Poloncarz Says Budget $50 Million Short at Year's Halfway Point.

POLONCARZ REPORTS ON MID-YEAR BUDGET, WARNS OF FISCAL CHALLENGES AHEAD
 
Identifies More than $50 million in Unanticipated Costs, Declining Revenue Projections and Unfunded Obligations by Collins Administration in 2012 Budget
 
Additional Costs Associated with Union Contract Negotiations, Mandated Staffing Increases for Sheriff’s Jail Management Division Expected
 
ERIE COUNTY, NY— Today, Erie County Executive Mark C. Poloncarz commented on the status of the Fiscal Year 2012 Erie County Budget (“2012 Budget”), issuing a warning about the fiscal challenges that the County is currently experiencing as well as those that lie ahead.  Over the first six months of his term, Poloncarz has identified more than $50 million in unanticipated or unbudgeted expense inherited from the Collins administration as well as declining revenue projections in the 2012 Budget and beyond.
 
Poloncarz said, “As Comptroller, I believed it was my job to report on the actual state of the County, and not the one portrayed by my predecessor.  As County Executive, I still believe in telling the residents and taxpayers the real story and not hiding behind the sort of smoke and mirrors prior administrations have relied on.”
 
“Over my first six months in office, I have worked to return county government back to its core mission:  to provide the programs and services that resident—our customers—demand as effectively and efficiently as possible. 
 
“I also knew that along the way we would overturn some rocks and find some issues, but the magnitude of those issues left unaddressed by the prior administration is significant and is problematic for County taxpayers in 2012 and 2013 and they deserve to know the truth.
 
“Last year when I ran for executive I said the county’s financial picture was not as rosy as portrayed by Mr. Collins.  In fact, after six months in office it is clear that the situation is much worse than expected.
 
“In the first six months of my term alone, we have identified more than $50 million in unanticipated expense and declining revenue projections not included in Mr. Collins’ 2012 Budget or Four-Year Financial Plan – many of which he, in all likelihood, knew about but failed to address and chose to hide from me as comptroller, the legislature and even the control board.
 
“Chief among these is the tens of millions of dollars of unbudgeted healthcare payments we must make this year, and every year, to ECMCC, despite ‘being out of the hospital business.’  Over the past several years, while Collins touted that the County’s only obligation to the hospital was a ‘fixed subsidy’ of $16.2 million, I have warned that this is an open-ended obligation and not accurate and will haunt us budgetarily for years to come.  This year, we estimate this obligation could cost County taxpayers as much as $51 million—or $34.7 million over what Collins budgeted for.  
 
“We have had to pay out many millions of dollars to settle lawsuits that Collins dragged out as long as possible and pay for outside counsel to argue cases that could have been handled in-house by the County Attorney.  The County maintains significant liability for certain other cases also.  Additionally, we have had to find more than $3 million to pay for construction projects that Collins began that were either underfunded or simply not properly funded at all and without prior legislative approval in violation of the Charter. 
 
“We are also dealing with the costs associated with the Department of Justice stipulated settlement and mandates from the NYS Commission of Correction—some of which are known, some of which are not yet.  Already this year the County has incurred a significant cost to increase medical staff at the Holding Center and Correctional Facility based on federal and state mandates.   We estimate these areas of correctional health will go over budget by millions of dollars this year. 
 
“And, we know that we will be mandated to hire an additional 72 deputies and possibly 7 civilian support staff as part of the recent COC report—which will be at a cost of about $6 million in total.  But unlike the previous administration, we will cooperate and comply fully because we all ultimately have the same goal: to make the County jails as safe a place as possible for both deputies and inmates. 
 
“On top of this, I am also in the process of trying to negotiate new contracts with the 8 of 9 bargaining units that saw their contracts lapse or fail to be renegotiated under the previous administration—all of which will likely contain some sort of upfront costs. 
 
“Over the past three years, Collins had the historic luxury of more than $105 million dollars in federal Stimulus dollars to not only plug those holes but manufacture huge budget surpluses each of those years—crediting running government like a business, not President Obama for his good fortune. 
 
“From 2009 to 2011, Erie County saw budget surpluses totaling more than $62 million.  Take away $105 million in one-shot Stimulus funding, it is very likely we would have seen multi-million dollar deficits each year—not surpluses.  As the last of the Stimulus funding was distributed in 2011, my administration does not the luxury of such a multi-million dollar ‘get out of jail free card.’
 
