The following appears in the October 21-27, 2011 issue of the Long Island Business News:

Managing New York’s local governments has not been an enviable job in recent years. Unfunded state mandates, plus a weak economy plus declining residential and commercial real estate values do not always equal easily balanced budgets.

However, hardworking magistrates who are not afraid to exercise their authority and take on entrenched bureaucrats are succeeding in keeping the wolves away from their municipal doors. Westchester County Executive Robert Astorino is a fine example of such an official. Since taking office in January 2010, he has proven to be an effective and tenacious executive who has put Westchester on the road to fiscal stability.

In my search for such a leader on Long Island, I drove out to Islip and spent some time with Town Supervisor Phil Nolan. Elected in a 2006 special election for the vacancy created by a judge who sentenced long-time incumbent Pete McGowan to jail, Nolan came to the job well-versed in the machinations of local governments.

As a former chief of staff to a mayor of Yonkers, Nolan learned a lot in a city that was broke and under the thumb of a state-appointed emergency control board. He figured out that scrutinizing every expenditure and saving money on even the smallest scale are not only the bases of good management but also send a strong message that business as usual will not be tolerated.

One of Nolan’s first shots across the government’s bow was the elimination of “confidential pay.” What, you ask, is that? It’s a good question because in my 40 years of studying government operations I have never heard of such an arrangement. The answer: In 2006, 21 Islip town employees secretly received additional compensation totaling $120,000 annually above union contracts. Newsday condemned this scam as “irrational and arbitrary compensation, flying in the face of civil service.” By revealing and terminating this perk, the establishment learned there was a new sheriff in town.

Next, Nolan significantly cut back the use of non-emergency vehicles by town employees. The number of autos used for personal commuting was cut from 155 to 83, a 46 percent drop that is saving taxpayers $200,000 annually. Responding to whining bureaucrats, Nolan said: “Some people might think this is trivial, but it is a classic example of use of public assets for private gain.”

To save the town another $50,000 a year, Nolan reformed mobile phone policies: Thirty-six percent of the phones were deemed unnecessary and the contracts were cancelled. Investigators discovered that approximately 3 percent were used by people who had left or retired from government service.

By applying a common-sense approach, Nolan has also cut back overtime yearly by $300,000 without compromising safety. Many weekend projects were put off until Monday and night work was reassigned to daytime. And, after a protracted battle with town legislators, Nolan received approval to eliminate an outlandish perk: health care benefits for part-time members of local boards. The savings: another $300,000 annually.

Finally, Nolan has pared back town employment from a high of 1,029 to 730, a 29 percent deduction. That’s pretty impressive.

Total cuts have averaged about $8 million a year for a total of $40.4 million since Nolan took office. With the town’s operating budget at about $120 million, these savings have made a big difference toward achieving balanced budgets without raising taxes. The proposed budget for 2012 once again calls for no tax increases and a spending increase within the inflation rate.

Islip’s fiscal success is also reflected in the town’s debt rating. In January, Fitch Ratings affirmed the town’s AAA rating and concluded the financial outlook is stable.

In economic development too, Nolan has been a leader, partnering with Brookhaven Supervisor Lesko on development around Long Island MacArthur Airport while casting an appropriately wary eye on claims of the Heartland Town Square promoters.

In these difficult times, governing requires more than attending ribbon-cutting ceremonies and fireworks displays. To succeed, leaders cannot be disengaged or complain they are victims. They must, like Nolan, be responsible, disciplined, hardworking and willing to fight every day for clear objectives based on sound principles that put the taxpayers first.

 The following appears in the October 7-13, 2011 issue of the Long Island Business News:

There is a subset of self-made billionaires who, in their twilight years, strive to be loved by liberal political movers and shakers.  They yearn for the New York Times editorial page to declare that they “have grown”—in other words, have adopted leftist ideological nostrums.

Mayor Michael Bloomberg is an example of such a person.  In his drive to please Manhattan opinion makers in the chic Upper East Side and the radical Upper West Side, he has endeavored to create a nanny city that micromanages people’s every day behavior.  To score brownie points—actually given the Mayor’s obesity campaign that would be soy points—with this crowd, the Mayor, speaking at the opening session of the U.N. on September 20, chose to urge delegates to lead a worldwide crusade against global tobacco giants.

