The following appears in the August 23-29, 2012 issue of the Long Island Business News:

In an important report released this month, State Comptroller Thomas P. DiNapoli diagnosed the rapidly declining fiscal health of municipalities throughout the Empire State.

“No matter how you measure it,” he states, “almost all cities in New York are stressed and have to work hard to keep their fiscal houses in order. … If a city is not facing budget solvency issues, it is likely facing service delivery stress – that is, it is having a hard time maintaining the services its residents want and need.”

The reason why municipalities are in fiscal peril: Tax revenues do not match expenditures.

First the revenue side of the ledger.

Since the Great Recession began in 2008, property tax revenues in most municipalities have declined due to the drop in residential and commercial real estate values. In the nine downstate suburban counties, including Nassau and Suffolk, property values have, on average, decreased 5.3 percent annually.

Upstate declines during the same period have been smaller, 1.8 percent a year, because many cities in northern regions did not participate in this century’s real estate boom. For instance, between 1998 and 2005, property values in Oswego were down 45 percent; Dunkirk, -38 percent; Fulton, -12 percent; Schenectady, -11 percent; and Buffalo, -10 percent.

State aid to municipalities, which peaked in 2008-2009, has declined over the last three fiscal years. Fewer home sales translated to lower mortgage recording tax income. The comptroller’s report points out that since 2005, “local governments have lost nearly $320 million in annual MRT revenues.”

Many municipalities are also reaching their constitutional tax limits. There are presently eight local governments that have hit the total amount of property taxes that can be levied.

Declining populations due to huge manufacturing job losses have also contributed to lagging tax dollars. Buffalo, whose population stood at 532,000 in 1960, is now down to 240,000. With more than 40,000 single-family homes abandoned, the city’s property tax base has been wrecked.

As for expenditures, thanks to unfunded state mandates, gratuitous public employee contracts and spiraling pension and health care contributions, local magistrates are cutting essential services to cover those costs.

There are over 2,000 unfunded mandates imposed on New York municipalities. These mandates, of which Medicaid is the most costly, consume more than 60 percent of county governments’ budget dollars. For example, Erie County in 2003 had announced that its Medicaid costs hit $175 million while its total property tax revenue was expected to be $128 million. County officials told The New York Times, “Every penny we take in the county property taxes is used to pay for Medicaid. This is before we pay for any libraries or plow any roads or pay for any police services.”

Instead of grappling with the fiscal crisis and making tough budget decisions, some municipal leaders have resorted to sloppy bookkeeping or cooking the books. The comptroller points out an audit uncovered that the Village of Freeport between 2006 and 2010 adopted unrealistic general fund budgets that resulted in operating deficits totaling $10.9 million. The budget included $5 million in transfers from nonexistent reserves. In addition, Freeport issued long-term debt to cover short-term operating deficits. This is like using one’s credit card to make a current mortgage payment. One is merely transferring debt, not paying it down.

The comptroller’s report is a wake-up call. And if state and local elected officials do not aggressively address these fiscal woes by slashing state mandates, enacting genuine pension reform, renegotiating union contracts and scrapping rigged arbitration boards, expect the day of reckoning to quickly arrive and distressed municipalities lining up to enter into receivership.

The following appears in the August 10-16, 2012 issue of the Long Island Business News:

After observing Nassau elected officials from a ringside seat the past few years, I have concluded many squander much of their day on extraneous matters. Too much time is spent attending photo opportunity events, fundraisers, golf outings and issuing reams of press releases containing dubious data and claims.

As a result, not enough time is spent governing and this, in my judgment, explains why the county is teetering on the edge of the fiscal cliff.

Governing is more than political posturing. It requires more than just showing up at one’s office. Governing is about advancing one’s policy agenda. And to achieve that end, elected executives must devote their time, energy and influence hamming out agreements with the legislative branch.

Gov. Andrew Cuomo is a good example of a chief executive who has been successful at governing. When he took office Jan. 1, 2011, he immediately tackled the $10 billion budget deficit he inherited, calling for shared sacrifices that spared no facet of government. He persuaded the Democratic Assembly and the Republican Senate to pass a budget that eliminated the deficit without new taxes or borrowing.

