We know that Nassau County faces an estimated $749 million deficit over the next 18 months, thanks to a pandemic that could cost $400 million in sales tax revenue and has reduced income from fees like red-light violations and mortgage and tax map recordings.
We also know that school districts face a 20 percent reduction in state aid as New York grapples with a loss of $14.5 billion in revenue for the year due to the COVID-19 pandemic.
Gov. Andrew Cuomo recently announced the state would not withhold 20 percent of the aid to schools for September after aid payments came in at 80 percent of what was budgeted in July and August. But this may just be short term.
Cuomo has said the state would be forced to cut state aid across the board by 20 percent unless the federal government provided assistance to offset revenue losses in New York as well as in states, municipalities and school districts across the country.
It would normally be hard to believe the federal government will not provide aid to state and local governments. But these are not normal times.
House Democrats recently passed a $2.2 trillion plan to aid those affected by the pandemic, including state governments. The Republican-controlled Senate responded with a $1.4 trillion plan that included aid to schools but no aid to states and local municipalities.
Hours after the Federal Reserve chair warned that the economy could see “tragic” results without robust government support, President Donald Trump abruptly cut off stimulus talks until after the election.
But after the stock market dropped, Trump in a series of tweets late Tuesday urged both houses of Congress to “IMMEDIATELY” revive a lapsed loan program for small businesses and to approve funds for airlines and another round of stimulus checks.
We also don’t know when there will be a vaccine for COVID-19, how long it will take to distribute when it is approved, whether people will get the vaccine when it is available and whether we face a second wave of infection for a virus that has already claimed the lives of 210,000 Americans and infected more than 7.4 million.
President Trump has claimed there could be a vaccine by Election Day, but then again he said in March that the virus would just disappear in the spring. Most scientists believe a vaccine is more likely by the end of the year or the beginning of next year with distribution and the actual administration of shots taking us later into 2021.
So what should Nassau County, school districts and local governments do to keep their financial houses in order?
Blank Slate Media asked that question last week of an expert panel of financial experts with years of experience in local government finances during a virtual town hall it hosted.
The panel included Chris Wright, a longtime member of the Nassau Interim Finance Authority, a state agency which has been overseeing the county’s finances since 2000; Michel Imber, a partner in Conway MacKenzie, a financial consulting firm, who helped develop a financial plan for NIFA in 2011; and Adam Haber, a former Roslyn school board trustee, former NIFA director and former deputy chief of staff for economic development and government efficiency in the Town of Hempstead.
The panelists’ short answer to the question of what to do in the face of this bleak financial picture was that local governments could do a lot to both raise revenues and cut expenses.
This included the consolidation of county departments, creating a single county water department, sale or leasing of government land, installation of solar panels on the roofs of government buildings, greater use of the latest technology and increasing county taxes by the 2 percent limit permitted under the state tax cap.
They also called for centralizing the building approval process and even permitting contractors to self-certify to help increase economic activity in Nassau and create jobs.
But the problem, the panelists agreed, was the political will.
An example of that is in the study Imber helped author in 2011.
“Nassau County faces extraordinary fiscal challenges over the next several years,” the executive summary of what is known as the Grant Thornton study said. “The size and dimensions of the forecasted budget deficits will require the best efforts of the County’s elected leaders, management and employees to prioritize the essential missions of county government that best serve the interests of its citizens.”
The study was written 11 years after Nassau County – one of the wealthiest counties in New York – received a bailout from the state.
But, according to Imber, few if any of the report’s very detailed proposals to make county government more efficient were adopted.
Wright, who has served on the NIFA board since its inception, said county lawmakers, particularly Republicans, have chafed over the past 20 years about having unelected appointees oversee Nassau’s finances.
He said he agreed. But county legislators had failed to come up with suggestions that would balance the county budget and eliminate the need for NIFA.
This included refusing to raise county taxes by 2 percent each year. This, he said, by itself would have balanced the county’s budget.
Instead, county Republicans used not raising taxes as a battle cry to win re-election.
Haber has repeatedly documented how the Town of Hempstead had failed to refinance bonds at lower rates that would have saved the residents millions of dollars and rebid contracts every three years to ensure better rates.
But, he noted, the Hempstead Town Board also had failed to even replace electric typewriters in the town clerk’s office with computers.
Nassau County Executive Laura Curran in recent years was making progress toward balancing the county budget. Annual budgets had been as much as $150 million in the red less than a decade ago, and the county finished 2019 with a surplus.
And then the COVID-19 pandemic struck.
With a projected deficit of $749 million over the next 18 months, Imber, Wright and Haber say the county and school districts may not have a choice but to raise revenues and cut expenses.
Cuts in school aid would require school districts to reduce or eliminate programs such as sports and the arts and consider increasing class sizes.
County, towns and villages would need to reduce services.
The time is long past for local governments to decide between “must have” vs. “nice to have” in services, Imber said.
Perhaps the federal government will provide states and local governments money lost as a result of the pandemic. Perhaps there will be no second wave and the rate of infection will allow business to resume more or less as it had been.
But the odds, at the moment, are very long against all that happening.
A better plan is to plan for the worst and hope for the best. And the time to do it is now – before the floodwaters rise too high.