March 1, 2007

WEITZMAN REPORTS NASSAU COUNTY CLOSED 2006 WITH $45.4 MILLION SURPLUS

Warns Legislature, County Exec that Challenges Remain for This Year and Big Structural Gap Looms in 2008

Nassau County achieved a budget surplus in 2006 of $45.4 million, its fifth annual surplus under the Suozzi administration, Comptroller Howard Weitzman announced today in his annual end-of-the-year report on the county’s finances. Despite this year’s surplus, however, the county’s structural deficit is continuing to widen.

As a result, Comptroller Weitzman today wrote to the County Executive and leaders of the County Legislature to urge them to start working now, on a bipartisan basis, to begin to make the hard choices necessary to balance next year’s budget (see attached letter).

“The good news for taxpayers is that the county generated another budget surplus in 2006,” Comptroller Weitzman said. “This was the fifth consecutive surplus since 2002 and represents the third year in a row a surplus was achieved without a tax increase.

“The continuing surpluses are the result of strong fiscal management by the Suozzi administration, including a 2006 freeze on non-essential hiring and purchasing. In fact, had it not been for a one-time accounting change, the surplus would have been almost $20 million higher. Because in recent years the county has used its annual surpluses to establish reserves, it has been able to fund normal expense growth without raising property taxes.

“But despite the county’s robust fiscal recovery,” Comptroller Weitzman said, “we must still deal with the realities of a mature suburban economy with little economic growth and increasing expenses. Our reserves are being depleted and the structural deficit - the extent to which recurring annual expenses exceed recurring annual revenues - is increasing.

“By the end of 2007 we expect the County’s reserves to be essentially exhausted. Moreover, the 2007 budget included a number of items that might not be achievable, including aggressive assumptions about labor concessions and other cost-cutting initiatives totaling more than $30 million. Two months into this budget year, those concessions have yet to be achieved. Meanwhile, looking ahead to 2008, we face a $164 million structural gap, according to the 2007-2010 Multi-Year Financial Plan.

“With such an enormous gap projected for 2008 and little likelihood of a surplus from 2007 to help reduce it,” Comptroller Weitzman said, “the administration and the Legislature have no time to waste. That’s why I wrote today to the County Executive and the leaders of the Legislature to urge them not to wait until September to start planning strategies for 2008. They need to begin now to determine what spending is truly necessary and where the revenue to support that spending will come from. We will also need the help of our state representatives with state initiatives, such as the cigarette tax increase proposed by Presiding Officer Judy Jacobs.

“All parties must roll up their sleeves and get to work to resolve this looming budget crisis. The time to do so is now, before the legislative election campaigns heat up, making it that much harder to achieve a consensus,” he added.

The Comptroller noted that most of the 2006 surplus has been earmarked for 2007 budget relief and so will not be available for 2008. Under legislation creating the Nassau County Interim Finance Authority, the county is no longer permitted to issue debt to pay for property tax refunds. Therefore the administration plans to use $25 million of the 2006 surplus to set aside funds for 2007 property tax refunds. The remainder of the surplus is planned to be used as follows: $16 million for the pension reserve and $500,000 for a management study, with $3.9 million added to accumulated fund balance.

“The county balanced the budget in 2006 with the use of ‘one-shots’ (i.e., non-recurring sources of revenue or expense reduction), as it did in 2005,” Comptroller Weitzman said. “But because the structural deficit was larger in 2006 than in 2005 - $59 million this year, compared to $37 million last year - more one-shot revenues were needed to close the gap. The greater reliance on one-shots demonstrates the ever-increasing difficulty of balancing the county’s budget.”

In all, there were $121.6 million of one-shots in 2006, including $94.4 million of reserves established from prior years’ surpluses.

Weitzman cited less than robust growth of sales tax revenues, which totaled $989.2 million in 2006, a growth rate of 3.8 percent over the previous year and $6.6 million under the amount projected in the county’s 2006 budget.

Among other highlights of the 2006 financial results:

• The county made a one-time, non-recurring accounting adjustment of $19.5 million to record the change brought on by its transition from using debt to pay for property tax refunds to “pay-as-you-go” funding of such refunds.



• Investment income totaled $24.9 million, $10.9 million over budget, thanks to more available cash to invest and better short-term interest rates than the budget projected.



• Payroll was $31 million under the $832.6 million budget, due in part to the County Executive’s freeze on non-essential hiring. Included in this amount were:



• Police Department overtime totaling $43.8 million, $3.6 million under budget;



• Correctional Center overtime of $22.2 million, $1.7 million over budget; and



• Police termination pay totaling $16.7 million, $6.6 million under budget.



• Workers’ compensation of $21.2 million, $3.6 million over budget.



• State aid was approximately $16.6 million over budget, primarily due to reimbursements for higher than budgeted special education and Medicaid administrative costs.



• The county transferred $10.3 million of the tobacco settlement funds to the Nassau Health Care Corporation.

“The continued ability of the county to achieve surpluses provides further proof of its current financial health," Comptroller Weitzman said. "But we cannot be complacent. It was not easy to turn the county around financially,” he noted, “and it only gets tougher from here.”

Click here for the charts and letter.