What exactly happened when the governor bargained with legislative leaders behind closed doors we will never know for sure. Nevertheless, I believe it is fair to assume that Cuomo’s hard-nosed negotiating and his threat to use his broad executive budgetary powers persuaded legislators to come to terms with the state’s fiscal plight.

Speaker Sheldon Silver and Senate Majority Leader Dean Skelos did receive some swag in the deal (i.e., $250 million in education cuts were restored). But that’s part of the give and take of governing. The key was for the first time in years the budget agreement was a major victory for taxpayers, not special interests.

For a real lesson in the art of governing, I recommend local officials pick up a copy of the recently published “The Passage of Power,” the fourth volume in Robert Caro’s monumental “The Years of Lyndon Johnson.”

In that work, one learns how Johnson immediately grasped the reins of power after being sworn in as president in Dallas and moved through Congress John F. Kennedy’s tax and civil rights legislation that was hopelessly logjammed for years.

Johnson, a former “master” of the U.S. Senate, wooed legislative leaders of both parties. He threw himself into the budget and tax-cut negotiations, and made the compromises and deals necessary to break the deadlock that Caro reports “before November 22, 1963, had seemed all but unbreakable.”

When Johnson was told by advisers that he should not antagonize Southern Democratic members of Congress by promoting Kennedy’s civil rights bill that had no chance of passage, he looked at them and said, “Well, what the hell’s the presidency for?”

Dismissing conventional wisdom, Johnson executed a plan strategy to get the Civil Rights bill out of committee and on to the floors of the House and Senate for a vote. “It was a struggle,” Caro writes, “whose strategy and day-to-day tactics were laid out and directed by [Johnson].”

Johnson successfully marginalized the South by persuading the members of the party of Lincoln to join northern Democrats in supporting the legislation. By using all the levers of power available to him, he broke the bill free from the Congressional logjam and on the road to passage one month after assuming office. Seven months later, on July 2, 1964, he signed the 1964 Civil Rights Act into law.

Johnson, whom the chic Kennedy crowd called “Rufus Cornpone,” proved that it takes more than glitz to govern. He proved much could be accomplished when a chief executive is determined, hardworking, and not afraid to step on a few toes.

Unless county officials heed the Cuomo and Johnson examples, expect Nassau to continue down the road to fiscal perdition.

This Op-ed piece I wrote appears in the New York Post on August 6, 2012.

The following appears in the July 27-August 2, 2012 issue of the Long Island Business News:

After weeks of procrastinating, Nassau County Comptroller George Maragos has finally confirmed that the county incurred a cash deficit of $50.4 million and a generally accepted accounting principles, or GAAP, deficit of $173.4 million for the year that ended Dec. 31, 2011. (These deficits would have been $30 million higher if the Nassau Interim Finance Authority had not ordered a wage freeze.) He also announced a “deficit of approximately $45 million is projected for a year-end fiscal 2012 unless immediate steps are taken to end in balance.”

Back in September 2010, when NIFA announced that the county’s proposed 2011 budget and its multiyear financial plan did not “meet the standards of prudence necessary for us to project balance at this time,” the county dismissed this assessment, insisting its budget was balanced.

Time and again, Nassau argued that the 2011 budget “was definitely balanced.” Even after NIFA declared a control period on Jan. 26, 2011, 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.”

As late as August 2011, the county was still maintaining that its 2011 budget was balanced. Nassau’s chief financial officer, Tim Sullivan, told the county Legislature that it will have a balanced budget. “I know the budget is balanced when a Big Four audit company signs off on it.”

It is now official: Nassau’s budget prognostications were wrong, and NIFA’s deficit analysis released in January 2011 was pretty much on the mark. NIFA had projected a GAAP deficit of $155.5 million and a cash deficit of $53.4 million.

Why was the county’s 2011 budget a fiscal disaster? Many of its revenue and expense estimates were delusional:

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 confirm that NIFA had a statutory obligation to declare a control period in January 2011 because there existed a substantial likelihood of the county incurring a major operating funds deficit of 1 percent or more in the aggregate results of operations during its fiscal year 2011.

