Nassau County Executive Edward Mangano has submitted a $2.6 billion budget for fiscal 2012 while a New York State-appointed oversight board continues to cast a watchful shadow.

Mangano’s spending plan for the county, which envelops Long Island suburbs just east of New York City, would eliminate a $310 million deficit and lay off more than 1,000 workers.

The $310 million deficit would have equated to a 39% property tax increase, he said.

Mangano’s proposal, about $62 million less than the $2.7 billion adopted in fiscal 2011, follows several months of disputes with a the Nassau Interim Finance Authority over how best to close the budget gap.

NIFA rejected the county’s multi-year budget update for fiscal 2012 to 2015 two weeks ago, saying Nassau based its projections on revenues that may not materialize.

Mangano, in a statement late Wednesday, said the proposed budget also orders the structural revisions necessary to fix the county.

“Nassau’s finances spun out of control over the past decade because of a broken assessment system and overly generous contractual obligations that are unaffordable in a sluggish economy,” said Mangano, executive since Jan. 1, 2010.

Nassau is rated A1 by Moody’s Investors Service, A-plus by Standard & Poor’s and AA-minus by Fitch Ratings.

The budget, through layoffs and attrition, would further reduce the county government to 7,400 workers from 8,410 and for the first time force all employees to contribute 25% toward their health care insurance policies.

Mangano said the spending plan also stops paying employees for education expenses they never incurred.

Along with police overtime changes, Mangano also proposes eliminating minimum staffing in police precincts, a clause that he said forces the county to call in officers on overtime even when straight-time police are available. The plan also realigns precincts from eight to six.

Mangano also repeated his call for a state law that would incorporate a margin for error when assessing properties.

Last week, he proposed selling the county’s sewer system.

Nassau voters in August rejected a $400 million bond proposal to build a replacement for Veterans Memorial Coliseum, home of the National Hockey League’s New York Islanders and a minor league ballpark.

NIFA imposed control over the county’s finances last January. Accounting firm Grant Thornton LLP has been reviewing  the county’s finances since June.

Magnano’s budget proposal includes some of the firm’s proposals.

 “What’s different about Nassau is the size of the budget and the depth and breath of its services,” said Grant Thornton managing partner Marti Kopacz. “Unlike other municipalities, sometimes it works as a city and sometimes like a county. The scope of its services is significantly broader, It’s not easy to pigeonhole.”

Kopacz, who described her firm’s efforts in Nassau as “very intense,” led a team that included principal Michael Imber and director Robert Childree, who served as Alabama’s treasurer for 22 years.

Kopacz said her firm stays out of the political fray.

“Politics for us is just not an issue we get involved in. That doesn’t mean we don’t sense the politics around us, but we take ourselves out of the political maelstrom,” she said. “We made recommendations based on solid business sense.”

Meanwhile, in Long Island’s other county, Suffolk, Executive Steve Levy on Wednesday proposed a $2.7 billion budget that calls for a tax freeze and the dismissal of 709 employees.

On the same day, Suffolk County issued $120 million of Series 2011-I tax anticipation notes. Piper Jaffray & Co., PNC Capital Markets, Wells Fargo Securities, Goldman, Sachs & Co. and Citigroup were the winning bidders.

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