April 7, 2014
COMPTROLLER MARAGOS: COUNTY TO END 2013
UNAUDITED $54.7M BUDGETARY SURPLUS
Mineola, NY- Nassau County Comptroller George
Maragos released the 2013 unaudited fiscal results today and reported
that the County is expected to end the year with a budgetary surplus
of $54.7 million in the five operating funds. However, the County
could have ended with a $60.8 million budgetary deficit without
$115.5 million in borrowing to pay for property tax refunds, Judgments,
Settlements and Termination Pay as authorized by the Legislature
and the Nassau County Interim Finance Authority (NIFA).
“The County continues to struggle to repay 100% of the property tax refunds
while taking in only 16% of the collected revenue, and to pay for the rising
costs of police overtime,” Comptroller Maragos said. “The
use of borrowings to pay for operating expenses is not the answer
even if approved by the Legislature and NIFA. Structural reforms
are needed to increase revenues, decrease expenses, and reduce the
high levels of police overtime costs.”
Under Generally Accepted Accounting Principles (“GAAP”),
as required for governmental financial reporting at the fund level,
the County’s unaudited results for the fiscal year are expected
to result in a budgetary surplus of $54.7 million or $58.7 million
on a modified accrual (GAAP) basis, for the five operating funds.
Based on reporting prescribed by NIFA, the County adjusts its modified
accrual results for certain financing sources, including premiums
on bonds issued, and borrowed funds for termination pay and property
tax refunds. The County’s expected results for 2013 on a NIFA
presentation basis of reporting will result in a negative $68.5 million.
The NIFA result is a 60% improvement compared to the negative $169.5
million recorded in 2009, the final year of the previous Administration,
but higher than the negative $64 million in 2012.
Effective with fiscal year 2013, the NIFA reporting methodology was
revised. The County may now exclude from the adjustments to the County’s
modified accrual results, the transfers from other funds to pay for
debt service expense and investment income. This change had
the effect of improving the NIFA presentation by $22.9 million in
2013 and improved the prior years’ results as shown in Table
2. The Structural Gap, which has been used historically to measure
the financial health of the County, has continued to improve for
the fourth consecutive year. The Structural Gap has progressively
improved to $96.6 million in 2013 from $251.6 million in 2009, a
62% improvement, and better than the $116.9 million result in fiscal
2012. The Structural Gap is the difference between recurring revenues
and expenses, and excludes non-recurring items, such as certain borrowings,
and extraordinary items.
1 summarizes the major variances to the 2013 Budget. Although
revenues were lower than budgeted by $57.4 million or about 2.1%,
the expenses were also lower by $112.1 million or 4.0% resulting
in the $54.7 million budgetary surplus. Budgeted revenues fell short
primarily due to lower Federal and State Aid but were offset by $18.5
million in higher sales tax revenues.
Expenses were $112.1 million better than budgeted primarily due to
the use of borrowings to pay $11.7 million of budgeted Property Tax
refunds and $22.1 million in budgeted Judgments and Settlements,
as well as $32.8 million in lower Early Intervention and Pre-School
costs, $26.7 million in lower Debt Service expenses, and $28.3 million
in lower Payroll and Fringe Benefits. The lower expenses were offset
by approximately $23.3 million in higher police overtime.
The positive expense variance would have been lowered to $30.4 million
had additional borrowings of $81.7 million not been used to pay for
unbudgeted property tax refunds, Termination Pay, Judgments and Settlements.
This borrowing, in addition to other capital projects’ borrowings,
increased the total County Long Term Debt at year-end to $3.64 billion
up from $3.49 billion in 2012, for a net increase of $148.9 million
(see Table 2).
Three major issues confront the County and threaten to unwind the
multi-year fiscal plan; the rising long-term liability relating to
property tax refunds, the wage freeze, which was re-imposed by NIFA
for another year and is still under court appeal, and the growing
overtime cost for police officers.
An additional $48 million of new property tax liabilities were added
in 2013, which increased the total liability for property tax refunds
to approximately $325 million. The courts have rejected the County’s
attempt to end the “County Guarantee”, whereby the County
pays the property tax refunds for the school, town and village portions
of the tax. The County must now develop alternative solutions to
make greater progress in reducing the growing liability, and revert
to a PAYGO system to pay down the liability.
The recently negotiated labor concessions to end the wage freeze
represent structural reforms that will provide long-term savings
for taxpayers and will assist the Administration in reducing police
overtime expenses through the hiring of an additional 450 police
officers. However, these proposed labor agreements involve higher
costs of about $120 million over the next four years that will need
to be funded from uncertain new revenue sources.
“Increased borrowing to pay the growing property tax refunds
and the potential increases in labor costs will continue to challenge
achieving fiscal balance under NIFA’s accounting standard,” Comptroller
Maragos said. “The Administration, the Legislature and NIFA
must readjust the fiscal multi-year recovery plan with new revenue
sources and greater economies in order to protect the County taxpayers.”
1 and Table 2
Follow the event on Twitter.com/nccompchallenge and on Facebook.com/nccompchallenge
Connect with Nassau County Comptroller Maragos Online: