NASSAU COUNTY FIRMLY IN THE BLACK, WEITZMAN FINDS

Conservative Budgeting, One-Time Revenues Help;
County Could Reap An Extra $77 Million
in 2004 From State Pension Relief

Nassau County closed the books for fiscal 2003 with a $25.5 million surplus thanks to conservative budgeting and unexpected one-time revenues, Nassau County Comptroller Howard S. Weitzman said today.

"The actual operating surplus was much higher - more than $127 million - however, the county has elected to apply $102 million to reduce anticipated future budget deficits, a decision I fully endorse," Mr. Weitzman said.

"Nassau's surplus last year demonstrates the wisdom of the county's conservative budgeting policies and aggressive cost-cutting, as it continues its return to fiscal health under the oversight of the Nassau Interim Finance Authority (NIFA). Since 2002, each Suozzi Administration budget has relied less on "one-shot" revenues and avoided the kind of fiscal gimmicks that, in the 1990's, almost overwhelmed the county with debt, bringing it to the edge of fiscal disaster."

"It is notable that in 2003 the county would have achieved a small surplus on its own, even without non-recurring revenues," Mr. Weitzman said. Such revenues included $56.6 million of NIFA aid, $43.1 million in state pension relief and $15.3 million of Medicaid liability forgiven by New York State.

The Administration plans to transfer $12.8 million of the $25.5 million surplus to fund new technology initiatives, contingent upon legislative approval.

Mr. Weitzman attributed the surplus to a combination of expense reductions - especially in payroll and benefits - management efficiencies instituted by County Executive Suozzi, and outside sources of revenue. The largest single factor in producing the surplus was in the area of employee salaries and benefits, where the county spent $104.1 million less than the budgeted amount of $1.04 billion, before the discretionary actions to reduce future deficits. The $104.1 million includes $43.1 million of budget relief for Nassau in 2003 resulting from the state pension relief initiative for local governments proposed by State Comptroller Hevesi and passed by the State Legislature last year. Most of the remainder is attributable to the successful resolution of county labor contracts in 2003, resulting in less than budgeted personnel costs.

Net savings in the personnel budget will be used to finish paying for the cost of the 2002 early retirement incentive ($16.5 million); to establish a $38.5-million reserve for police termination pay during 2004; and to pay off $17.7 million of retirement related debt. The last two items are contingent upon approval by the county legislature.

Healthy sales tax receipts added to the positive financial performance in 2003. Sales taxes grew significantly at year-end, resulting in total gross receipts of $895.5 million, $13 million over budget.

"No one would argue that the county's fiscal recovery during the last two years has been anything less than remarkable," Mr. Weitzman said, citing its two bond upgrades since 2002 (prior to that the county's bonds had not been upgraded since 1987), and its return to the bond market under its own credit for the first time since 2000. "Nevertheless, like all counties in New York State, Nassau's finances continue to be threatened by double-digit percentage increases in state-mandated Medicaid expenses, soaring employee pension and health insurance costs, and the critical fiscal condition of the Nassau Health Care Corporation, which receives county subsidies and whose debt the county guarantees. It is entirely necessary that Nassau continue to follow its conservative fiscal path and put whatever surpluses it achieves aside for the rainy days we see coming in the next few years."

Weitzman also cited an unexpected potential windfall in 2004 - a one-time modification to the New York State pension system proposed last month by State Comptroller Alan G. Hevesi that could result in a $77 million expense reduction for Nassau County this year. The change moves by statute the 2004 pension contribution into 2005, permanently deferring a significant expense already budgeted for 2004.

"The proposed one-time pension adjustment, if approved by the State Legislature and Governor, would be welcome news for Nassau," Mr. Weitzman said. "Although most municipalities in New York State would benefit from this relief, the benefit to Nassau is almost certain to be the largest in the state. This is because Nassau has been more conservative than many other counties in budgeting for the expected steep increases in state pension contributions necessitated by the stock market fluctuations of recent years." Mr. Weitzman also noted that Governor Pataki has proposed alternative legislation that would provide lower, but still significant, pension relief for local governments.

"It is the prerogative of the County Executive and the Legislature as to what to do with the projected savings. Even so, in view of the county's fiscal outlook - which continues to be precarious, with serious deficits projected for the period of 2005-2008 - I urge the county to use this as an opportunity to reduce the budget pressures we know we will face in the near future." The expected budget shortfall is $121 million in 2005, and $285 million in 2006.

"I am recommending that this surplus be used in two ways:

• To fund a reserve to help the county cope with the impending steep increases in required contributions to the New York State pension system. Such a reserve fund is conditional upon a proposed state law expressly allowing municipalities to maintain such reserves; and
  
• To invest in assets that will allow the county to operate more cost-efficiently in the future, for example to consolidate and modernize county buildings, and to improve the county's outdated technology."