Rockland County is sinking

September 9, 2013

There is the idea in muniland that all state and local governments balance their budget at the end of every year. But the reality is a little messier because governments often do short term borrowing from Wall Street. The Federal Reserve reports $54 billion of short term municipal borrowing in the first quarter of 2013, at least part of which is used as deficit financing. Cities and states also borrow internally from other government funds, like a water fund, to balance the general fund. That is what sunk San Bernardino, California, which sucked money from its external funds to paper over huge deficits in the general fund. That story ended with San Bernardino in bankruptcy.

Rockland County, New York is running an accumulated $125 million deficit and awaiting approval from New York governor Andrew Cuomo to issue a $96 million long term bond to shore up its general fund budget hole. The State Legislature approved the borrowing in June but the governor has not moved to sign the law. His counsel continues to study the legislation. The county’s accumulated deficit comes from failing to raise taxes, the public unions’ unwillingness to renegotiate labor contracts and the county’s support of the county nursing hospital which runs large deficits. The Journal News tells the story:

Since 2012, Rockland officials have viewed [long term] deficit borrowing as a way to avoid the stopgap trips to Wall Street two or three times a year, during which time Rockland rolls over its debt with short-term borrowings. The county pays the interest and lucrative fees to outside attorneys, but never touches the principal.

Rockland has seen its financial condition deteriorate during the fifth and final term of County Executive C. Scott Vanderhoef, who for years kept county property taxes low while depending on growth in sales-tax income from Rockland’s retail industry.

Rockland is a relatively affluent county with 317,757 residents. The median household income was $82,217 in 2011 compared to a state median household income of $55,216. County executive Scott Vanderhoef took office in 1994 and has let the county’s financial condition deteriorate to where it shares the distinction with Nassau County of the being the lowest rated county in the state (Baa3). The county provides a full array of government services employing 3,257 workers (the majority are unionized).

Moody’s detailed the county’s fiscal woes in a December, 2012 report:

The county, facing a significant mid-year budget gap of approximately $40 million for fiscal 2012, has implemented a number of recurring revenue increases and expenditure cuts that will partially close the current year’s budget gap and provide some recurring benefits in future years.

In May, the county did not receive the required state legislative approval for various revenue increases, for which it had budgeted $21 million in fiscal 2012. In addition, the county budgeted for $18 million in concessions from various employee bargaining units, of which a minimal amount has been realized to date.

So the state will not permit the county to raise taxes and fees and the unions won’t put anything on the table. And the nursing hospital has been subsidized with $91 million of county funds in the last 10 years. The county is being squeezed from all directions.

The county legislature packaged the nursing facility for sale but has not found a buyer. Like many other county hospitals in the state, traditional funding via Medicaid is slowing and the county is finding it difficult to make up the shortfall. The New York-based Center for Government Research found “92% of county-owned nursing homes outside New York City lost money in 2010, and without significant changes in how they operate, most have little chance to survive.”  These nursing facilities have long provided care to the indigent, behaviorally-challenged and other residents that other nursing homes might be reluctant to admit. CGR found that out of the 33 counties outside NYC operating nursing homes eight are in the process of selling them and possibly five more are considering selling. The county-level safety net for the most vulnerable citizens is disappearing.

Rockland County is in a very tough spot and Governor Cuomo needs to do more than approve a $96 million bond offering to help the county in the short term. The powerful influence of public unions needs to be addressed and Rockland County is a good test case for the state. Otherwise more and more communities will have difficulty balancing their budgets every year.

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