COMPTROLLER FINDS 2006 NASSAU BUDGET PLAN FISCALLY SOUND

Major Changes: Shift to "Pay-as-you-go" for Property Tax Refunds, and
Reduction in County Contribution to Medicaid

Date:

October 17, 2005

Nassau County Comptroller Howard S. Weitzman today said he finds the county's proposed 2006 budget to be fiscally balanced and described its projections of revenue and expense growth rates as "properly conservative."

The Comptroller's comments were in connection with a report on the proposed budget, which he presented today at a meeting of the Nassau County Legislature.

"This is the fourth year of Nassau's fiscal recovery," Comptroller Weitzman said. "The proposed 2006 budget contains the same kind of common-sense, conservative financial assumptions that produced surpluses in each of the previous three years. More important for all Nassau County taxpayers, it manages this feat without the need for a tax increase, again for the third year in a row.

"Much like a family budget, Nassau's budget is only a plan for expected expenses and revenues. And like all plans, it involves assumptions and risks. We note some of the risks in our report. But we also note that the Suozzi administration has repeatedly demonstrated its ability to close budget gaps and adjust to circumstances as necessary to balance the budget."

The budget recognizes the impact of two significant changes in the county's financial environment: the need to pay for nearly all property tax refunds out of the county's operating budget rather than borrowing, as in years past; and state legislation instituting a cap on the county's share of Medicaid costs, achieved this year after years of lobbying by the County Executive, County Comptroller and other officials.

Under an amendment to the law creating the Nassau Interim Finance Authority (NIFA), the county may borrow only $15 million in 2006 and $10 million in 2007 to pay property tax refunds, and thereafter may not borrow for that purpose. Beginning in January 2006, any amounts exceeding those levels must be paid out of the county's operating budget.

"The administration plans to set aside $53.5 million out of the 2005 projected surplus, and apply $50 million of that amount in 2006, to ease our transition to the new 'pay-as-you-go' policy for property tax refunds," Comptroller Weitzman said. He noted that the use of the $50 million reserve fund is part of a projected $119.6 million in non-recurring revenues in the proposed 2006 budget. Other such revenues include the use of pension reserve funds created by the Hevesi pension reform legislation of 2004, and proceeds of the tobacco settlement.

"While I fully concur with these decisions, we have to recognize that, in order to meet these recurring higher costs in future years, we will have to replace these transitional funds with expense reductions, revenue increases, or a combination of the two."

The Comptroller's analysis projects that gross sales tax receipts for this year will be $961.4 million, $3.3 million less than the 2005 budget projected. The 2006 budget assumes a 3.2 percent annual growth rate for the county sales tax in 2006 and a 4 percent growth rate in 2007-2009. "The administration has moved away from overly conservative sales tax forecasts to ones that are more optimistic, and, as a result, subject to greater risk," the report notes. Sales tax receipts have increased an average of slightly more than 4 percent over the last three years, but recent trends reflect a moderation in the growth rate.

The financial plan includes projected future-year structural gaps of $175.3 million in 2007, $230 million in 2008, and $272.3 million in 2009. "It's always difficult to balance Nassau's budget, due to revenues that are basically static while expenses grow every year due to inflation and state and federal mandates. Nevertheless, these gaps are significantly lower than earlier predictions, and the Suozzi administration has shown its ability to close projected budget gaps in past years through cost-cutting, sensible labor settlements, and conservative budgeting."

The four-year financial plan also includes new county policies aimed at maintaining accumulated fund balance levels, as well as policies on the use of reserves and limiting the issuance of long-term debt. "This represents an improvement to the way the county does business," Comptroller Weitzman said. "Institutionalizing prudent fiscal policies in this way is an important step in ensuring the county's future fiscal health."

The full audit report can be read or downloaded by clicking on the link below.