Nassau County, N.Y.’s state-appointed financial overseer sent the county back to the drawing board.

Delivering a harsh rebuke, the Nassau County Interim Finance Authority Thursday rejected the latest multi-year budget proposal update by county officials. It wants the county to devise another such plan for 2011 to 2014 by July 28, providing for $225 million in budget cuts.

A staff-written NIFA report said the update “indicates that the county is moving in the wrong direction.” The report said many proposed gap-closing actions have been postponed, scaled back, “or are expected to produce outsized savings in the second half of the year.”

“I totally refute that. How can we say they’ve done nothing,? We’ve eliminated 1,200 positions,” deputy county executive for finance Tim Sullivan told The Bond Buyer on Friday, citing headcount reductions since Edward Magnano took over as county executive in 2009.

Nassau County, on suburban Long Island east of New York City, has an estimated budget gap of $120 million for fiscal 2011, down from $176 million, and NIFA worries that the gap could widen to $225 million for the next fiscal year.

Magnano must submit the county’s budget for fiscal 2012 by Sept. 15.

NIFA board member George Marlin lambasted the county for unrealized revenue assumptions, including sales tax increases the county is seeking, red-light camera authorization from the New York State Legislature, and labor concessions.

“The county has exhibited delusions of fiscal balance,” Marlin said. He invoked comments by New York City turnaround architect Felix Rohatyn, who said in 1975: “The dikes are crumbling and we’re running out of fingers.” Speaking Thursday, Marlin said: “That metaphor applies to Nassau’s present crisis.”

Marlin added: “The revised three-year plan is another example of unacceptable wishful thinking. Today there is a crisis of confidence in the county’s fiscal management. If corrective actions are not pursued now to cure the county’s fiscal ailments, Nassau will be plunged into fiscal chaos.”

Sullivan said the county would continue to work with NIFA. “The best way to work out our differences is to partner with the authority,” said Sullivan, who is asking NIFA to petition Albany to allow the county to restructure its debt.

NIFA in January imposed a control period over the county’s finances. In June, it hired consulting firm Grant Thornton LLP to report on the county’s finances.

Moody’s Investors Service in May assigned an A1 rating to Nassau County’s $82 million of Series 2011A general obligation bonds. The outlook is negative.

On Aug. 1, voters will be asked to approve a $400 million bond issue to replace Nassau Veterans Memorial Coliseum, home to the National Hockey League’s New York Islanders since 1972, and build a minor league baseball field nearby.

Mangano has said the project could be an economic boon for the county.

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