Let’s see:  the Middle East is a tinderbox, Iran is developing a nuclear bomb, the Palestinians are pushing for statehood, Europe is on the verge of financial collapse, but an anti-smoking offensive is Mayor Bloomberg’s number one international concern.  How absurd is that?

Another billionaire seeking love is 81-year old Warren Buffett of Omaha, Nebraska.  Buffett, who is the world’s third richest person and worth about $50 billion, supports Obama’s plan to raise taxes on those making over $200 thousand because he believes he is under-taxed and pays a lower tax rate than his secretary.

Buffett is dead wrong.  Contrary to what has become known as “Buffett’s Rule,” high earners do pay more than the average middle class taxpayer.  Those who reported incomes over $1 million in 2008 paid on their adjusted gross income an average tax rate of 23.3 percent.  Earner’s between $100 to $200 thousand, paid an average of 19.6 percent, $50 to $100 thousand—8.9 percent, $30 to $50 thousand—7.2 percent.  The Wall Street Journal rightfully called the “Buffett Rule,” that CEOs are routinely paying lower tax rates than their secretaries, “Omaha hokum.”

If Buffett gets his way, the impact on New York will be devastating.  That’s because a disproportionate number of high income earners live in the state.  Right now New York’s wealthiest, the top 1 percent earners, generate over 40 percent of state income taxes.  If the federal rate goes from 36 percent to 39.6 percent, the combined federal state and local tax rates will exceed 52 percent.  This will drive the wealthiest, who can afford to move, to neighboring lower tax states—Connecticut, Massachusetts and Pennsylvania—or to the state income tax-free states of Florida, Texas and New Hampshire.

In a radio show interview on September 24, Governor Cuomo appeared to agree with this analysis saying, “We are in a competitive foot race every day with our neighboring states.  And people are mobile.  If you just keep raising taxes, people will move.”

Another serious objection to the “Buffett Rule” is that the cost of living in New York is significantly higher than other parts of the nation.  A report released in 2010 pointed out that a Dallas, Texas household living on $125 thousand annual income must earn $250 thousand to live the same lifestyle in New York.  That’s an incredible cost of living differential.  That explains why even our senior U.S. Senator Chuck Schumer, whose National Taxpayers Union Rating is a dismal 2 percent, is leery about the “Buffett Rule.”  “$250 thousand makes you really rich in Mississippi,” said Senator Schumer, “but it doesn’t make you rich at all in New York, and there ought to be some kind of scale based on the cost of living on how much you pay.”

New Yorkers are the highest taxed people in the nation.  And higher federal taxes will only drive up labor costs, discourage new investment capital and increase the states already alarming out-migration.  If Buffett believes he is under-taxed, instead of sticking the tax bill to struggling New Yorkers, he should write a check of his own to the “Gifts to the United States” fund established in 1843.

Statement by

George J. Marlin

Director

Nassau Interim Finance Authority

October 6, 2011

           At the September 28, 2010 board meeting—over a year ago now—NIFA announced that after a preliminary review of the County’s proposed 2011 budget, “given the level of risks in the County’s Multi-Year Financial Plan as presented, we do not believe the Plan, and its FY 2011 Budget, meets the standards of prudence necessary for us to project budget balance at this time.”  The County promptly disagreed with that assessment, insisting its budget was balanced.

           On December 16, 2010 five days before the December 21 NIFA Board Meeting, the County Executive ordered $23 million in additional cuts and said, “The 2011 budget was balanced before these new spending cuts.  These new budget cuts are designed to strengthen the County’s fiscal situation even further.”  On December 20, 2011, the County Executive reiterated, “Nassau’s 2011 budget is balanced and maintains significant contingencies.”  On December 22, 2011, Newsday reported that County CFO Timothy Sullivan said in a statement, “There is no deficit.”

           Prior to NIFA’s December 30, 2010 meeting in a letter dated December 28, 2010 to Chairman Stack, the County Executive wrote:  “Just two months ago the County Legislature adopted a balanced budget for 2011 that closes a $343 million deficit while not increasing property taxes.”

           In the January 26, 2011 edition of The Wall Street Journal, the day NIFA assumed control of County finances citing a budget imbalance of $176 million, reporter Sumathi Reddy wrote, “Mr. Mangano insists the budget is balanced and has said NIFA is requiring him to come up with unnecessary contingency plans.”

