August 6, 2007
WEITZMAN: NASSAU WILL FINISH 2007 ON BUDGET
Concern About Sales Tax Receipts and Police Termination Pay;
County Still Facing Tough Choices In 2008
Nassau County Comptroller Howard Weitzman today predicted the county will finish 2007 on budget or possibly achieve a small surplus – but only if the county continues to take aggressive measures to control expenditures through year-end.
The projection was part of the Comptroller’s annual review of the county’s fiscal condition at mid-year, a report mandated by the Nassau County Charter. Weitzman delivered his comments in an appearance before the County Legislature today and at a Mineola press conference this morning.
“As we predicted when we reviewed the 2007 budget last fall, we expect Nassau County to end the year on budget or with a small surplus” Comptroller Weitzman said. “This is in marked contrast to 2003–2006, when the county enjoyed large surpluses that were used to fund services and avoid a tax increase in the following year’s budget.
“In my October 2006 testimony before the Nassau County Legislature and again in March of this year, I cautioned that the county’s reserves were being depleted, and the county could not rely on budget surpluses to close gaps in the future. In fact, the administration will have to continue taking aggressive cost-cutting measures, such as avoiding non-essential purchases and hiring, during the second half of 2007 to meet this year’s budget,” Comptroller Weitzman said.
“The county has won national recognition for its economic recovery and 11 upgrades in its bond rating. However, given the absence of a large surplus in 2007 and the continued depletion of our reserves, we expect that the 2008 budget discussions will require especially difficult choices.
“Despite double-digit growth in areas such as pensions, Medicaid and employee health benefits, our total expenditures over the last five years grew on average only 3.21% per year. Unfortunately, revenue has grown even less, at an average annual increase of 3.09% (see chart A). In the end, we need to react to our anemic revenue growth – either new sources of revenue will have to be found, or deeper cuts will have to be made to expenses,” Comptroller Weitzman said.
The Suozzi administration has supported various initiatives at the state level that would increase recurring revenues in 2008, including a hike in the cigarette tax, a unified filing fee for county clerks, and the introduction of red-light cameras. “None has been enacted into law by the State Legislature, however,” Comptroller Weitzman said. “In the absence of new revenues, it will be difficult for the county to continue to fund in 2008 all the services it currently provides.”
For 2007, the report predicts the county will end the year on budget or experience a small surplus of up to $5.8 million – but only if the administration continues to aggressively manage expenditures for the balance of the year and maintains its freeze on non-essential hiring and procurement.
The report projects a shortfall of $13.8 million in 2007 budgeted sales tax receipts, and that police termination pay expense will reach $32.5 million, $12.9 million over budget. The administration has provided contingency plans to address these potential shortfalls, including the use of nearly $8 million in reserves to pay for the higher-than-expected police termination pay.
Growth in sales tax receipts is lower than the 3.9 percent rate assumed in the 2007 budget, rising only 1.9 percent for the first six months of 2007. The report projects 3 percent growth for the remainder of the year, resulting in year-end sales tax receipts of $1.016 billion, $13.8 million under the 2007 budget. The county will always be vulnerable to decreases in sales tax revenue, which has grown to approximately 42 percent of all county revenues.
The administration’s second quarter budget report noted that real property tax refunds may exceed budget in 2007, because cases involving potentially large refunds have come up on the court docket and because of increased efficiencies in processing refund payments.
“If sales tax growth continues at the current 1.9 percent rate or lower in the second half of the year, or if property tax refunds go over budget as the administration has warned is possible, it will increase the shortfall and could eliminate the potential surplus, creating the necessity for additional spending cuts,” Comptroller Weitzman said.
As of mid-July, 99 police officers have filed for retirement, consuming the entire year’s budget for termination pay. “Although in the near term the county will have an increased expense for police termination pay,” Comptroller Weitzman said, “taxpayers will benefit from the recent Police Benevolent Association (PBA) arbitration award, which caps termination pay at two times salary beginning in 2009. The PBA contract helped the administration achieve its labor savings target for 2007. In addition, the officers who retire will be replaced with lower-salaried recruits, whose salaries under the new contract will grow more slowly over their first eight years, which will result in a savings for taxpayers.”
Offsetting these shortfalls, the county benefited from an increase in investment income, which is projected to be $7.1 million over budget and from the Suozzi administration’s aggressive management of personnel and supply costs.
As reserves continue to be drawn down to pay for operating expenses, the county’s reserve funds are expected to decline from a high of $214.5 million at the end of 2004 to $77.7 million at the end of 2007 (see chart B).
Since 2004, the county has incurred two major recurring expenditures for which permanent funding sources were never provided: an increase of approximately $100 million a year to our pension contribution beginning in 2005; and the inclusion in the operating budget of $50 million in real estate tax refunds that were previously bonded, starting in 2006. Both of these items have been supported by dedicated reserve funds that will soon be depleted.
For 2007, the Comptroller projects that recurring expenses will exceed recurring revenues by $72.1 million (see chart C).
“There is no question the county’s budget will be balanced in 2008, as it must be by law,” Comptroller Weitzman said. “But for us to get there, the administration and the Legislature, with help from New York State, must find ways to reduce our structural gap.
“Nassau County taxpayers are rightly concerned about their high taxes. We have to continue to cut costs wherever possible. In addition, we must vigorously pursue opportunities for new sources of revenue, such as increasing our tax base through smart growth projects, for example the redevelopment of the Nassau Coliseum property and downtown redevelopment projects. Major relief will not be possible until our legislators fix the school aid formulas that are a major cause of our high local property tax burden, and until we reduce the duplicate and wasteful layers of government that drain our pocketbooks.
“While we look to Albany for legislative help, I share the confidence of the Wall Street rating agencies that we will find creative and responsible solutions to our current challenges," Comptroller Weitzman said.
The full text of the report may be read or downloaded by clicking the report title in the link below.
Report on the County's Financial Condition For The First Six Months of 2007