Archive for August 2020

How to cure Nassau’s ailing finances – By George J. Marlin

August 28, 2020

The following appeared on Monday, August 24, 2020 on The Island Now’s website:

When the Nassau Interim Finance Authority voted in January 2011 to impose a control period on the county government, the board chairman, Ronald Stack—an expert in municipal finance—had a plan in mind to get the county back on the path of fiscal righteousness.

The Stack plan, which included controls on spending and hiring, a wage freeze, and some tax-cert borrowing, was working, and the annual GAAP deficit was declining through 2013.

A wrench was thrown into the plan, however, when Stack’s successor, NIFA Chairman Jon Kaiman, negotiated a union wage deal in 2014 that was nothing more than blue smoke and mirrors. Kaiman’s claim that the deal was cost-neutral was false and based largely on expectations for the ill-fated and infamous county speed camera program.

An analysis released by the county’s independent fiscal watchdog concluded the new labor amendments would cost Nassau taxpayers somewhere between $120 million to $292 million.

The Kaiman deal caused the Nassau budget deficit to jump in 2015 to $189.2 million.

In later years, however, the county’s deficit began declining, thanks to NIFA’s insistence on fiscal discipline (including multiple rejections and revisions of county budgets) and a strong economy.

The county has reduced its dependency on borrowing for capital projects, employee termination payments, and legal judgments and settlements.

Sales tax and other key revenue streams had grown significantly and rising property values had stabilized property tax streams.

In fact, in fiscal 2019, the county incurred its first GAAP surplus, $76.8 million, in decades.

If that trend continued, NIFA might have lifted its controls in 2021.

But all bets are off due to the COVID-19 pandemic.

On August 18, NIFA issued its mid-year analysis of the county’s financial plan—and it is depressing reading.

NIFA projects that the $3.55 billion 2020 budget can incur a GAAP deficit to the tune of $334.2 million.

In the out years, the budgets are projected to have deficits of $481.4 million in 2021; $423.9 million in 2022; and in 2023, $436.3 million.

What’s driving these deficits?

The main culprit is the reduction in sales tax dollars due to Gov. Cuomo’s shutdown of the economy. In the second quarter, those revenues were down 24 percent compared to the same period in 2019. Sales tax revenues could be off as much as $237.8 million in 2020.

Proceeds from other income streams (i.e., Department Revenues, Fine and Forfeitures, OTB payments) are also taking hits due to lower transaction and economic activity.

NIFA estimates that total revenues could be off as much as $334.2 million by year end.

To address this crisis, NIFA Chairman Adam Barsky urged the county “to use the economic catastrophe as an opportunity to go beyond pre-existing geographic and political disagreements and examine all options, including those that might have been disregarded in more ‘normal times.’”

Many of the options available to elected officials can be found in the Grant-Thornton study commissioned by NIFA in 2011 to identify potential savings and cost-cutting opportunities valued at between $251 million and $319 million.

Since most of the recommendations have been ignored, the nine-year-old report is still relevant and its suggestions valuable.

The savings the county executive has proposed thus far don’t cut it. NIFA’s analysis reveals “almost 40 percent would not provide savings on a GAAP basis and more than 90 percent would be non-recurring.”

These gimmicks will not put the county on a firm, structural financial footing. They will only kick the fiscal can down the road.

To address the projected deficits in the coming years, NIFA recommends that the county “implement gap-closing initiatives in fiscal year 2020, which provide recurring revenues and savings beyond the current year; and pursu[e] productivity improvements through collective bargaining in order to control labor costs, which represent approximately half of total spending.”

Such measures and increasing sales tax receipts, due to a recovering economy, may significantly improve the county’s fiscal condition.

However, if the County refuses to deal with fiscal realities and employs fiscal sleight of hand schemes as the Republicans did back in the 1990s and during the corrupt Mangano administration, NIFA will have to step in and impose what Chairman Barsky has called “Draconian” spending cuts.

Barsky said the measures could include laying off as many as 2,900 employees or hiking county property taxes by up to 60 percent.

The time has come for the county to face reality and to implement a dramatic restructuring of its government operations.

And the road map can be found in the 300-page Grant-Thornton report, as well as a subsequent, shorter report commissioned by NIFA a few years ago.

