Statement by

George J. Marlin

Director

Nassau Interim Finance Authority

Monday, November 25, 2013

               When I joined this board four years ago, NIFA warned the County was utilizing blue smoke and mirrors budgetary gimmicks similar to those employed in the 1990s that brought Nassau to the edge of bankruptcy.

             Refusing to adequately address the fiscal deficit County officials inherited, NIFA was compelled by state law to invoke a control period on Wednesday, January 26, 2011.

             While the County on the one hand claimed it wanted to “cooperate” with NIFA, on the other hand it publicly vilified NIFA board members and brought a suit to enjoin and restrain NIFA from continuing to impose the control period.

             After the Supreme Court ruled against the County citing that the NIFA control declaration was neither unconstitutional nor arbitrary and capricious, the board reminded the County that the estimated $176 million budget deficit was “real,” “substantial” and “the deficit [was] in accordance with GAAP as it must according to State law.”

             The NIFA warnings that the County stop illusory budgeting practices and actually govern and manage fiscal realities fell on deaf ears.  The County continued to refuse to come to grips with the fact that its budget was woefully out of balance and that 2012 threatened to be even worse.

             The County Executive claimed “Nassau’s 2011 budget is balanced and maintains significant contingencies.”  As late as December 2011, Newsday reported that County CFO Timothy Sullivan said in a statement, “There is no deficit.”  The Wall Street Journal reported “Mr. Mangano insists the budget is balanced and has said NIFA is requiring him to come up with unnecessary contingency plans.”  Mangano also told The Long Island Press, “I put forth a budget that is definitely balanced.”

             Meanwhile, in the last quarter of 2011, 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 was $153 million.  (The actual 2011 GAAP deficit was $173 million.)

             In December 2011, this board agreed to a 2012 Fiscal Plan that included $449 million in Tax Cert and other borrowings.  In return for imposing on taxpayers another multi-generational backdoor tax increase, the County pledged it will either obtain $150 million of union givebacks or make other recurring costs in the budget totaling $150 million.  In addition, the County promised to have a GAAP balanced budget in 2015 and that it would fully fund with operating revenue all tax certs, judgments and settlements and termination expenses beginning in 2015.

             Obviously, the County’s approved budget and fiscal plan for 2014-2017 repudiated those promises, hence the conditions this board imposed on the County today.

             Since December 2011, the County has continued playing fiscal games and has failed to adequately address its structural deficit.  NIFA had the good sense to derail two County schemes.  The first one was a potential sewer system deal that would have included approximately $750 in borrowing of which up to $300 million of the proceeds would have been used as “one shot’ revenues to balance operating budgets.  NIFA effectively killed a scheme that would have forced the next two generations of Nassau residents to pay ever increasing toilet flushing taxes for “one shot” dollars that would have plugged deficit holes in current operating budgets. 

             The other scheme NIFA derailed was a deal to finance property tax judgments that would have evaded the legal approval process to borrow money. 

             In 2013, the County made the absurd claim that it incurred a $41.5 million budgetary surplus in 2012.  The County came up with that number based on the fact that they failed to pay some current bills in 2012 and paid others by borrowing money.  The NIFA analysis of the 2012 budget revealed that the County incurred an $85.5 million GAAP deficit.

             And as the County claims they want to “cooperate” with NIFA, they continue their shenanigans.  The budget they presented to this board projects operating deficits as far as the eye can see.

            After four years on this board I have learned that the County’s definition of “cooperation” means “do what we want.”  Cooperation for the County is a one-way street.

             NIFA is a New York State control board.  The Oxford Dictionary defines control as “the act or power of directing or regulating.”  NIFA’s task is to judge financial numbers and contracts and to direct the County accordingly.  Therefore, it cannot judge and be part of any negotiations.  NIFA must never have its role as an independent State body compromised by the political desires of any elected official, whether it be State or County.

             Good corporate governance mandates that the board be independent if it is to meet its fiduciary responsibility as a New York State Public Authority.  This is clearly delineated in the Public Authorities Reform Act.

             It has been a privilege to serve for four years on this board.  Throughout my tenure whenever I have had to make an important public policy decision, I have looked for guidance to Sir Thomas More, who observed almost five hundred years ago, “When statesmen forsake their own private conscience for the sake of their public duties, they lead their country by a short route to chaos.”

