reserve, the county's financial plan indicates the administration's intent to borrow the portion of the pension costs that otherwise would have been covered by the reserve. Even if the pension reserve is created and used, the proposed plan includes financing a portion of pension costs during 2007.
The financial plan also proposes, as a gap-closing measure, the imposition of a 4.25- percent residential energy tax, as has Suffolk County, previously authorized by the state, which is estimated to generate $46.1 million in 2006, $57 million in 2007, and $58.8 million in 2008. "This action would require approval by the County Legislature," Mr. Weitzman notes, "which historically has been loath to raise taxes." As a result, this source of expected revenue is at risk.
The Comptroller's report on the 2005 budget and multi-year financial plan is available here: