Report: County faces deficits totaling $530 million, fiscal emergency declared

JENNIFER GUSTAVSON PHOTO | County Executive Steve Bellone, left, and County Comptroller Joseph Sawicki listens to a presentation Tuesday morning in Hauppauge detailing the county's fiscal situation.

A review of Suffolk County’s finances shows the county could face a staggering $530 million budget deficit come the end of fiscal year 2013 — unless county leaders take drastic measures to stop it.

The estimated deficit number is an accumulation of budget shortfalls starting from 2011.

After taking office in January, Suffolk County Executive Steve Bellone announced the formation of a six-man task force of regional financial experts to review the county’s finances. The move came after Fitch Ratings issued a negative outlook in November on county bonds. Then, in December, Moody’s Investor Service downgraded the county’s short-term borrowing.

The task force’s findings were announced Tuesday at a meeting of the Legislature’s budget and finance committee in Hauppauge.

“We now have a picture of the real state of our finances and the truth is worse than any of us could have imagined,” Mr. Bellone said.

During the presentation, panel chairman Richard Halverson, a former assistant deputy director of the New York City Financial Control Board, said the main cause of the county’s deficit is the economic downturn, which created slumping sales tax revenue.

The county projected “over-optimistic estimates” for sales tax revenue, he said.

North Fork native and county comptroller Joseph Sawicki described the report as “eye-opening.”

“If these numbers bear out, we may very well surpass Nassau in terms of dire straits,” Mr. Sawicki said.

In January 2011, the state intervened in Nassau County’s struggle to deal with its own budget deficits; a state oversight board now controls Nassau’s finances.

Mr. Halverson said the task force’s function wasn’t to “identify villains” responsible for the county’s financial woes. He said he believed “the biggest villain is the U.S. economy.”

Following the presentation, Mr. Bellone declared a “fiscal emergency” in order to embargo 10 percent of each county department’s budget. Later this week he’s expected to meet with union leaders about potential layoffs and contract givebacks.

Vanessa Baird-Streeter, a spokeswoman for Mr. Bellone, said all options to mitigate the county’s fiscal situation are “on the table.”

“We’ll be coming up in several weeks with a mitigation plan,” she said.

An unresolved issue Mr. Bellone is expected to address is proposed county worker layoffs.

Last year, legislators passed a half-year budget in order to give Mr. Bellone an opportunity to find funding for over 600 county jobs. While former county executive Steve Levy had proposed 710 layoffs in his spending plan, the Legislature passed a budget that temporarily reduced that number to 88.

When asked specifically if Mr. Bellone was considering presiding officer Bill Lindsay’s pitch to set a referendum on allowing the county to suspend its open space acquisition program, instead using funds slated for land preservation to balance the budget, Ms. Baird-Streeter said she couldn’t comment directly.

But she did say the county is “looking at all opportunities” in order to deal with county’s shortfall.

As the county continues to seek budget deficit solutions, it is preparing to obtain a $70 million revenue anticipation note (RAN) to make payroll because the county is expected to deplete its cash flow next month. The county hasn’t had to issue a RAN, which North Fork Legislator Ed Romaine described as “going to a loan shark,” in over 20 years.

“I understand that money will only get us through September and then we’ll have to do another RAN, so imagine having to go back to the loan shark again,” Mr. Romaine said. “I’ve been saying for years that we have a structural deficit that was growing. I did not realize the extent that it has been growing.

Obviously, there is a dichotomy of what was being told to us, the general public, bond investors and rating agencies and, what in fact, was the truth.”

On Monday, the night before the panel released its report, Mr. Levy released a six-page memo to members of the media entitled “The Real Story Behind the 2012 Suffolk County Budget.” In the memo, he compares Suffolk to other New York counties, while defending his own record as county executive. He says that the county’s credit rating was only downgraded after the Legislature made amendments to his 2012 budget.

“It was only after the Legislature radically changed the executive budget in November that the agencies downgraded the rating in December,” Mr. Levy wrote. “They were especially critical of the Legislature having raided the tax stabilization fund as a one-shot revenue, and having restored the nursing home and hundreds of employees without properly paying for the them.

“It was the first time in history that the Suffolk Legislature adopted a six-month, rather than a full-year budget.”

Check out a recap of our live blog of the meeting below:

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