RBA and Pattern for Progress’ White Paper on Budget Deficit a Must-Read for County Politicos and Concerned Taxpayers

EDITORIAL REPORT BY DYLAN SKRILOFF

The Rockland Business Association and Hudson Valley Pattern for Progress have released a stellar white paper on Rockland County’s approximately $100 million budget deficit.

The business membership group – Rockland’s largest – and the noted think tank’s work offers a comprehensive, but not excessively wonkish, overview of how Rockland got into its budget mess and some reasonable solutions on how it might begin to escape.

The paper takes its initial aim at the most basic problem with Rockland’s recent budgets; alleged purposefully dishonest accounting and bookkeeping strategies. While the County Executive’s Office and the County Legislature have each year given taxpayers a wink and a nod while kicking the can down the road, the white paper claims branches of Rockland government often knowingly  produced revenue estimates for taxes that were inaccurate for the past seven years.

According to the RBA and Pattern for Progress, the county’s own budget consultants would warn lawmakers against adopting rosy estimates of tax revenue, and then lawmakers would proceed to ignore. The result was catastrophic shortages in the county’s books. The gap between projected sales tax revenue and actual sales tax revenue since 2005 is over $70 million. Mortgage tax shortfalls add up to over $12 million more.

The report does not state it explicitly, but such an environment has been tolerated mainly because lawmakers have wished to avoid tough decisions regarding cutting programs and raising revenues.

But the county’s fly by the seat of its pants approach to budgetary discretion can last no longer, the report -and reality- makes clear.

The report blames both branches for failing, however it takes a harsher tone with the legislature, seemingly due to the attitude of some leaders in the body. The report says, “The county executive may have offered inaccurate revenue and spending projections, but county legislators almost universally adopted those projections without change. The County Legislature’s response to the New York State Comptroller’s audit was telling. Where the county executive accepted criticism and blame, the Legislature said none of the crisis was its fault.”

Legislators have contended that because County Executive C. Scott Vanderhoef provided the initial incorrect estimates, they are not responsible for the final result. The report states that  legislators have voted on those numbers against the advice of their own consultants, even increasing the 2012 projections before passing the final budget.

The white paper states, “Sales tax and mortgage tax must be carefully and conservatively estimated in county budgets because they are subject to the highs and lows of a volatile economy.”

By contrast, “The County Legislature changed sales tax projections for the first time in 2012, adding an additional $13 million in revenue that is unlikely to be realized as the economy continues to sputter.”

In addition the report cites as a problem the practice of anticipating revenues before they arrive, such as when the county budgeted $18 million for a predicted sale of the county hospital to a public benefit corporation. The sale never received needed state approval. Consultants had warned the county that the sale was unlikely to be made within the budget year, but their warnings were ignored.

One of the most praiseworthy aspect’s of the report is its distilling of basic facts and figures into an easily digestible picture. Many in the media and public have followed the stumblings and bumblings of county lawmakers in the last half decade, but the white paper presents a bird’s eye view that might not be easily attained by those in the midst of the situation.

Indeed, it seems quite obvious looking at it through the eyes of the white paper’s authors, that what appeared to be “harmless” budget gimmicks at the time, were in fact the main cause of Rockland’s current crisis.

County lawmakers will try to place the blame on the forces of nature, the economy, and unfunded mandates, but nobody made them kick the can down the road and fail to deal with the moment in an honest and urgent manner. Government often plays can-kicking games, but the fact that it is common is no excuse.

The report takes on some other specific issues and expenses the county ought to consider dealing with. The white paper points out that “Rockland taxpayers subsidized operations at Summit Park by a total of  $55.8 million from 2006-2010. In his 2013 budget proposal, the County Executive estimates that Rockland taxpayers will have to subsidize Summit Park in 2013 by more than $17 million.”

Praised is the recent decision to create a Local Development Corporation (LDC) which will eventually sell the hospital and nursing home at Summit Park. The report states, “Rockland County officials must also be careful about how they ultimately use any proceeds from the future sale of their hospital and nursing home. Those proceeds should not go toward balancing a single year’s budget. Instead, the county should put any proceeds from a sale into a dedicated fund – set aside from the General Fund – that will go toward paying the debts and legacy costs of Summit Park. If the county does not set aside money from the sale for these purposes, we fear the General Fund will assume an increased financial responsibility for legacy and other costs associated with Summit Park.”

In other words, the report is encouraging a conservative, common sense approach to keeping the county’s books manageable. The budgetary gimmicks do not cover up the problem, they cause the problem, is a main underlying thrust of the report.