Implementing its scores of recommendations could be the prescription to cure the ailing county government. NIFA can impose controls, but it can’t create political will—that’s up to the county’s elected officials.

Leftist Tech Oligarchs: Destroying America’s Middle Class – By George J. Marlin

August 24, 2020

This article I wrote appeared on the web site on Monday, August 24, 2020.

DiNapoli waves red flag on NYC revenue loss – By George J. Marlin

August 12, 2020

The following appeared on August 10, 2020 on The Island Now’s website:

In early August, State Comptroller Thomas DiNapoli released a 43-page analysis of New York City’s economic and fiscal trends. His perceptive report should be read by every local official facing an operating budget deficit.

Here’s an overview of DiNapoli’s findings:

Two months after Gov. Cuomo ordered the shutdown of the New York City economy, 940,000 workers lost their jobs. The city’s unemployment rate, which hit an all-time low in February of 3.4%, had skyrocketed to 20.4 percent by June.

The hardest hit: bars, restaurants and hotels. That sector lost 304,000 jobs by the end of April.

Retail lost over 90,000 jobs.

Those sector losses explain why the highest unemployment is among minorities and young people living in the Bronx. Unemployment in that borough has hit 24.7 percent.

The DiNapoli report goes on to describe the shutdown’s devastating impact on the city’s fiscal condition.

In June, the city estimated that its two-year revenue loss will be at least $9.6 billion—and that’s a low-ball number.

Those estimates do not factor in money that may not arrive from Albany. If the state does not benefit from a new COVID-19 relief bill, the city could lose up to $3 billion in aid.

Urging the mayor to face fiscal realities, DiNapoli concludes his report with these words: “Given the size of the budget risks outlined in this report … the Office of the State Comptroller urges the city to prepare additional actions to balance the budget.”

What actions has Mayor de Blasio taken to balance the city’s budget? So far, it has been mostly fiscal sleight of hand.

He has raided trust fund reserves to the tune of $1.3 billion. The total drawn down could hit $4.1 billion.

The city has also reduced its reserve for collective-bargaining agreements by $1.6 billion. (This is a dubious reduction, considering de Blasio’s history of giving away the store to non-police unions.)

Since de Blasio took office, the city workforce — the largest of any municipality in the nation — has grown by 24,000 bureaucrats for a total of 325,000.

The mayor’s latest plan assumes the number of employees will drop by a paltry 3,656. Most of those, no doubt, will be police and school principals retiring because they are disgusted with the mayor’s inept crisis leadership.

Instead of cutting out the lard in the city’s bureaucracies to balance his budget de Blasio wants to raise taxes on the wealthy.

Prior to the pandemic, 1 percent of the city’s 4 million households—that’s 40,000—paid 50 percent of the city’s income tax.

However, since March, scores of residents living in the city’s wealthiest neighborhoods have fled to their weekend homes in Long Island, upstate, Connecticut and even Vermont.

Gov. Cuomo, realizing the city is losing revenue, has been urging them to come back.

But Cuomo has conceded that his pleas have been falling on deaf ears. Many have said to him that if they stay in their vacation homes, “I pay a lower income tax, because [I] don’t pay the New York City surcharge.”

The governor rightly dismissed raising taxes on the rich because he knows that even if a few thousand of the city’s wealthiest households pull up stakes, the city’s tax collections will crumble.

De Blasio rejected the governor’s position saying: “To the point about the folks out in the Hamptons, I have to be very clear about this. We do not make decisions based on the wealthy few…. That’s not how it works around here anymore.”

The delusional mayor went on to say that the wealthy can afford to pay more in taxes and that many of them would be happy to do so.

During de Blasio’s reign, expenditures have increased by over $20 billion —3 times the rate of inflation. And the mayor’s spending spree was funded by tax revenues from the top 1 percent.

De Blasio is incapable of grasping that the city is dependent on revenues from the wealthy because middle-class jobs have declined significantly in recent decades, and lower-income folks if they are lucky enough to be employed, pay little in local taxes.

De Blasio and regional officials better heed DiNapoli’s warnings and find ways to do more with less.

But if they fail to right-size government and raise taxes on the well-off, they will alienate the very people who have the financial resources to pack up and quit New York.

New York’s Charter Schools and Their Enemies – By George J. Marlin

August 3, 2020

This article I wrote appeared on the web site on Monday, August 3, 2020.