Nassau County Comptroller Jack Schnirman’s midyear financial report estimated that the county will end the fiscal year with an operating deficit of more than $340 million, underscoring the economic impact of the coronavirus pandemic.
The report provided projections for the 2020 fiscal year compared with the 2020 adopted budget based on the first six months of the year, according to a news release from the comptroller’s office last week.
Along with the looming $340.4 million deficit, Schnirman reported, the county faces an unassigned fund balance deficit of $227.1 million. The unassigned fund balance represents funds that have not yet been allocated or restricted to specific purposes throughout the county’s general fund, according to the report.
Last year’s unassigned fund balance of $112.2 million was a “significant improvement” compared with the county’s 2017 negative unassigned fund balance of $68.8 million, Schnirman said. A negative unassigned fund balance, according to the report, represents the overspending of the fund balance, rendering municipalities unable to fund “governmental obligations” owed at the end of each fiscal year.
“The improvement in the county’s total unassigned fund balance was primarily the result of improved 2019 results over the prior year mainly due to higher sales tax revenue and lower expenditures resulting from salary and fringe costs,” Schnirman said in the report. “However, with the onset of the COVID-19 pandemic and related shutdown, the positive gain that the County experienced in 2019 may potentially be erased in 2020.”
Factors that drove the improvement included higher sales tax revenues from a robust pre-COVID Long Island economy, according to a July report from the comptroller’s office. Sales tax collections grew 3.5 percent in 2019, and total revenues grew by $47.7 million. Spending on personnel costs fell, and off-track betting revenue rose due to video lottery terminal receipts of $15 million.
Following the onset of COVID-19, the comptroller’s office said, it conducted an analysis of the impact on county revenues, modeling low, moderate and high impacts that projected sales tax declines from 12 to 28 percent.
With sales tax as the county’s largest revenue source, and without revenue assistance from the federal government, the impacts of COVID-19 will likely erase the significant progress of the past two years, Schnirman said. The office will be placing its full report online.
Sales tax receipts, according to Nassau County Executive Laura Curran, account for more than 40 percent of the county’s revenue.
Along with sales tax revenue, other potential shortfalls projected in the report include $65.3 million in departmental revenue, $52 million as a result of a lack of state aid and $43 million from fines and forfeitures, including lower public safety, red light camera, and other traffic and parking violations.
Schnirman outlined potential financial opportunities to mitigate the deficits, including $71 million from payroll and fringe benefit savings as a result of unfilled positions, $30 million in federal aid from the CARES Act, and $15.5 million in projected savings of social services from recipient grants, purchased services and Medicaid.
The potential opportunities could reduce the deficit to $124.4 million from $340.4 million, Schnirman reported. On the other hand, according to the report, if a second wave of the coronavirus were to come along and the economy had to be shut down again, the deficit could increase to a whopping $526.8 million.
“As we look ahead to the second half of 2020,” Schnirman said, “the looming questions we must ask are: ‘How can we improve the trajectory, how bad can it get, and what if there’s another shutdown?’ The answers to those questions will drive how large the deficit is at the end of the year.”
The county faces a deficit of $384 million in the 2020 fiscal year and $364 million in the 2021 fiscal year due to the coronavirus pandemic, according to the county’s multiyear financial plan released two weeks ago.
The county’s latest fiscal strategy avoids additional borrowing by the Nassau Interim Finance Authority in the 2020 fiscal year and will not extend the current date of expiration of the finance authority’s debt or extend the length of its control period over the county, according to county officials.
Previously county officials said programs to close the budget gap had been prepared that relied on the finance authority to refinance $75 million of existing county debt in the fiscal year 2020 and another $210 million next fiscal year.
