March 16, 2010
COMPTROLLER MARAGOS: NASSAU COUNTY ENDS FISCAL YEAR 2009 WITH ALARMING STRUCTURAL DEFICIT OF OVER $248 MILLION
The deficit is 102.5% higher than the previous year
Nassau County Comptroller George Maragos announced the County’s 2009 year end fiscal results today, saying that the County had a structural deficit of $248.9 million in a budget of $2.6 billion (see Exhibit 1).
"As a result of the Suozzi Administration optimistically budgeting $188 million in revenues that never materialized and lack of oversight in the monitoring of spending that allowed expenses to exceed the budget by $60.9 million, our structural deficit ballooned to $248.9 million from a structural deficit of $122.9 million the prior year. This is an alarming 102.5% higher than the previous year’s structural deficit,” Comptroller Maragos said. “The economic strain that affected the Country during 2009 also impacted the local economy, but the County failed to anticipate and adjust.”
The major revenue shortfalls were:
- Sales tax receipts were under budget by $107.1 million.
- County wide departmental revenues, fines and forfeitures were $16.2 million less than budgeted.
- Investment income fell short of budget by $14.7 million.
- Revenues from Red Light Camera and Ticket Surcharge came in $17.5 million lower than budgeted.
- Other budget revenue shortfalls totaled $10.5 million.
At the same time, expenses were $60.9 million higher than budgeted by the former administration. They are as follows:
- Payroll and Fringe Benefit expenses were $7.3 million higher.
- Property tax refunds were $64.5 million more than the budgeted amount.
- Other expenses exceeded budget by $8.3 million.
- Offsetting these negative variances, Contractual, Equipment, and General Expenses were $19.2 million lower than budget.
The $188 million revenue shortfall in 2009 combined with the $60.9 million of expense overruns resulted in the structural operating deficit of $248.9 million.
In order to balance the budget the prior administration covered the structural deficit of $248.9 million by using one-time expense deferrals, one-time revenues, borrowed funds and nearly depleted the County’s reserve funds. The County:
- Borrowed $118.4 million to cover termination payments and pay property tax refunds.
- Deferred $40.7 million in payroll to future years as a result of renegotiated labor contracts.
- Received temporary stimulus funding of $44.8 million in Federal Medicaid Assistance.
- Used $25.2 million in tobacco proceeds and general fund balance.
Despite the $248.9 million structural deficit in 2009, the County ended the year with a small 0.1% budget surplus of $2.6 million as a result of all these one-time revenue items, deferral of payroll expenses, and use of borrowed funds.
"The structural deficit grew to an alarming level, continuing a pattern of growing deficits that began in 2005,” (see Exhibit 2) Comptroller Maragos added. “The structural deficit was double the previous year structural deficit of $122.9 million. Furthermore, the 2009 structural deficit is 91.5% higher than the budget gap of $130 million projected by the previous administration as recently as March 2009.”
Recommendations expressed by the Comptroller’s Office in prior years that the structural deficit needs to be reduced by controlling expenses and finding new sources of recurring revenues, were largely ignored by the previous County Executive. The accumulated deficits over the last five years amounted to $589.6 million (see Exhibit 2).
"The 2010 budget has the same risks that resulted in the massive 2009 structural deficit,” said Comptroller Maragos. The reliance on nonrecurring revenues and expense deferrals was continued in the 2010 budget passed during the last Legislative session of 2009 at the request of the prior administration.
The 2010 budget has been balanced with the use of $119.1 million one-shots. These include the additional use of reserves of $24.0 million, nonrecurring revenues of $87.5 million and payroll expense deferrals of $7.6 million.
"The 2010 budget will require constant monitoring, aggressive spending controls and non-tax revenue initiatives in order for the structural deficit to be contained within manageable levels. I am glad to see County Executive Mangano has begun to address these issues by cutting spending and by reducing headcount,” Comptroller Maragos concluded.