March 24, 2009                                                                           

WEITZMAN: ‘NASSAU COUNTY TO END DIFFICULT 2008 WITH $2.1 M SURPLUS.’

County forced to react to sales tax decline

Nassau County Comptroller Howard Weitzman announced the County’s 2008 year end results today, saying that Nassau County will end the year with a $2.1 million surplus (see chart 1). Among the budgetary challenges faced by the County in 2008 were plummeting sales tax receipts, drops in other County revenues, higher than expected property tax refunds, over-budget overtime, and the failure of the State to approve several revenue-producing initiatives.

 “The sales tax decline in 2008 presented significant problems for the County,” Weitzman said. “Sales tax dropped 0.8% below 2007 receipts, the first year-over-year decline since 1991, and came up approximately $37.7 million short of budget. But sales tax was not the only major obstacle the County had to deal with in 2008.”

Property tax refunds reached $98.8 million in 2008, partially as a result of accelerated court calendars. The administration began paying refunds from its operating budget in 2006, a major change from prior practice and an important step in maintaining financial stability. However, the $40 million for property tax refunds included in the 2008 budget was insufficient. The administration relied on borrowing to fund the additional $58.8 million expense.

 “Because the administration used long-term borrowing to pay this additional expense, the additional real estate refunds had no budgetary impact in 2008. A lot of work has been done to reduce property tax refunds, but more needs to be done. The County’s need to rely on borrowed funds to pay a portion of its refunds is still deeply troubling,” Weitzman said.

Comptroller Weitzman stressed that the collapsing economy in 2008 forced the administration to quickly realign its spending plan to reflect the bleak realities of the times. “The administration reacted quickly,” Weitzman said, “They put rigid spending controls in place,”

The County saved $22.9 million by strictly controlling spending on contracts and other non-personnel expenses and by using $17.6 million in excess cash from prior year capital projects.  The administration also benefited from its conservative practice in reserving $14.8 million more than required to resolve open labor agreements.

The significant savings and expenses that were over or under budget are laid out in the annexed Table 1.

Other financial challenges faced by the County in 2008 included:

• While the county is moving aggressively to reduce overtime, it was still $12.4 million over budget, primarily in public safety.
• Revenues from Parks and other County Departments came in $13.7 million under budget.
• The State did not enact into law the vast majority of the $19.6 million in initiatives that the County had requested; this was partially offset by $14 million in budgeted contingency funds.
• Debt service was $22.7 million lower than budgeted because the County paid lower interest rates on its and NIFA’s variable rate debt and because the County borrowed less than anticipated. These savings were partially offset because the County received $9.9 million less in interest due to the same lower interest rates.

The 2008 year end results do not include any additional Medicaid funding that the County is in line to receive from the federal government’s stimulus package. The approximately $7.5 million that the County believes it will receive for 2008 will be included as revenues in 2009, upon receipt.

 “The next year will be difficult for all governments,” said Weitzman. “With sales tax receipts in an unprecedented freefall, 2009 presents serious challenges. The administration is in the process of closing its projected 2009 budget gap of approximately $130 million, of which reduced sales tax receipts could comprise approximately $100 million.”

In 2008 the County saw a small increase of approximately $1 million in its $122.9 million structural gap (see chart 2):  a structural gap is the difference between recurring expenses and recurring revenues. Among the major items the County used to close the gap: $58.8 million in non-recurring borrowed funds to pay real estate refunds, $25.3 million in reserved funds, $23 million from the tobacco settlement, and $17.9 million in prior year surplus. In order to reduce the County’s structural gap in the future, the administration will have to continue to reduce recurring expenses or identify new sources of recurring revenues.

2008 Year End Charts