“Additionally, over the past six years, the County has grown accustomed to covering budget gaps with higher than budgeted sales tax revenues.  However, through June 2012, the County is not showing significant positive variances in sales tax. Year-to-date sales tax revenues are just above budget at 2.8% growth compared to the budgeted 2.5% growth.    Because this is the County’s largest revenue stream, simply staying on budget, rather than substantially over budget, is significant and negative for the County.
 
“Our other major revenue source is property taxes.  And, while the property tax rate has not increased, we still count on additional revenue through assessment growth.  This year’s budget is predicated on a 2% assessment growth, which I believed was over optimistic.  In my Four-Year plan, I reduced our growth prediction to 1%; however, after a refund and reassessment of the Huntley Steam Station, among other reassessments, it is highly probable we will see zero assessment growth next year. 
 
“I find it interesting that last December, had he won, Chris Collins described his next term as being on ‘cruise control.’ After spending the last six months working to clean up the messes he left behind, it is likely that being on ‘cruise control’ would have driven Erie County off a cliff.
 
“In spite of these fiscal challenges, I will continue to do the job I was elected to do and I will continue to tell the public the truth regarding the actual state of Erie County’s finances.  While, we have come a long way since the days of the ‘Red-Green’ fiscal crisis, Erie County’s budget requires constant vigilance, especially with so many mandated costs and services that add up to about 90% of our budget.  We will continue to work to address the additional unforeseen costs that Erie County has incurred this year and find ways to mitigate the impact of reduced revenues.”
 
“In 2005 I was elected as comptroller to clean up the Red-Green fiscal crisis and we succeeded in that task.  As executive I will not allow the County to return to those days and will take the necessary steps to ensure the County’s financial stability.”
 
UNANTICIPATED COSTS
 

• Hospital Payments: $34.7 million.  While Chris Collins proclaimed Erie County ‘Out of the Hospital Business,’ under his 2010 agreement with Erie County Medical Center (“ECMCC”) County taxpayers are annually forced to foot the bill for tens of millions of dollars in reimbursements to for the care of uninsured or underinsured patients at ECMCC (Disproportionate Share [“DSH”] and Upper Payment Limit [“UPL”] programs).   What Collins described as a ‘fixed cost’ of a $16.2 million annual subsidy to ECMCC, has ballooned in recent years.  Last year, the County’s financial obligation to ECMCC was over $40.4 million. While the County was able to utilize a $15.1 million credit, reducing the cost to $25.3 million—or $9 million over budget – that credit no longer exists.  This year, the combined DSH/UPL payments could be high as $51 million in 2012—$34.7 million higher than the 2012 Budget. 

• Open Lawsuits/Legal Fees: $9 million.  Beginning in December 2011, before taking office, Poloncarz has had to deal with the costs associated with open lawsuits and outside legal fees perpetuated by the Collins administration.  These include a $7 million settlement in the Morales Case, $750,000 in a Jail Management case, $250,000 in fines from the U.S. Environmental Protection Agency and $1 million in outside counsel fees for work that could have been done by the Erie County Attorney’s Office at a lower cost.

• Unfunded Capital Projects: $3.3 million.  After taking stock of the County’s public works obligations, Poloncarz was made aware of several construction projects that had been initiated by the Collins administration and were either unfunded or underfunded, some of which were not approved by the legislature prior to their start.  These include $465,000 for fuel tank remediation (an additional $1 million in costs are expected in 2013), $850,000 for a new boiler room at the Erie County Correctional Facility in Alden, $500,000 for the replacement of air handling units at the Edward A. Rath County Office Building, $300,000 for the renovation of the Holding Center gymnasium as a new inmate reception housing and medical unit, and $150,000 for the replacement of electric transformers at the Buffalo Niagara Convention Center among others.

• New Jail Management Staffing Costs: More than $6 million.  As required by a New York State Commission of Correction’s (“CoC”) recent directive, Erie County is mandated to create an additional 72 sworn officer positions as well as possibly 7 civilian support staff within the Sheriff’s Jail Management Division between now and 2014 at a cost of more than $6 million. This mandate includes a requirement that the County must create 15 new officer and supervisor positions by September 2012 – an unbudgeted 2012 expense.   This state-mandated expense is unfortunate and reflects troubling issues in Jail Management that my administration is attempting to address with the Sheriff. 

