Nassau County Finances Taken Over By New York State

Watchdog
UNIONDALE, N.Y. One of the nation's wealthiest counties was placed Wednesday under a state
fiscal watchdog that determined it was headed for financial trouble, opening the possibility of a
wage freeze for thousands of workers.
The unanimous vote by the Nassau Interim Finance Authority came after auditors found Nassau
County's 2011 budget gap could be as much as $176 million. The authority is required to take
control of the county's finances any time it finds the risk of a 1 percent deficit, or $26 million.
The decision puts the authority in charge of borrowing for operating expenses and means it also
must approve any county contracts, from purchasing new shovels to agreements with labor unions,
before any money is spent.
The duration of the takeover will be determined by how soon the budget gap can be closed, authority
chairman Ronald Stack said. The authority instructed county officials to revise their $2.6 billion
budget by Feb. 15.

"These are the real world consequences of the worst recession in 70 years, and the federal and state
response to it," said Lawrence Levy, executive dean of the National Center for Suburban Studies at
Hofstra University. "Unlike presidents and congressional leaders, mayors and county executives live
with the consequences."
Stack said taxpayers in the county just outside New York City where last year's average property tax
bill was $11,500, nearly the highest in the country will not notice any difference in government
operations. He said the authority's purpose is to advise county officials, not to make policy decisions.
County Executive Edward Mangano, who lobbied hard to prevent the takeover, decried it as
unnecessary and premature. He said county attorneys would review the decision before proceeding
with a likely legal challenge. "I will take the necessary legal steps to protect our residents from
property tax increases," he said in a statement.

Mangano insisted the budget, ratified by the county legislature and comptroller, is balanced.
"If they wanted to run Nassau County, there is a process, get elected," Mangano said.
Stack disputed assertions that the vote was politically inspired.
"On this board are three registered Democrats, a registered conservative, a registered Republican
and an independent," Stack said. "And it voted unanimously. It is not partisan, it is not political."
The county is hardly alone in its struggles.
A June 2010 survey by the National Association of Counties found 65 percent of responding counties
reported between $100,000 and $50 million in budget shortfalls. "Things are pretty dim," said
Jacqueline Byers, association's director of research and outreach. "We're waiting with bated breath
to see how much worse it gets in 2011."
In the past month, officials in Harris County, Texas, which includes Houston, began notifying 14
employees of layoffs in an effort to trim its $1.3 billion budget for the fiscal year that begins March
1. In Ohio's Cuyahoga County, including Cleveland, workers are facing a third straight year of being
forced to take five unpaid days off to help balance the budget. In Boyd County, Ky., 17 county
employees were laid off earlier this month.
The finance authority overseeing Nassau County is a state watchdog created in 2000 when the
county first had fiscal difficulties requiring a $100 million state bailout after years of little or no tax
hikes. The six-member board (there is currently one vacancy) is appointed by the governor, state
comptroller and the two leaders of the state legislature.
Mangano, a Republican who ran as a "tax revolt" candidate in 2009, said he inherited a $133 million
deficit when he took office, and kept a campaign promise to eliminate a $40 million home energy
tax, but argues the county now has a $5 million surplus obtained through staff cuts and other
savings. He complained that recent chatter over Nassau's finances led Moody's late last year to
downgrade the county's credit rating, making it more expensive to borrow money.
"When you create doubt where none exists, it costs dollars," Mangano said.
Nassau has had to contend with shortfalls in sales tax revenue, increases in employee health care
and social services costs, police overtime and other issues.
But E.J. McMahon, a senior fellow at the Manhattan Institute and expert on New York state issues,
also noted that for decades after World War II, as Long Island evolved into quintessential suburbia
with a current population of 3 million, county politicians made spending decisions their successors
have come to regret. The average police salary approaches six figures, and 400 retired county
officers currently receive pensions of more than $100,000, he said.

Mangano also has tried to overhaul the county's convoluted tax assessment system. Nearly 65
percent of a county property owner's tax bill is dedicated to school taxes, although the county has no
say over school district spending. Despite that, in an arrangement created decades ago, the county
pays refunds to property owners who claim their school tax assessments are too high.
Nearly a decade ago, the county legislature voted to revamp the system, spurred in part by the
threat of a lawsuit claiming it was racially discriminatory because homes increased in value much
faster in white neighborhoods than in minority areas. That left minority homeowners paying a higher
percentage of home value in taxes.
While changes were made, Hofstra's Levy and others note the county still owes tens of millions in
refunds for overassessments. Brian Nevin, a senior adviser to Mangano, said the county has passed
additional assessment reforms, but they don't kick in until 2013.
According to Levy, the system is so flawed that virtually every business or homeowner that
challenges their assessment rate wins. That forces Nassau to borrow $100 million annually to refund
homeowners.
The county portion of a homeowner's tax bill is only 16.4 percent of the total, but the Manhattan
Institute's McMahon points out that is an average of over $1,800 a year.
"There are people in other parts of the country whose entire tax bills are not that much," he said.
(This version CORRECTS in 3rd paragraph that the finance authority decides on any borrowing, not
a halt on short-term borrowing.)
http://www.huffingtonpost.com/2011/01/26/state-watchdog-takes-over_n_814502.html