             I am pleased that my colleagues and I carried out our fiduciary responsibilities by judging the County’s actions based on rational analysis and not ill-tempered emotions or election results.  I am also grateful to Ronald Stack who served on this board for 12 years, ten of them as Chairman.  His wise counsel and his expertise in municipal finance were invaluable to the decision making process of this board.  He is a statesman of the first rank who was never under anyone’s thumb.

             My thanks to the NIFA staff who have performed their duties and have provided us with first rate analysis during very trying times.

             I wish my colleagues good luck as they continue to grapple with the County’s dismal fiscal condition.  It is my sincere hope that they uphold NIFA’s excellent reputation as an independent body that stays above the political fray.

The following appears in the November 22-28, 2013 issue of the Long Island Business News:

It appears political conservatives like me were right when we warned three years ago that the federal government’s attempt to seize control of one-sixth of the U.S. economy would wreak havoc on the health care industry and hurt a lot of people.

We now know that President Barack Obama’s pledge, “If you like your present health-care policy, you can keep it,” was, as The New York Times gently put it, “an inaccurate promise.”

As for the botched rollout of the Rube Goldberg Obamacare website, the president – who loves big government – blamed it on his bureaucrats. He said they are lousy at executing complicated policy initiatives and awful at creating websites.

Think about it. It took three years and over a half-billion dollars squandered before the bureaucrat-in-chief and his top advisers realized their Internet engineers were not up to the job.

What Obama seems to miss is that, by definition, the only people who manage government programs are bureaucrats. By conceding that bureaucrats are incompetent at running government programs, he’s implicitly affirming that the Affordable Health Care Act is condemned to failure because they are the only people available to run it.

Another great lie circulated in recent weeks by Obama apologists has been that the millions of canceled individual policies were “junk” ones that only covered catastrophic medical cases.

A friend of mine, a single mother of two children, showed me her cancelation letter, which stated that her carrier was “exiting the individual major medical insurance market in Pennsylvania” due to “increased regulation since the federal government’s passage of its recent federal health-care reform … As such your referenced coverage will terminate as of March 31, 2014.”

This person’s policy was not junk. It had a $600 family deductible and $20 co-pay for doctor visits as well as catastrophic coverage. Comparable coverage on the exchange will cost her about the same, but the deductible skyrockets to $5,000 annually. A visit to the local general practitioner will no longer cost $20 but about $150.

Many, like my friend, will not be able to afford such costly visits on a regular basis. Hence, general-practitioner practices will suffer and preventive medical care will decline.

There will be plenty more horror stories, particularly when small businesses get their renewal options. I can speak with authority because I run a small company that employs fewer than 50 people, and it’s being adversely impacted by Obamacare.

For 15 years, it’s been my company’s practice to provide no-deductible Cadillac-level health care at no cost to our employees. But with insurance consultants telling me to expect renewal premiums for Cadillac coverage to go up 50 percent to 100 percent, that practice may have to change. Thanks to Obamacare, my colleagues and I will likely have to dig deep into our pockets annually to maintain the policy we like.

Last week, fearing a political backlash from his own party, the president announced that many individuals may keep the health-care plans they like for another year. Obama’s instant fix, however, may create even more chaos in the marketplace if state insurance commissioners and carriers determine it’s impossible to overturn three years of planning and programming to reinstate cancelled policies within 30 days.

The Affordable Health Care Act is collapsing under its own weight, and all the president’s bureaucrats will not be able to put it back together again. Come next November, I expect millions of Americans – whose lives have been disrupted by intrusive Washington social engineers – will register their anger at the polls by punishing the culprits who swore “big brother” knows what’s best for them.

The following appears in the November 8-14, 2013 issue of the Long Island Business News:

The future does not bode well for Long Island taxpayers.

State Comptroller Tom DiNapoli recently designated Nassau and Suffolk counties as exhibiting “significant fiscal stress,” and both “have big issues to grapple with in the future,” according to the comptroller.

Suffolk officials, so far, have failed to get their arms around their structural deficit. The county ran up a deficit of $156 million in 2012 and projects a $100 million shortage in 2013.

Despite the imposition of a control period by the Nassau Interim Finance Authority in January 2011, and despite the public-employee wage freeze the county requested and received – it saved $215 million between 2012 and 2013 and is projected to save $185 million in 2014 – Nassau continues to incur GAAP operating budget deficits.