• 2^nd Primary Election: $325,000.  The Board of Elections estimates that the additional June 2012 Federal Primary Election cost Erie County more than $325,000 that could have been avoided had the New York State Senate joined the Assembly in consolidating this election with the traditional September Primary Election. This was unbudgeted mandate of state government for 2012.

• Sheriff’s Overtime Over Budget: Several Million Dollars.   Year after year the Sheriff’s Office fails to get a handle on overtime costs within the Jail Management Division that are, again, going to be several million dollars over budget. 

• Correctional Health:                Several Million Dollars.   Under the consent decree with the U.S. Department of Justice settling their lawsuit against the County during the Collins administration, as well as CoC regulations concerning medical staffing in the Sheriff’s Division of Jail Management, the County has incurred significant new expense for medical staff in the Holding Center and the Correctional Facility.  The County estimates we will go over budget in 2012 by several million dollars for hiring contract nurses to work in Jail Management.  This problem is exacerbated by the unwillingness of a county union to cooperate in order to hire new nurses for correctional health.

• Lapsed Union Contracts: Millions of Dollars.   Contracts with the 8 of 9 bargaining units that saw their contracts lapse or fail to be renegotiated under the previous administration—all of which will likely contain some sort of upfront costs.  Current proposals from these units would require millions of dollars in retroactive payments or cost-of-living adjustments with minimal immediate savings to the County.  Poloncarz has promise the taxpayers and County employees that any settled contracts will be fair to both the public and employees. This includes my insistence that all unionized County employees must contribute to paying for their health insurance just like management employees, elected officials and the public.

• One-Shot Stimulus Revenues Exhausted:  Over the past three fiscal years, Erie County has enjoyed budget surpluses totaling more than $60 million.  However, none of these surpluses would have been possible without Erie County receiving more than $105 million in FMAP Stimulus funding from the federal government over the same period of time ($41 million in 2009, $44.8 million in 2010, and $19.2 million in 2011).  These one-shot revenues were used by the Collins administration to hide severe gaps and budget problems that would have existed otherwise.  With the last of the Stimulus funding distributed in 2011, there are no multi-million dollar windfalls to bridge budget gaps anymore, thus putting additional strain on the County.

• Zero Property Tax Assessment Growth:  While the Collins administration estimated a 2% property tax assessment growth in its 2012 Budget and last Four Year Financial Plan, the Poloncarz administration believed that was overly optimistic and reduced it to a 1% projection in its revised Plan in April 2012.  With a recent Huntley Steam Station in the Town of Tonawanda assessment refund of $1.4 million and reassessment eliminating $194 million in taxable value each year, along with reassessments or court-ordered lowering of assessments in various towns across Erie County, the Poloncarz administration now believes there is a high probability there will be zero assessment growth next year.  Had assessment growth continued at 2% for 2013, the County would have received an additional $5.1 million in property tax revenues that can no longer be counted on.

• Stagnant Sales Tax Growth:  Through the first six months of 2012 sales tax revenues are just barely above the 2012 Budgeted amount (2.8% growth against budgeted growth of 2.5%), and there is a real possibility that the County’s actual 2012 sales tax revenues will not meet the Collins administration’s budget projections. If sales tax receipts do not increase over the next quarter, adjustments in sales tax projections for the County’s 2013 – 2016 Four Year Financial Plan may have to be lowered.  In recent years, Erie County has counted on greater-than-budgeted sales tax growth to cover gaps caused by ballooning DSH/UPL payments to ECMCC and other negative variances.  

• Loss of Federal and State Aid/Grants:  Due to federal and state reductions, Erie County is losing grant funding and being forced to make tough choices on moving critical jobs to the General Fund, especially in the Health Department, Central Police Services and District Attorney’s Office.  Further grant funding reductions in areas including homeland security and the crime lab are expected.  In 2012 alone, the County has lost approximately $1 million in grant funding, with additional losses in the future as the state and federal governments reduce grant funds to local governments.  This is creating unbudgeted pressure on the County in 2012 and will be exacerbated in 2013.