Nassau has squandered the past 19 months denying inconvenient facts, promoting a $400 million Coliseum referendum the voters had the good sense to overwhelmingly reject, seeking irresponsible Albany bailouts and pursuing dangerous one-shot revenue proposals.

The time for scheming, whining and finger-pointing is over. The time to govern is at hand. The county executive must be responsible and take the necessary corrective actions to restore fiscal integrity. It will mean making difficult and unpopular decisions. Such, however, is the price for holding executive office.

The following appears in the July 12-19, 2012 issue of the Long Island Business News:

The 2012 session of New York’s state Legislature ended – to borrow the words of  T.S. Eliot  – “Not with a bang but a whimper.”  But this is not what Albany’s potentates would have us believe.

True, they did pass the state budget on time. But that is part of their job description. Legislators don’t deserve pats on the back for simply doing what is expected. That would be like Long Island Rail Road commuters giving conductors rounds of applause for announcing station stops.

The Legislature also increased school aid and Medicaid spending. But that was possible because Albany raised state income taxes last December and used the $2 billion in additional tax revenue to reward teacher and health care unions for failure in an election year.

Lest one forget, New York spends more on Medicaid than Texas, California and Florida… combined.  As for education, New York spends more than any other state in the nation, about $18,000 per student. The results, however, prove that exorbitant spending does not guarantee a good education. New York ranks 39th nationally in the percentage of high school kids that graduates in four years.

The new state pension Tier VI for government employees is neither “bold” nor “transformational” as supporters have been insisting. It is merely an incremental nonstructural change that will affect future employees. E.J. McMahon of the Manhattan Institute has called projections that this new tier will save taxpayers $80 billion during the next three decades, “meaningless and speculative.”

Genuine reform that is financially sustainable will be accomplished when the state implements a defined-contribution model, or 401(k) plan, similar to the one offered to State University of New York employees for the past 50 years. The Empire Center for New York State Policy has pointed out that the successful SUNY plan, which is portable if one leaves government service, “is built on insurance annuity contracts, which deliver a stream of retirement income like a pension, in order to protect against the risk that retirees will outlive their savings.”

Albany failed to give struggling local governments unfunded-mandate relief. For years Albany has been evading its responsibility to fund programs they want by ordering municipalities and school districts to provide and pay for a host of services. Complying with these unfunded mandates has forced scores of municipalities to the edge of a fiscal abyss. Albany’s failure to act may force some cities into insolvency in the coming months. The governor should order a special session of the Legislature to deal with this pressing issue.

Albany also surrendered to union bosses and supported legislation that takes away a court-approved right of parents to receive and review teacher evaluations.

Most disappointing, for registered Conservatives like me, was Gov. Andrew Cuomo’s shameless accusation that New York’s Conservative Party engaged in “extremism” for daring to oppose changes to existing marijuana-possession laws. Cuomo, whose locution was dripping with moral indignation, said, “There is no place in this state for extreme conservative theory.”

If the Conservative Party is a hotbed of extremists, why did Cuomo, as attorney general, speak at the party’s February 2009 Albany conference and urge an alliance to pass his proposed legislation to initiate referendums to reorganize or eliminate inefficient local governments? If Conservative Party Chairman Mike Long is an extremist crackpot, why did Cuomo enthusiastically accept Long’s endorsement of the bill and praise him as a man of principle? And, by the way, am I to suppose that I was the token “extremist” member of Governor-elect Cuomo’s transition team?

If the governor is committed to combating extremism, he might begin by repudiating the ACORN/public employee-controlled Working Families Party, whose endorsement he accepted in 2010. Since he has taken office, those big-government, “soak the rich,” tax-and-spend ideologues have vigorously opposed the implementation of Cuomo’s New New York Agenda to stem the state’s economic hemorrhaging.

As a summer project, the governor should clean out from his own political backyard the extreme left-wing alarmists and cranks who have been hiding in the weeds.