A NIFA analysis of the Nassau County 2014-2017 Multi-Year Financial Plan projects operating deficits of $104 million in fiscal year 2014, $157 million in FY2015, $199 million in FY2016 and $255 million in FY2017. It appears the county will not keep its 2011 promise to have a GAAP-balanced budget in 2015.

The gloomy fiscal outlooks, plus high property taxes and a weak job market, are taking a toll. Between July 2010 and July 2012, the percentage of people on Long Island over 65 years of age increased by 4 percent while the percentage of people under 30 decreased by 4 percent. Many young people who go away to college are not returning. Struggling middle-class families are seeking employment opportunities in thriving low-tax states like Texas.

These phenomena leave retiring Long Island baby boomers and other seniors living on fixed incomes holding the bag, stuck paying a larger slice of the tax pie.

America’s leading political analyst, Michael Barone, in his excellent new book, “Shaping the Nation: How Surges of Migration Transformed America and Its Politics,” confirms these demographic trends.

In places like Long Island, he observes, “High taxes produce revenues to finance handsome benefits and pensions for public-employee union members … It’s hard to see how this benefits middle-class people making their livings in the private sector.”

So people, Barone concludes, are moving to low-tax states “that are providing jobs and living space where they can pursue their dreams and escape places that burden them with high costs and provide few middle-class amenities in return.”

This helps explain why the population in Texas, between 1970 and 2010, increased 160 percent to 25 million, while New York’s population went up only 8 percent, from 18 to 19 million.

Here are some other interesting comparisons between New York and Texas:

• Number of jobs created between April 2012 and April 2013: New York 111,000, Texas 326,000
• Top state income tax: New York 8.82 percent, Texas zero percent
• 2012 building permits issued: New York 24,872, Texas 135,514
• Ranking among states for best business environments: New York 49, Texas 1
• Rank among states, based on cost of living: New York 47, Texas 9
• Percentage of labor force in unions: New York 23.2 percent, Texas, 5.7 percent
• Dollar value of exports in 2012: New York $81.4 billion, Texas $264.7 billion

This comparison explains why middle-class Long Islanders are racing to the exits. And if elected county officials in Nassau and Suffolk don’t begin to govern, fail to take on the vested interests and don’t make the tough cost-cutting decisions that produce genuinely balanced budgets, it will only get worse.

Expect skyrocketing tax rates and the continued flight of the middle class to greener economic pastures.

The following appears in the October 25-31 2013, issue of the Long Island Business News:

The New York City mayoral candidacy of Bill de Blasio has been driven by two issues:  First, he wants to handcuff the police by ending stop-and-frisk practices. Second, he wants to raise taxes on the so-called 1 percent.

These are his public positions. God only knows what other deep-rooted, extreme left-wing ideological schemes he has in mind.

Let’s face it, the man who championed and happily spent time with the leaders of the oppressive Sandinistas regime in Nicaragua and freely chose to spend his honeymoon in Cuba – a Marxist totalitarian state that has imprisoned and executed tens of thousands of innocent political prisoners, has driven out over 2 million people from a population of 11 million, and whose people earn, on average, $19 a month – isn’t a mainstream politician.

Despite this background and his radical views, public opinion polls indicate that de Blasio is running away with the election. My explanation for this phenomenon: no historical memory.

Few members of the general public remember how the city went downhill when John Vliet Lindsay, the 1960s darling of the left, was mayor of New York.

Lindsay’s tax-and-spend and social-justice policies turned the city into the welfare capital of the nation and unleashed the worst crime wave in New York history. Even leftist journalist Jack Newfield quipped that Lindsay “gave good intentions a bad name.”

Lindsay proved that big, expensive, activist government not only failed to achieve expected social and financial equality but also created a permanent underclass – and bankrupted the nation’s largest city.

The Lindsay debacle haunted New Yorkers until the 1990s, when the Giuliani administration tackled the fiscal mess and successfully implemented social philosopher James Q. Wilson’s “Broken Window” theory, which holds “that maintenance and monitoring urban environments in a well-ordered condition may stop further vandalism and escalation into more serious crime.”

Because of the precipitous drop in crime during the Giuliani and Bloomberg administrations, New York experienced economic and real-estate booms. Housing in Brooklyn and Bronx neighborhoods that couldn’t be given away in the 1970s and 80s is now selling at exorbitant prices because people felt it was safe to move back to these areas.

