While we await the appointment of a new chairman of the Nassau Interim Finance Authority, there has been much misguided chatter concerning the proper role of the state control board.
And as a former NIFA director, I consider it my duty to set the record straight. Let’s review:
In 2000, NIFA was created as an independent New York State authority to help restore the county’s fiscal health, which had been suffering for years due to mismanagement, cronyism and sleaze.
Prior to the state taking action, the Nassau County Legislature unanimously approved a home-rule message requesting Albany to create a state oversight panel with the power to direct the county’s budget policies.
By asking for an independent public authority possessing budgetary oversight power, the Nassau legislators conceded that they could not trust themselves to manage the county’s finances responsibly.
During Ronald Stack’s tenure as NIFA chairman (2003-2013), he worked with the county and had regular “leaders meetings” to discuss fiscal issues with county officials from both parties.
In January 2011, after numerous warnings about Nassau’s growing structural operating deficit were dismissed, NIFA directors unanimously approved a motion to invoke a control period.
Chairman Stack rightfully pointed out that the estimated $176 million deficit was “real” and “substantial” and that the deficit was “in accordance with GAAP as it must according to State law.”
He also said “It is not a NIFA deficit. It is not a ‘paper’ deficit. It is a statutory deficit which comes largely from trying to borrow money and counting it as revenue.
This is contrary to GAAP. This is contrary to common sense. Borrowed money is not revenue and to claim it as such is simply nonsensical.”
The county executive, instead of cooperating with NIFA, sued NIFA claiming it did not have the legal authority to impose a control period.
The New York Supreme Court rejected the county’s claim and ruled that NIFA’s declaration was neither unconstitutional nor arbitrary and capricious.
Despite the tension, NIFA continued to try to assist the county to regain fiscal balance and even commissioned an independent consultant who issued a myriad of cost saving ideas in a 300-page report.
Little, if any, was adopted by the county, and what was adopted was done so as a token, merely to avoid being charged with having done nothing with the report.
In addition, NIFA approved in December 2011, a 2012-2015 fiscal plan that projected the county could achieve a GAAP balanced budget in 2015 that would permit the control period to be lifted.
However, when Jon Kaiman was appointed NIFA chairman in September 2013, he did not “work with Mangano”; he instead capitulated and led NIFA to approve, 6-1, union contracts that it had previously said it would reject as fiscal gimmicks.
Kaiman’s statement reported in the February 4, 2016 issue of Newsday that the labor deal “saved the County hundreds and hundreds of millions of dollars” is false.
It is costing taxpayers over $70 million a year more.
Interestingly, if NIFA’s 2011-2015 fiscal plan had been adhered to, it would have worked.
Nassau’s GAAP deficit for fiscal year 2015 will come in around $90 million. The unfunded Kaiman labor contract costs were about $70-$75 million.
If those had either not been added, or had been funded, the deficit in 2015 would have been $15 million-$20 million which is less than the NIFA control period trigger of $30 million.
Sadly, as Nassau enters its sixth year in a control period, Mangano has still not learned that the $150 million the county borrowed in 2015 does not count as operating revenue.
Hence there is not a $45 million surplus as he claims but a $90 million deficit.
Also, his recent reference to the GAAP-projected deficit as “NIFA’s standard” is ludicrous.
New York State law mandates the use of GAAP!
Hopefully, the governor is paying attention to this mess and appoints a municipal finance expert as NIFA’s chairman, not another political lackey.
One last note, NIFA is a fiscal control board — not a congeniality board.
NIFA is a state public authority; the county is a creation of the state, a municipal entity which is now under NIFA control; the two are not in a “partnership.”
Suggestions that they are merely provide covering language for capitulation, acquiescence and other forms of dereliction of duty for those charged with fiscal oversight.
When New York City was under state control in the 1970s, and the Emergency Financial Control Board was chaired by the governor, no one thought Mayor Abraham Beame and Gov. Hugh Carey were in a “close working relationship.” Thanks to Carey, the state saved the city that the mayor was leading quickly to bankruptcy.
With huge budget deficits projected for years to come, the next NIFA chairman must emulate Gov. Carey and use NIFA’s powers forcefully to prevent pols from pushing Nassau closer and closer to the fiscal abyss.