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.

Statement by

George J. Marlin

Director

Nassau Interim Finance Authority

Wednesday, October 9, 2013

on

“The Proposed Multi-Year Financial Plan”

2014-2017

Nassau County’s proposed multi-year financial plan for fiscal 2014-2017, in my professional judgment, is seriously flawed.

In 2011 after NIFA declared a Control Period—upheld by the Courts after the County sued, and instituted a wage freeze, notably requested by the County—Nassau County prepared its 2012-2015 Financial Plan. That Plan, approved by NIFA (which I reluctantly supported) was to be a transitional plan—and included as the report notes on page 12, certain conditions including $150 million in labor saving that would recur and a GAAP balanced budget in 2015. In exchange for these two conditions, NIFA agreed to approve borrowings for Certs and judgments and settlements at an agreed upon level.

The County has failed both conditions. Blatantly and without remorse or explanation.

The County projects in their multi-year fiscal plan, on a non-GAAP basis, deficits of $32 million in FY 2015; $48 million in FY 2016; and $51.3 million in FY 2017.

The NIFA staff analysis projects deficits of $157 million in FY 2015, $190 million in 2016 and $255 million in 2017.

Labor has given no concessions. Any labor savings were imposed by the County not given by labor. And here we are in the fall of 2013 and the County’s financial plan as our staff outlines is not anywhere near GAAP balance in 2015. Yet it plans to borrow and expects NIFA to approve this borrowing for operating expenses.

Why? The County simply does not care. A control period and a wage freeze are draconian measures that a locality should wish to avoid and if it occurs to climb out of as quickly as possible. What duly elected official wants a non-elected State board to control? Sensible governments would do anything to get out of controls.

But not Nassau. So what if contracts and borrowings have to be approved. So what if wages remain frozen.

As long as the County does not have to make the tough decisions. As long as the County can blithely go along la dee da, tomorrow is another day.

The leadership of the County was elected to lead and to govern and not to absolve itself of responsibility by blaming NIFA whose controls it brought down on itself and whose controls the County now finds as the easy way to go.

When can NIFA lift controls? Never unless the County wants controls to be lifted and stops borrowing for operating expenses, makes the hard decisions and produces a GAAP balanced budget.

Statement by

George J. Marlin

Director

Nassau Interim Finance Authority

Wednesday, October 9, 2013

on

The Nassau Events Center

I am skeptical of a deal of this proportion when:

• The Party to the agreement is a shell corporation with no assets;

• The agreement is subject to financing that the shell corporation does not possess;

• The agreement is subject to numerous other conditions.

(Frankly, I doubt the conditions of the agreement will ever be met and I expect that in a year to eighteen months the shell corporation will try to renegotiate.)

Nevertheless, I would like to note that although we have decided that the particular structure of the coliseum redevelopment documents does not require our contract approval, we reserve our right to examine and consider any other contracts related or ancillary to the coliseum. We are not giving a blank check. And the decision that the current documents do not need our approval should in no way be construed or expanded to imply that we will hesitate to interject whenever we believe a commitment by the County constitutes a contract requiring our review under our statute which gives broad power to oversee contracts impacting the County’s finances.