Weitzman says 2009 results hang on sales tax receipts

Several key budget gap closers remain ‘ifs’

Nassau County Comptroller Howard S. Weitzman today presented his analysis of the 2009 budget to the Legislature’s Budget Review Committee, stating that the County’s 2009 budget results will be highly dependent on sales tax receipts, which in the current volatile economic climate are extremely difficult to forecast. Weitzman stated that the County appears to be positioned to weather a sales tax drop of up to 4.4% ($77.1 million), if it can achieve a number of crucial budget opportunities, which include reaching new labor agreements and additional State assistance.

"At this point in time the County’s budget is shrouded in a cloud of ‘ifs’,” the Comptroller said. “We can be sure of one thing; 2009 remains a work in progress and the County must remain on a state of heightened alert if it is to break even.”

Weitzman stated that the County is facing an estimated $140 million gap to its planned 2009 budget. This gap will be reduced by an estimated $45 million infusion of the Federal Medicaid Assistance Percentages (FMAP) stimulus money to be received during 2009 and the Administration’s gap closing measures outlined in February.

Sales Tax Decline

According to Weitzman, sales tax uncertainty is not just plaguing Nassau County. In New York State, 36 counties are seeing reductions in sales tax revenues compared to the first quarter of 2008 and 10 of those counties are seeing declines of 8% or more. Nassau County had originally budgeted for a 0% growth in sales tax for 2009. Nassau’s most recent sales tax check showed sales tax 10% below 2008’s year to date receipts. This year will represent the first time in the County’s history that sales tax has declined for two consecutive years.

"No one could have predicted that even a conservative sales tax revenue estimate would turn out to be out of reach,” he said. “Fear of the economy has turned consumers from spenders to savers, the national savings rate has increased from 0% to 5%, and outstanding credit card debt is going down. While in the long run, this is a very positive development for our country, the transition is very painful for retailers and governments.”

The loss of retirement savings and jobs, and reduced home values, tighter credit, and lower incomes and bonuses is driving down retail sales and sales tax receipts, especially in the downstate New York area, Weitzman added.

While Nassau County cannot control how much more sales tax will drop, we can plan to weather the storm. Under the administration’s current gap closing plan, which consists of a number of critical expense reduction and revenue producing opportunities, Weitzman says the County could sustain up to a 4.4% sales tax decline and still end the year in balance.

"We must monitor sales tax receipts closely and readjust our plans should we have reason to think sales tax receipts will drop further. Our office will continue to update sales tax receipts immediately and post them to our web site.” In addition, the County must change its budgetary expectations to reflect recurring revenues and expenses so that the County can weather 2010 and beyond.

Potential opportunities

In February 2009 the administration proposed adjustments to the 2009 budget, which had been crafted in a totally different fiscal climate. Among these adjustments were federal stimulus money, state-authorized revenue initiatives, a residential energy tax and $50 million in labor savings. The federal stimulus money, or FMAP revenue, has already been applied to the County budget gap.

While it appears the County did get state approval to install red-light cameras, it did not receive approval for several other critical initiatives including permission to impose a cigarette tax and ticket surcharges. Potential labor union and non-union savings, totaling $48.2, have been negotiated but are not yet finalized, Weitzman said.

"The county’s labor unions have been serious in stepping up to the plate,” he said. “But these elements of the administration’s plan still need to be completed and in some cases approved by the rank and file.”

Some of the labor savings will come from encouraging employees to resign or retire from County employment. The Comptroller’s analysis assumes that the County will use the remaining reserve funds set aside for termination payments, but that $63.7 million more will be needed. The County will need state authority to borrow to fund termination pay of $50.2 million to cover payments to CSEA employees who are being offered an incentive to leave, and police officers whose termination pay formula becomes more stringent after this summer. In addition, the County will need State approval to bond approximately $13.5 million in normal termination pay that cannot be covered in the operating budget. State approval of bonding for termination payments is a critical condition of the labor savings agreements.

"With all parties working together to achieve the County’s gap closing measures, the County could cover as much as a 4.4% drop in sales tax,” Weitzman said. “However, should sales tax decline even further to 5%, 6%, 7% or 8%, each additional 1% decline would require the County make up an additional $10 million shortfall with further cuts or revenue producing initiatives. There still remain many ‘ifs’.”

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