August 2, 2006

WEITZMAN WARNS OF GROWING STRUCTURAL DEFICIT,
CALLS FOR EXPENSE REDUCTIONS

Nassau County Comptroller Howard Weitzman today predicted the county will close 2006 with a small operating surplus of approximately $16 million but warned that the county’s structural deficit – the extent to which recurring annual expenses exceed recurring annual revenues – is more than $100 million and growing.

Comptroller Weitzman presented his annual report on the county’s financial condition at mid-year, as required by the Nassau County Charter, to a meeting of the county Legislature today and at a Mineola press conference this morning.

“Even after all that the county has accomplished since 2002 in reversing years of mismanagement, waste and abuse,” Comptroller Weitzman said, “the realities of a mature suburban economy – stagnant economic growth and inevitably growing expenses – are still with us.  Today the county’s financial trends are headed in the wrong direction: lower operating surpluses, lower reserves, and a rapidly growing structural deficit.

“Nassau has been enormously successful in righting its fiscal boat over the last four years,” Comptroller Weitzman said, “cutting costs, reducing debt, and setting aside annual budget surpluses in reserve funds.  In the future, however, if the structural deficit continues to grow, it will be increasingly difficult to continue to achieve balanced budgets.  This is the ‘crunch time’ we predicted a few years ago, as the county has drawn down its hard-earned reserves while annual expenses continue to grow faster than revenues.

“For the last several years,” he continued, “Nassau County has used aggressive cost-cutting, healthy sales tax collections in 2002-2004, and cost-saving initiatives pushed by county officials in Albany, such as the cap on county Medicaid expenditures and pension expense relief, to establish substantial reserves.  It wisely allocated those reserves to provide budget relief in future years.

“That was then – this is now,” Comptroller Weitzman said.  “The county is drawing down those reserves and will substantially exhaust them by the end of 2007.  Because the reserves will no longer be available to close the gap between expenses and revenues, the county has to move immediately for a top-to-bottom review of its budget to determine areas for savings.  We also need to find new ways to encourage economic growth.

“In the face of these serious challenges, it is critical that we make every effort to find ways to balance the budget without increasing the burden on the hard-pressed taxpayers of Nassau County.

“One area in which the county can contain rising costs is health benefits.  We recently suggested a way to save at least $28 million over the next five years – by eliminating duplicate family health insurance policies for employees who are married to other covered employees.  This can be done without any reduction in benefits to employees.  My office is drafting a bill for the County Legislature that will help expedite this change, and I urge its swift passage.”

For 2006, according to the mid-year report, the county will experience a small surplus of approximately $16 million, amounting to less than one percent of its $2.4 billion operating budget (see Chart A, p. 3).  The operating surplus is primarily the result of conservative budgeting and aggressive cost cutting by the Suozzi administration.  But the report also projects a 2006 structural deficit of $104.4 million (see chart B, p. 4), “indicative of a growing imbalance between recurring annual operating revenues and expenses.”

Reserves established in previous years are predicted to decline from $206.6 million at the close of fiscal 2005 to $86.2 million by the end of 2006 (see chart C, p. 5).  Comptroller Weitzman noted that, in addition to the reserves, an additional fund balance of $77.1 million is available, but he agrees with the administration’s policy that it should not be used except in extraordinary circumstances.

Chart A

Chart B

Among the report’s other major findings:

• Salaries:  Nearly $27 million will be saved by the end of fiscal 2006 as a result of conservative budgeting for salaries, vacant employee positions, and a hiring freeze imposed by the County Executive on all but essential hires.
  
• Overtime:  Total overtime costs for the county’s police department and correctional center are projected to be $900,000 under the budgeted amount of $67.4 million.  Higher-than-expected overtime at the correctional center and at police headquarters was more than offset by lower-than-expected overtime at the police districts.
  
• Sales Tax:  The report predicts 2006 sales tax collections will total $988.9 million, $6.9 million below the budgeted amount.  Sales tax collections are the largest source of county revenue, accounting for 41 percent of total revenues.
  
• Property Tax Refunds:  In accordance with state legislation, the county began paying most property tax refunds out of its operating budget in 2006, using $50 million reserved for this purpose in the prior year. 
  
• Nassau Health Care Corporation:  A positive resolution of state and federal reimbursement problems has improved the corporation’s near-term fiscal outlook. A “preliminary updated strategic plan” issued by NHCC management on July 24 outlines initiatives to improve the corporation’s long-term fiscal viability.  NHCC has indicated that any request for the county to release tobacco settlement proceeds to provide additional subsidies to NHCC will not occur prior to completion of its capital plan.

Chart C

"In the next few years, Nassau County will face serious challenges as it strives to continue the financial turn-around that began in 2002,” Comptroller Weitzman said.  “We will have to be aggressive about cutting costs and vigorously pursue opportunities to increase our base for sales and commercial property tax collections, such as the redevelopment of the Nassau Coliseum property (Nassau Center) and smart downtown and brownfield redevelopment projects.  I share the confidence of the Wall Street rating agencies that, as it has in the past, the Suozzi administration will deal with such financial challenges responsibly and creatively."

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Nassau County 2006 Mid-Year Report