Statement by

George J. Marlin

Director

Nassau Interim Finance Authority

 May 17, 2012

“On the 2011 Nassau County Operating Deficit”

On January 26, 2011, after numerous warnings to the County were ignored concerning budgetary deficiencies and the degree of risk in various projected revenue sources and cost savings, the NIFA board voted unanimously to declare a control period.

Grant Thorton had analyzed the 2011 budget risks and had concluded it was likely that Nassau County would end the fiscal year on December 31, 2011 with a statutory GAAP deficit of $155.5 million and a cash deficit of $53.5 million.

After the NIFA board declared a control period, my colleagues and I were vilified by County officials.  We were accused of being mean-spirited partisans.  Wanted posters which contained our names and photos were distributed at a press conference.

Today I will review our estimates of January 26, 2011 versus the unaudited actuals released by the County Comptroller, and I am confident the general public will agree that our actions were warranted.

On March 28, 2012 the Nassau County Comptroller announced that the 2011 year-end unaudited fiscal results indicated the County would incur a statutory GAAP deficit of $167.6 million and a cash deficit of $42.9 million.  (It is my understanding that the cash deficit could grow to $50 million+.)  This cash deficit explains why the County is desperately seeking the authority from the County legislature to issue long-term debt—they wish to borrow to fill the deficit hole.  (This, as we all know, is like using one’s credit card line to make one’s mortgage payments.)

Let’s review:  NIFA projected a statutory GAAP deficit of $155.5 million; the County’s unaudited actual GAAP deficit is projected to be $167.6 million.  NIFA projected a cash deficit of $53.5 million; the County’s unaudited actual cash deficit is projected to be at least $43 million.  It certainly appears to me that NIFA called it right on January 26, 2011.

Now I will go through one more financial exercise:  I will compare various projected revenue and expense line items in the 2011 adopted budget to those line items in the 2011 unaudited actuals.  (Lest we forget the County claimed throughout 2011 that the adopted budget was either “balanced” or “achievable.”)

And let’s not forget the $61 million in labor contract savings that never materialized.

The unaudited actual budget results and the revenue and expense variances confirms NIFA’s January 2011 analysis that there existed a substantial likelihood of the County incurring a major operating funds deficit of one percent or more in the aggregate results of operations during its Fiscal Year 2011.

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