New York’s practice of delaying payments to local governments and school districts to manage its cash-flow difficulties is causing headaches for aid recipients, who have responded with a variety of financial gymnastics.
The problems of the cash-strapped state have been exacerbated by a late budget. Some aid recipients have responded by increasing their borrowing from other sources and have even begun talking about feeing the state for tardy payments.
Part of the problem could be alleviated if the Legislature passes a budget bill this week that includes the revenue sharing payment program called Aid and Incentives to Municipalities, or AIM.
Anticipated delays in Medicaid payments prompted the Nassau Health Care Corp. to sell $50 million of taxable revenue anticipation notes earlier this month. The notes are secured by future payments of federal Medicaid reimbursements processed through the state.
Nassau Health runs the Nassau University Medical Center, a nursing home and various medical clinics that serve the uninsured and underinsured.
The state reimburses municipalities for certain mandated services after the county has provided them.
And Stephen Acquario, executive director of the New York State Association of Counties, said delays in reimbursement have imposed an additional burden on counties that have to pay for things like social services up front.
“Maybe the counties ought to start charging the state interest,” Acquario said. “That’s something we’re going to look into.”
Acquario compared the situation to what happens when the state fails to make timely payments to state contractors.
“If the state does not pay its bills on time to these contractors, they are assessed a penalty or interest — what’s the difference?” Acquario said. “If the counties are providing a service to the state of New York, we ought to be entitled to the same prompt pay.”
The state is behind in payments to smaller jurisdictions that range from $20 million to $40 million and owes hundreds of millions of dollars to some larger counties, he said.
“This is on all the county leaders’ minds these days,” Acquario said.
Nassau County increased its regular cash-flow borrowing in anticipation of reimbursement delays from the state, said budget director Jeff Nogid.
“Things are coming in a little slower but we are getting paid,” Nogid said.
The county sold $210 million of revenue anticipation notes earlier this month, of which about $30 million to $40 million was borrowed to cover delayed funds, he said.
Having to borrow more because of the delays raises the cost to the county, which pays interest on the notes.
“To the extent that we have to borrow more there is an additional added burden to the county,” he said.
The state has delayed approximately $1.5 billion of education aid for school districts from June 1 to the end of the month.
A postponed payment in December and a warning that the June 1 payment might be late prompted school districts to get revenue anticipation note authorizations, said Charles Bastian, a municipal consultant at the financial advisory firm Bernard P. Donegan Inc.
Though there has not been a rush of short-term borrowing, the delay of June 1 payments has probably tipped some school districts into a negative cash flow position.
“We are doing some borrowings for those folks,” Bastian said.