The Suffolk County Legislator talks about how Suffolk County wound up with an estimated $200 million hole in its 2012 budget and some of the tough choices – including possibly raising sales tax revenues on some goods – government leaders are going to have to make to ensure Suffolk County can continue to operate.
Suffolk County is facing about a $200 million deficit in its 2012 spending plan. How did we get here?
There are people who will argue what the exact size of the deficit is, but I do believe it is close to $200 million. We got here a few ways. First, we haven’t raised revenues and taxes have stayed the same, so we don’t have more income coming in. We lost close to $100 million annually in sales tax revenue when the recession hit and the state has placed a lot of extra burdens on the county. In particular, the state changed the funding formulas for health care and social services, so that things we are mandated to provide we no longer are reimbursed for by the state. At the same time, health insurance costs went through the roof, and the state pension program requires us to make up any deficits when their portfolios are not performing well in the market, so that is another $40 to $50 million we need to find each year. Contractual obligations, like salary raises, add tens of millions of dollars more to what we need to make up.
In essence, what you are saying is that Suffolk County doesn’t have a spending problem, but cannot meet its non-discretionary obligations?
Discretionary spending we have actually been reducing. The county budget itself has been growing at less than one percent a year, which is less than the rate of inflation, but this $200 million hole has been forming since we hit the recession. When that happened, at first, we had economic stimulus monies to help us – $40 million for Suffolk County alone. That helped fill the hole. We also sold things, and we used our rainy day funds so that we would not have to use property taxes to raise revenues. One of the biggest ways we filled that deficit was through our tobacco money.
There was a national lawsuit settled several years ago with the big tobacco companies and the county got about $25 million year for 40 years under that settlement. We decided instead of waiting the next 30 years, and collecting annually, that we would sell the right to collect that money in exchange for a big chunk of it upfront. We got several hundred million dollars and paid down the county’s debt.
I think we were all hoping the recession would end, the economy would bounce back and we would see an increase in our sales tax revenues. That just didn’t happen, and we ran out of things to sell and no one wants to raise property taxes, including me. I would rather us look at other revenue sources.
The other side of the coin is, as the county has seen an decrease in our sales tax revenues and increase in our non-discretionary expenses as the economy has worsened, the demands on the county have also increased. Our homeless population has skyrocketed, crime has increase, more people rely on our health care clinics. We have less money, and more demand. We have reduced our workforce, eliminated positions that were budgeted and the county did not fill when people retired. This budget we have passed for 2012 has an immediate 80 positions being eliminated. About 700 positions will be eliminated late this year if we cannot find the money to fund them.
So that’s a lot of bad news. Are there cuts that can be made?
I don’t believe we can continue to contract the county workforce because there are demands on the county that are mandated to be met and we need people to deliver those services. For example, in our health department it will come back to haunt us if people cannot get approvals to set up a new business or if people are getting sick because we are not inspecting restaurants. I believe we are already operating on a skeleton crew level, so reducing the size of government is not the solution.
So if cutting is not the answer, what is?
We are going to need to increase revenues by either successfully stimulating the economy, providing incentives for new businesses to come to Suffolk County and create the infrastructure that will lead to economic growth.
We have to look at things like how we can bring money into the economy and keep it from leaving. For example, most of our waste is trucked to other states and processed there. If we could find a way to cleanly recover and process waste, sell the reusable material and convert leftover waste into energy that could bring in hundreds of millions of dollars and lower the cost of running the county as well.
Another option, and I know a lot of people may not like this, is gaming. I have never liked gambling – I have seen it destroy lives. I don’t do it. However, a lot of people are going to Connecticut and hundreds of millions of dollars are being spent there at gambling facilities, helping Connecticut’s educational system. I would rather they spend that money here. Obviously, I would not want to see it on the South Fork, but I believe we could find an appropriate location and it could add $100 million in revenue to the county alone. When we have something like that, we are not talking about raising taxes.
The other piece is, of course, tourism. We have done such a good job preserving our natural resources on the East End. Tourism is an important job generator and stimulates the economy helping local businesses, restaurants and hotels. We have the open spaces that bring people here, but we may need more hotel rooms. The revitalization of Riverhead and Riverside will be a major priority of mine in this term.
In terms of tourism, we have often talked about the viability of a passenger water taxis.
That is certainly another idea I have had. I would like to see a small, 20-person water taxi start with a leg from Sag Harbor to Greenport as a pilot program. Then we could expand it to Riverhead, Orient Point and Montauk. I think a lot of people would come here, without their cars, if we had that kind of service available. It could be tied into environmental tourism, hiking, biking, using our beaches. The idea of being able to see all of the Peconics by water is just awesome and it is those kinds of ideas that are going to help us get to where we need to be.
What about sales tax revenues?
Sales tax, in general right now is at 8.625 percent, and of that four-percent goes to the county, four-percent to the state and the rest to the Metropolitan Transportation Authority – that is a whole other issue. So if you spend $100, you are charged $8.62 in sales tax. If weadded $0.25 to that it would cost you $8.87 in sales tax for every $100 you spend. That would generate about $70 million for the county, which would really help close this budget hole. It would keep things from falling a part. Do I like the idea of raising sales tax, no. I would much rather create a luxury tax, so I would look at ideas if we did raise sales tax to eliminate all sales tax for clothing under $100, for example. Right now, the county only exempts food sold at grocery stores. If we were to raise sales tax I would also like to have it be a one-year authorization. It wouldn’t be permanent, but an emergency measure and if in doing that we take away sales tax altogether for clothing under $100, we are shifting the burden towards luxury items. I also like the idea of sales tax free days to help boost business. Too much merchandise is being purchased on the internet and if we can create an incentive to buy locally it would help local merchants and it would keep money in Suffolk County, which is what we need to do.