Budgetary Wonderland — Op Ed

In My View

Issue of Sept. 5, 2008

When I use a word,” Humpty Dumpty said in a rather scornful tone, “it means what I choose it to mean — neither more nor less.” Nassau County’s Controller and self styled “Fiscal Watchdog” Howard Weitzman has proudly released whBudgeat he calls a simple and easy to read report on the County finances. As simple as it may be, it is nonetheless horrifying in its nonchalant obfuscation of a County rapidly spiraling into financial crisis.

Weitzman touts the work that he has done and continues to do with County Executive Thomas Suozzi in “restoring the County” after a near financial meltdown in 1999. He then applauds the surplus that the County has had each year since 2003 during his tenure. We are presented with charts showing that the amount has declined steadily from a $127.5 million surplus in 2003 to a $23.8 million surplus in 2007.

It doesn’t seem to be a very good trend, but hey, it’s still a surplus, and that ain’t bad these days, right?

Don’t believe it.

In Weitzman’s words, “one [teensy weensy little] issue I am monitoring is the $3.4 billion cost of post employment health benefits for County employees and retirees.” For the first time, Weitzman says, the 2007 County balance sheet reflected this monstrous liability, after his being forced to do so due to “new accounting standards.”

But don’t worry. This obligation “will not impact our budget or taxes.” On what planet? Perhaps the good Mr. Weitzman is planning a move to higher office, or to a job where he will no longer bear any responsibility for the County budget. But the rest of us that live here will at some point have to deal with this obligation will, most assuredly, impact taxes and the budget. When this budgetary tsunami hits, he will be gone, and as famously said by France’s Louis XIV as his people descended into ruin, “apres moi le deluge,” or, loosely translated, “once I am gone, who cares about the coming floods.”

This sounds bad enough, but wait, there’s more!

A rather obscurely written and certainly not easily comprehensible section of the report is entitled “Structural Balance.” This section tells us, more than a little bit disingenuously, that the County has a Structural Gap, which, we are told, is not at all the same as a budget deficit. A Structural Gap, Mr. Weitzman explains, occurs when the County’s recurring expenses are greater than its recurring revenues. Since 2003, the helpful graphs show, the amount of recurring revenue over recurring expenses has declined each year from a $12.5 million surplus to a $122 million deficit in 2007.

Allow me to translate Mr. Weitzman’s simple and easy to read report. He is telling us that the County took in $122 million less in revenues in 2007 than it spent. But how, you ask, did we achieve a budget surplus if we spend more than we take in? Mr. Weitzman somehow neglects to explain this little detail, but the answer is easy.

The Suozzi-Weitzman administration uses one shot revenues, a risky tactic. When you take in one dollar and spend $1.25, you can sometimes get away with it, at least for a while, by finding a little stash of cash here or there. Eventually, there is no more to be found and you go broke. It is really not complicated at all.

In 2007, the County ended the year with a 23.8 million dollar surplus. But where did the extra money come from? One particularly alarming answer is to simply borrow extra money, add it to revenue, and voila, we have a surplus. That, however, is not as easy as it sounds.

If you or I borrow long term, to pay for a long term asset, such as a new house or a car, or even for education that will pay off over many years, that is a perfectly reasonable thing to do, so long as we expect to have the means to pay for it. If, however, we take out a mortgage to pay for short term obligations, say for a vacation trip, we would probably be doing something irresponsible that would, over time, cripple us financially if done repetitively.

There is absolutely no difference when a County does the same thing. Borrowing long term to pay for a building that will last many years is fair and sensible, as taxpayers will use the building for many years. However, borrowing long term to pay salaries and other current expenses is unfair to future taxpayers, irresponsible and a prescription for disaster. For the same reasons it is also illegal. Yet, that is exactly what Nassau County is doing.

How do the powers in control (since 1999, the Democrats) get away with something so apparently illegal and reckless? They borrow more than needed for long term projects such as roads and bridges, and “find” some money from these projects that was somehow not spent. They move that money to the general fund and presto! We have a budget surplus.

This practice, it seems, is technically legal, at least according to the Democrats in charge. However, it is no less reprehensible, even if it falls within a legal loophole. By this maneuver, the Democrats are either not spending money on the projects for which it was intended and, presumably, needed, or they are mortgaging our future for short term boasting opportunities.

Mr. Weitzman’s clear and simple budget document is not so clear or simple, after all.

Howard Kopel is a real estate lawyer and CEO of Sutton Alliance, a diversified Title Insurance and real estate services company. He can be reached at 516.837.6103, hkopel@suttonalliance.com