One expense the white paper suggests the county can do without is the perk for county employees of free prescription drugs at Summit Park pharmacy. It is noted that “the cost of these reimbursements [is] roughly $1.7 million…According to the annual reports by the accounting firm O’Connor Davies Munns & Dobbins, Rockland County failed to budget for the prescription co-pay refunds for several years in a row, under the assumption that county officials could eliminate the benefit during contract talks with labor unions. However, the benefits continued under the terms of the expired contracts.”

While not a major cause of the deficit, it is a contributing factor. The free prescription meds also represents a perk that’s above and beyond what is found anywhere else in the marketplace and the authors gently suggest that it should be phased out.

Another factor facing Rockland County which has already impacted the budget and may impact it further in the near future, especially if the economy does not resume strong growth, is the increase in population in high poverty communities, such as Kaser, New Square, Monsey and Spring Valley.

This increase is of course straining social services and makes it all the more urgent that the county deal with reality straightforwardly. Working to create a strategy toward job training and getting lower income persons involved in the workforce is recommended.

The white paper asks, “How can Rockland County partner with private companies and nonprofit agencies to prepare its low-income and unemployed citizens for the job market? How can the county encourage job growth and entrepreneurship? What role does SUNY Rockland, the community college, play in training people for new jobs? How can Rockland work with its booming but impoverished villages to help their residents improve their lives and become independent of government services?”

Another item misestimated in recent county budgets has been overtime. Between 2007 and 2011 the county underestimated overtime costs by approximately $10 million. The report states, “The county should consider all avenues to reduce overtime costs. That might include adopting a 21 ‘no-overtime’ policy for departments where that is practicable.”

The county’s move to receive a deficit bond was praised by the authors. It recommends the county pursue this course again, in spite of state not moving forward on it last year. In fact, the report says, the state did not move on any such bonds for any county last  year. “The deficit bonds would allow Rockland County to erase its current deficit, pay the shortfall over a period of 10 years, and start with a blank slate,” the report states.

The report praises Assembly Ken Zebrowski’s “Rockland County Deficit Reduction Task Force” proposal, stating that “the task force would exist for a three-year period, and could extend its oversight by majority vote for two-year periods until the deficit bonds were paid off…The task force would have broad oversight and budget recommendation powers. Under the terms of the bill, Rockland County would be forced to submit its annual budget, a multi-year budget plan and quarterly reports to the task force.”

An independent comptroller could be coming Rockland County’s way if the report’s suggestion is followed. The white paper authors state that the comptroller’s function “would include the certification of all county bills, the power to audit, and other such powers that would allow him/her to serve as a ‘financial watchdog’ on behalf of the taxpayers.” Several counties already have comptrollers.

The report also advises the formation of an audit advisory committee “that periodically monitor the county’s finances and report back to the public,” recommending Nassau County as a positive example of an existing similar committee.

New York State Comptroller Thomas P. DiNapoli recently was a guest at the Rockland Business Association’s annual dinner, where he praised the group’s efforts on the white paper. He may have some skin in the game himself, as the white paper gives a nod to DiNapoli’s proposed “Fiscal Stress Monitoring System.”

The white paper says, “While this recommendation is not specific to Rockland County, we believe it would be prudent for state officials to support Comptroller Thomas DiNapoli’s proposed Fiscal Stress Monitoring  System. Municipalities and school districts will be given two scores. On the financial side, the system will determine whether a given government unit is facing significant financial stress, moderate financial stress, nearing financial stress or no financial stress.”

The report states lawmakers must take it upon themselves to earnestly consider what can be cut from county government what services can be shared with towns, with least harm to the local quality of life. The Sheriff’s police unit is one possible place to look for cuts, the report states, as every town in Rockland has their own police force.

The report commended Rockland District Attorney Thomas Zugibe for helping to create a new Regional Investigative Resources Center this year after funding was cut for narcotics and intel investigations.

Lastly the report recommends local governments create a Council of Governments which convene and discuss matters of governance as well as the best means to consolidate services whenever possible. Times are tight and it’s time for the government to make its operations as lean and efficient as possible.

Haphazard cutting is not the solution either, the report intones, but measured and rational governance.

While Rockland lawmakers have had plenty of unexpected drama thrown their way, the report points out that other counties have handled economic drama with less trouble. Going forward the white paper paints a map of how a more functional and honest county government might operate.

We encourage readers to read the report at http://www.rocklandbusiness.org/pdf/Rockland-County-Budget-Crisis.pdf. It’s not a joy read, so pick it up when you are in a serious state of mind and have time to take it in.

The report is not revolutionary, unless good, solid and rational advice is revolutionary in 2012. It is, however, what the doctor ordered.

With the county executive race already on for 2013, we are sure county lawmakers are listening. They better be.

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