Throughout his eight-year tenure as county executive, the hapless Ed Mangano was clueless about the state of the county’s finances. Year after year, he would announce that his deficit-ridden budgets were balanced.
He dismissed the annual warning from the Nassau Interim Finance Authority, that the county’s budget deficits were real, substantial and that the deficits were in accordance with Generally Accepted Accounting Principles as they must be judged according to state law.
Mangano never understood GAAP. He thought it was something NIFA made up. Hence, he frequently referred to the standard accounting principles as “NIFA’s GAAP.”
Worse yet, he believed the county’s budget could be balanced with borrowed money.
He failed to grasp what every freshman accounting student knows: under GAAP, borrowing is not operating revenue. Genuine municipal revenue consists solely of taxes, fees and support from other governments.
Addicted to borrowing to pay for public employee buy-outs and judicial judgments, Mangano sought annual fixes to fund his cash shortfalls.
Fortunately, over the past few years, NIFA has been weaning the county off its borrowing dependency, has made it clear that it would reject any additional requests, and has held fast to that position since taking it.
Notably, Nassau Democrats have historically supported NIFA’s tight-fisted approach on borrowing, although perhaps as a means to make other political points, rather than as an indication of understanding its fiscal implications.
When Mangano requested $45 million borrowing approval in 2016 to pay a judicial award to two men exonerated of a 1984 murder rap, Democratic legislators, including then-legislator Laura Curran, killed the motion (which required a super-majority vote), arguing the county had ample reserves.
As a result, Mangano was forced to set aside the money in 2016 to cover the judgment while awaiting appeals, as he did.
Well, the appeal process ended in January when the U.S. Supreme Court declined to hear the county’s arguments and now it must pay out the $45 million.
However, now-County Executive Laura Curran has changed her fiscal tune.
She has requested that borrowing be approved to pay the judgment because county reserves are allegedly low.
It appears to me Curran is experiencing a John Kerry moment.
Remember when the 2004 Democratic presidential nominee was widely ridiculed for flip-flopping on funding of the Iraq war after saying, “I actually did vote for the $87 billion before I voted against it.”
In Curran’s case, she was against borrowing $45 million before she was for it.
The county’s arguments favoring the borrowing are specious.
Contrary to claims, paying out the $45 million will not adversely impact the county’s ability to pay bills in 2018 because there is plenty of cash in its coffers (the argument references the county’s reserve position as of Dec. 31, 2016, more than a year ago, rather than the county’s current cash position).
In December 2017, the County issued $300 million in short-term Tax Anticipation Notes to meet current expenses while awaiting 2018 property tax collections.
Also, the county mistakenly contends that the $45 million must be bonded out long term because the judgment was listed as an expense item in the TANs official statement.
County officials appear to be confusing TANs with Bond Anticipation Notes.
BANs are a kind of short-term debt that is retired with proceeds from a subsequent long-term bond sale.
The fact that the $45 million is not part of BANs shoots down the current argument that the County’s plans required it to be funded with long-term bonds.
Sadly, in early February, all the Democratic County Legislators put on John Kerry masks and approved legal judgment borrowing—albeit $23 million, while over half of the Republican County Legislators put on the same mask and opposed the same borrowing of which they had errantly approved in 2016.
One month in office and Democrats appear to be on the road to abandoning their promise to reject Mangano-type fiscal gimmicks.
Now it’s up to NIFA. Hopefully, board members don’t also have a John Kerry moment, and choose instead to uphold their pledge to reject any borrowing for legal judgments and termination pay.