Here’s what could go wrong in a de Blasio administration: If he emasculates the police department and crime begins to spike in the city’s revitalized communities, people who have paid high six and seven figures for homes and apartments will watch the values of their real estate drop like a rock. Their equity will be wiped out and they will be stuck with upside-down mortgages. Crime epidemics also spread, so expect the suburban counties surrounding the city to be impacted.

If de Blasio raises taxes on the 19,000 people who earn over $1 million and presently pay 41 percent of the city’s income taxes, a significant subset will move to tax-friendly states like Florida. Others could move to neighboring Connecticut, where the top income tax rate is 6.5 percent. Compare that to combined New York state and city income tax rates, which would hit 13.23 percent if de Blasio gets his way.

Wealthy entrepreneurs who vote with their feet will not only take their families with them but their businesses, too. This means some people who live in the NYC metropolitan region will lose their jobs and others will relocate with their employers. The number of young people who are leaving Long Island in search of employment opportunities, which is already high, will escalate.

Bill de Blasio’s Marxist wealth redistributionist agenda will be a nightmare for all New Yorkers. If implemented, it will further bolster the Empire State’s reputation as the nation’s tax capital.

The following appears in the October 11-17, 2013 issue of the Long Island Business News:

When Gov. Andrew Cuomo phoned George Pataki on Oct. 2 to ask him to serve as co-chairman of a Tax Relief Commission, the former governor thought at first it was a wrong number.

That reaction is what the Irish literary giant James Joyce called an “epiphany” – a sudden and important manifestation or realization of the essential nature of a situation.

Pataki’s epiphany: He grasped that he’s an unlikely candidate to lead such a commission.

Why? For most of his three terms in office, Pataki was an unengaged lifestyle governor who governed by press release and gave away the store to keep the perks of office.

Granted, Pataki – who knocked out liberal icon Mario Cuomo in November 1994 – got off to a good start. Thanks to the skills and efforts of its brilliant budget director, Patricia Woodworth, the fledging administration struck a tax-cutting deal with Speaker Shelly Silver: The top income tax rate, which stood at 7.875 percent, was reduced to 7.59375 percent in 1995, 7.125 percent in 1996 and 6.85 in 1997. (The rate did go up to 7.7 percent in Pataki’s third term and Andrew Cuomo has since taken it up to 8.82 percent.)

After that 1995 victory, however, everything went downhill. Pataki abandoned his pledges to curb Medicare costs, unfunded state mandates, one-shot fiscal gimmicks, back-door borrowing and tax-and-fee increases.

While inflation during the Pataki years was up 39 percent, state spending increased 85 percent, from $62 billion to $115 billion. State-funded debt, meanwhile, grew from $28 billion to $51 billion, an 82 percent jump.

As a result of Pataki’s insouciant leadership, when he left office in 2006, New York had the highest state taxes per capita and the worst business-tax climate in the land, and the state was rated worst in the nation in the U.S. Index of Economic Freedom.

The New York Observer summed up the Pataki years as “a legacy of laziness, mediocrity and pervasive neglect of the public interest, while creating a culture in which ethical corruption has become an acceptable way of life.”

Even the Republicans who jockeyed to succeed Pataki in 2006 were critical. William Weld, the former governor of Massachusetts, contended that “New York spends excessively, borrows excessively and, of course, taxes excessively.” Randy Daniels, who served as Pataki’s secretary of state, reminded voters that New York has “the highest combined state and local taxes in the country, the second-highest utility costs after Hawaii, some of the highest insurance rates and an out-of-control Worker’s Compensation System.”

John Faso, a former minority leader of the New York Assembly and the eventual 2006 GOP gubernatorial nominee, told The Wall Street Journal that Pataki “lost his way on taxes and spending.”

So why does Cuomo turn to a predecessor who pandered to special interests and increased spending, taxes and pork?

It gives him cover and makes him look open-minded and bipartisan. Also, the appointment neutralizes Pataki as a Cuomo critic.

Pataki’s acceptance, meanwhile, may increase government-related business for his low-profile environmental consulting firm, The Pataki-Cahill Group.

As a condition of sitting on the Tax Relief Commission, Cuomo’s Moreland Commission on Public Corruption should demand that Pataki disclose if the Pataki-Cahill Group has ever been retained by any state agencies – such as LIPA and the New York Power Authority – or agency vendors.

But don’t hold your breath waiting for that epiphany.