Nassau County Budget Figures Under Dispute (Long Island vs the State of New York)

Wall Street Journal ^ | 01/28/2011 | DEVLIN BARRETT and ROMY VARGHESE

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Nassau County says it has a balanced budget. The state of New York, which seized control of the county's finances earlier this week, says the budget is tens of millions in the red.

Which is right?

At issue are assumptions in the county's budget. The county is counting on revenue from a hiring freeze and a reduction in police overtime, among other things, as well as an increase in fees from red-light camera violations, which requires state approval. The state and at least one rating agency disagree with many of these assumptions, deeming the revenue "risky."

The heart of the problem is the county's high rate of spending, fueled by labor contracts, and an unusual property-tax system, which forces the county to foot the bill for schools districts and other taxing jurisdictions when residents challenge assessments and are awarded refunds.

That system has strained local finances for years, and a decade ago led to the creation of the Nassau County Interim Finance Authority. By seizing control, NIFA has the authority to review the operation and management of county government, approve borrowing and contracts, and freeze wages.

It is drastic step applied rarely to local governments in New York state. And county officials say they may fight in court.

The impasse is largely due to NIFA's doubt about the feasibility of the county's proposals, according to Amy Laskey, managing director at Fitch Ratings. Simply put, both the state board and many outside experts doubt the county's claims that it has found as much as $68 million in new revenue or cost savings.

Nassau County is hardly alone in facing a budget crunch. But it is unusual in that it has operated for years under a kind of budgetary probation imposed by the state, due to serious difficulties it ran into before.