           On February 10, 2011, The Long Island Press, reported that in an interview the County Executive said “I put forth a budget that is definitely balanced.”

           In the August 5, 2011 edition of the News Times Newspaper, Timothy Meyer reported, “Deputy County Executive of Finance Tim Sullivan told the Nassau County legislature Monday that the county will have a balanced budget in 2011, and if the Nassau County Interim Finance Authority continues to say otherwise, the state oversight authority should tell the county how to bring it into balance.  ‘We’ve given them every possible revised plan we can think of,’ Sullivan said.  ‘I know the budget is balanced when a big four audit company signs off on it.’”

           As late as August 1, 2011, the County was still maintaining that its 2011 budget was balanced.  Just days later, however, the Nassau County Comptroller estimated a $134 million budget shortfall; the Nassau Legislative Budget Office put the deficit at $118 million and NIFA’s revised projection for the 2011 budget deficit is $153 million.

           As Nassau’s fiscal condition continues to deteriorate, the County appears to be in denial.  For instance, the County wants to spend $20 million to improve its baseball fields, making the dubious claim there will be additional usage fees from little league and other amateur teams to cover the $1 million a year in debt service.  I ask, is it a wise expenditure of scarce funds during a fiscal crisis?

           The County announced a hiring freeze on December 17, 2010, an appropriate action.  But the hiring freeze thawed and additional County workers were hired even though other County workers were being laid off.

           On September 16, 2011, the County proposed a budget that assumes legislation will be approved that permits municipal employee contracts to be abrogated.  Is it probable that such legislation will be passed or survive court challenges?

           As for the 2012 budget; instead of designing an achievable “shared sacrifice” plan, the County proposed another high-risk budget that merely gives the illusion of being balanced.  NIFA estimates those risks at approximately $280 million.  2011 redux?

           Back in 1975, the financial markets closed their doors to New York City.  Years of balancing budgets with “blue smoke and mirror” gimmicks and a “borrow now, pay later” mentality caught up with elected officials.  To institute an orderly and controlled process for placing the City on a sound financial footing, then-Mayor Abraham Beame had to eliminate 47,412 jobs (20 percent of the total) between January 1, 1975 and May 31, 1976.  By means of attrition, retirements, resignations and layoffs, 20 percent of New York City’s teachers, 14 percent of the police, 14 percent of firefighters, 33 percent of sanitation and 25 percent of Parks Department positions were eliminated.  Scores of programs and departments were reduced or abolished.  Capital project spending came to a halt.  The City had no alternative but to heal itself because state coffers were empty.

           Assessing the dire fiscal conditions of New York State, the City and the Urban Development Corporation, the newly sworn-in governor, Hugh L. Carey, valiantly announced in 1975 “The days of wine and roses are over.”

           The time has come for the County to face reality and declare the days of minor league baseball parks, barbeques and coliseums are over.  The time has come for the County to face its responsibilities, dispense with fiscal shell games and take the necessary corrective actions to restore fiscal integrity.  It will not be easy or pleasant.  It will mean making difficult decisions.  Such is the price of holding an executive office.

           I also urge elected officials of every political party, good government advocates, journalists and reporters to remove their heads out of the sand, look beyond County press releases, and alert and educate the public to the magnitude of this crisis.

           All should promote public discourse as to whether it is wise policy to sell off the County’s assets and use the proceeds as “one shots” to balance the operating budget.  The public should be made aware that one-shots will not fix the County’s structural deficit.  It is only “kicking the fiscal can” down Old Country Road.

           There should be public discussion as to whether the proposed sale of Nassau’s sewer system is good public policy.  The public should be told how much more it will cost to flush their toilets if there is a sale.  There will be a flush fee (a/k/a tax) because sewage costs will no longer be based on property tax assessments and because the buyers of the sewer system will require a profit on their investment.

           NIFA has been sounding the fiscal crisis alarm; for the sake of the County’s taxpayers, it can no longer fall on deaf ears.  Officials can no longer be spectators in their own government.  As Abraham Lincoln said:  “…let us stand by our duty fearlessly and effectively…. Neither let us be slandered from our duty by false accusations against us, nor frightened from it by menaces of destruction to the Government…. Let us have faith that right makes might, and in that faith let us, to the end, dare to do our duty as we understand it.”