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August 4, 2008
Weitzman: ‘Storm clouds gathering; Administration & Legislature must act now against economic downturn.’
National & local economic slide will pressure 2008 County budget into 2009
 The administration will have to dig down deep to end 2008 with even a small surplus, Nassau County Comptroller Howard Weitzman said.
"The storm clouds are gathering and the County Executive and County Legislature need to act now to implement expense reductions and revenue enhancements so that the County is protected against a further economic downturn in 2008 and the possibility of a worsening economic climate in 2009,” Weitzman said.
Comptroller Weitzman reported today that he projected the County will finish 2008 with $46 million less in revenue and expend $11 million more than budgeted. The budget shortfalls can be offset by a combination of revenue-enhancing actions, expense reductions, and use of the County’s remaining reserves, prior year surpluses and unspent borrowed funds. With these necessary steps, the County can finish the year with a small surplus of approximately $9.4 million. (Actions and opportunities available to the County are presented in Table 1.)
Weitzman stated that Nassau County has joined the ranks of other governments confronting a slumping national economy and weakening sales tax receipts. The County also faces the risk that the State, facing its own fiscal pressures, will seek to shift expenses or reduce revenue to the County.
The somber 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 at a Mineola press conference this morning.
The County’s trouble spots include the following areas:
-The State did not approve nearly $20 million in budgeted initiatives needing State approval. The only initiative approved by the State was a local option for increased Clerk filing fees. The County will receive, at most, $1.8 million in 2008 from the increased Clerk fees, assuming the County Legislature enacts it into law;
-Sales tax receipts are projected at $7.4 million under budget and may slide further if the economy continues to weaken;
-Police and Corrections Departments overtime is projected to be $18 million over budget;
-Real Estate tax refunds are estimated by the Administration to be $18 million over budget;
-Departmental revenues, such as Parks Department fees, are projected to be $10 million under budget.
These areas of concern are partially offset by savings on debt service, successfully negotiated labor savings, and the continuing positive effect of the cap on increases in the County share of Medicaid expense, for which the administration successfully lobbied.
"The Administration and Legislature must work together quickly to ensure that all new expenditure reductions and revenue enhancements are given full consideration.”
Weitzman said that among the administrative actions available are $18 million from a 2007 borrowing to pay real estate refunds, $4 million for a parks revenue contract still being negotiated and a reduction in general expenditures. Although not quantified in the report, additional savings could come through tighter management of police and corrections overtime through the end of the year.
"Taken together, we identified $32.8 million in administrative actions that can be taken now to help balance the budget in 2008,” Weitzman said.
In addition, the Comptroller identified approximately $120 million in remaining reserves, prior year borrowing and prior year surpluses. Weitzman said he anticipates that approximately $34 million of that amount will be used in order to finish the year with a small surplus and leave a limited cushion to cover a potential further drop in sales tax receipts.
Current downward trend in sales tax
Sales tax, which is the County’s largest single source of revenue, is estimated to end the year at $7.4 million under the 2008 budget of $1.041 billion if current trends continue. The 2008 budget had assumed a 2.5% growth rate in sales tax; based on receipts to-date in 2008, the Comptroller has projected that sales tax receipts will increase by only 2.1% over 2007 receipts. Sales tax is difficult to project and local economists are split on its future direction. There is a potential for an additional decline in receipts given the difficult economic conditions nationwide and the drop in the housing market and in retail sales generally. If sales tax receipts in the second six months of 2008 drop to the level of 2007 receipts, the projected 2008 surplus would be sufficient to cover this shortfall but would not provide any greater cushion against a worsening economy.
"Looking ahead to 2009, because of the potential for a further softening of the economy, the County needs to act now to protect against the possibility that sales tax receipts will continue to drop,” Weitzman said. “With New York State and New York City projecting decreases in employment and lower income tax receipts, the Administration and Legislature need to prepare now since it is very possible that the County will face increased pressure on sales tax in its 2009 budget.”
"The Administration and Legislature have done tremendous work to keep expense growth to a compounded rate of 2.96% from 2002 - 2008, below the 3.7% rate of increase for consumer price inflation during the same period. However, revenue growth at 2.53% has still not kept pace,” Weitzman said, “and the County may face even lower revenue growth in 2009 with the declining national and local economies.”
The problems facing the County in 2009 include possible further declines in sales tax receipts due to the weak economy and the continued gap between the County’s recurring revenues and recurring expenses. This imbalance, known as a structural gap, is projected to decline by $12 million this year; it will still stand at $110 million by year end.
"In prior years the County has used non-recurring revenues, such as prior year surpluses and reserves specifically set aside for that purpose to provide budget relief. The reserves have been substantially drawn down, and will not be materially available in 2009,” Weitzman said.
"The County Executive and County Legislature must identify realistic expense reductions and revenue enhancements to protect against further budget shortfalls during the remainder of 2008 and prepare for the challenges in 2009,” Weitzman said.
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