The Bogus Kaiman Deal
Will NIFA Discard Its Fiduciary Obligations And Squander Its Integrity By Approving An Incredulous Deal That Lifts The Wage Freeze?
This past week will go down in NIFA annals as an extraordinary one. Extraordinary in terms of deceitful tactics and illusory pronouncements employed to procure a bogus deal to lift a wage freeze in a way that puts County finances in further peril.
Monday, March 10, 2014
The primary reason Chairman Kaiman called a board meeting was to force a vote on a “sense of the board” symbolic resolution that laid out conditions to lift a wage freeze (a wage freeze that nevertheless needed to be renewed that same day due to an impending deadline later in the week). That resolution was based on verbal representations of what parties said would be in the agreements—not on documented evidence supporting a cost neutral or revenue-funded deal, on the fear of losing the suit challenging the legality of the wage freeze that was pending in the State Supreme Court and other intangibles. Another reason for the Monday resolution: Kaiman wanted a public pat on the head at Mangano’s State of the County address on Tuesday.
Director Chris Wright rightly opposed the Kaiman resolution citing the likely double counting of most or all of the “savings” from attrition. Director Dermond Thomas opposed it, as well, citing his discomfort with the County’s continuation of the freeze without making progress on balancing the budget.
Attrition, while expressly not named in the budget, is what the County uses to cover excessive overtime and other unbudgeted costs such as those associated with harsh winter storms. Stripped bare of that cushion, which is a commonly used budgetary technique to keep governments liquid in the face of surprises which always seem to occur, the County could run out of cash.
Double counting means that the estimates of $129 million of net costs from these deals which require funding in order to lift the freeze are more likely in the range of at least $250 million, and as much as $285 million.
Even at $129 million, the County proposes (without yet documenting its proposal), and NIFA appears ready to accept inflated projected revenues from anticipated Albany approval of additional speed cameras, that are treated as “new” revenues to help pay for the deal even though a portion are already included in the multi-year plan. More double counting.
Tuesday, March 11, 2014
At Ed Mangano’s State of the County Address, Kaiman gets his public recognition.
In his speech, Mangano made this ridiculous comment: “In 2012, the County reported a $27.5 million dollar surplus on a GAAP basis and continues to show improvement with respect to the NIFA statute test, which is even more conservative than the GAAP reporting standard.”
After 4 years in office, Mangano has not learned there is only one “GAAP” and those accounting principles applied to the County determined it incurred, in 2012, an $85.5 million deficit (triple the NIFA threshold for a control period).
The County’s audit, based on the County’s chosen “budgetary basis” of accounting, came up with a “surplus” due to the fact that it failed to pay some current bills in 2012 and paid others by borrowing money. For example, $88 million in tax cert refunds were not paid in 2012 but were pushed into fiscal 2013. Also, there was an unbudgeted use of $10 million in reserves in 2012 and the use of $67.8 million in long-term borrowing to pay current bills such as termination payments. The County considers such borrowings to be “revenue” in its results, despite the fact that such treatment is at odds with both GAAP and specific provisions of the NIFA statute.
These practices are like using one’s credit card to make current mortgage payments on one’s home and then making minimum payments on the credit card balance for the next thirty years. And then declaring the household budget “balanced.”
The County Executive’s other absurd boast is the “fund balance has increased 28% to $82 million.” The fund balance did not increase because the County incurred a surplus; rather, it increased solely because it borrowed money.
Wednesday, March 12, 2014
Supreme Court Justice Arthur Diamond hands down an impeccably correct decision ruling that NIFA “did not exceed its authority to impose wage freezes in 2011, 2012, 2013.” This decision is a major blow to the unions’ bargaining position. This is one of the lawsuits of which the NIFA board was advised to believe it would lose. Advised by those looking to make a deal—any deal—with the unions. On the same day, the unions and the County filed agreements with the County Legislature which were at odds with what NIFA had been promised leading up to its Monday vote—the vote they took without the benefit of any documentation. Thank heavens Monday’s vote wasn’t binding.
Thursday, March 13, 2014
Knowing the finance numbers don’t work, Kaiman attends a series of meetings with County and union officials where he acts as both a negotiator and a supplicant, acting as if he had no leverage and did not win a court case. NIFA gives ground on a number of points, despite its court win.
Friday, March 14, 2014
More meetings. It appeared as though Kaiman was headed toward appeasement and dereliction of duty. What was a bad deal on Monday is a marginally worse deal on Friday, as more ground is given by the “winner”—something you wouldn’t see in any rational business deal.
Saturday, March 15, 2014
Kaiman, Mangano and union leaders announce a deal based on bogus numbers that if approved by the County Legislature, union members and NIFA will lift the Wage Freeze on thousands of unionized government workers. The means to pay for these deals? Nobody’s yet sure—they’re taking the County’s word for it for now.
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Don’t expect the Bogus Deal to get to a NIFA vote until early April. There is a false deadline of March 31 for the start of a new police class under the new arrangements, but this can be extended. The Legislature will have to mull things over for a few weeks and, since it meets on Mondays, will likely consider the deals on March 31. Many members—likely all nineteen—have asked Maurice Chalmers at the Office of Legislative Budget Review (OLBR) for analysis of the proposal. (Chalmers is known as a first rate numbers guy who calls them as he sees them.) Don’t be surprised if the OLBR determines that the negotiating parties will have to come up with $275 million or more—not $129 million.
At some point during this interim period, the NIFA board will realize that it’s not in on the joke—it is the joke. It’s been said that a mind is a terrible thing to waste. Well, a reputation—and NIFA had a good reputation, as did its individual members—is a terrible thing to waste, as well. NIFA’s credibility is one of its prime assets. Recent shenanigans represent a spend down of that asset. That’s not good for NIFA or control boards around the State.