Suffolk County budget proposal promises structural balance

In the wake of a bond rating downgrade, officials in Long Island’s Suffolk County are pushing a new budget that aims for healthier credit conditions.

Suffolk County Executive Steve Bellone unveiled a $3.11 billion 2019 budget proposal Friday that he says would eliminate its structural deficit with recurring revenue streams. The fiscal plan also would stop Suffolk’s past practice of deferring pension costs for the first time in eight years, which Moody’s Investors cited as a reason for dropping the county’s debt rating one notch to Baa1 from A3 on Thursday.

Suffolk County Executive Steve Bellone

“As a result of our ongoing efforts to shrink government and control spending, we have submitted a structurally balanced budget that relies entirely on recurring revenues,” said Bellone in a statement.

Moody’s analyst noted Tatiana Killen wrote in her Sept. 20 report that Suffolk deferred $32 million in pension payments in 2018 on top of $211 million in outstanding pension payments it already owed. The county began the practice of deferring in 2010 under a New York State law that allows municipalities to defer the cost of pension payments over a 10- or 12-year amortization period.

Bellone, who took office in 2012, said the recommended budget has no “one-shot" revenue sources for the first time since 2011. Moody’s noted in its downgrade that Suffolk’s past reliance on non-recurring revenue led to strained fund balance that grew to a negative 12% of revenues at the close of the 2017 fiscal year. The county’s cash flow borrowing is projected at $555 million at the end of the 2018 fiscal year, according to Moody’s.

The spending plan proposal, which still must be approved by the county legislature, budgets for a 3.5% increase in sales tax collections at $48.2 million. The current budget estimates a 4.9% growth in sales tax revenue.

“Sales tax revenues account for almost half of the county's operating revenues, which is considerable and on the higher end when compared to other New York counties,” said Killen in her report. “Under-performance in this key revenue item has been one of the main drivers of the structural imbalance experienced by the county in past years.”

Suffolk has around $1.6 billion of outstanding general obligation debt, according to Moody’s. The Baa1 rating ties Suffolk with St. Lawrence County as the lowest-rated county in New York by Moody’s.

S&P Global Ratings rates Suffolk at A-minus after lowering New York State’s fourth-most-populous county one notch in June 2017 as a result of weak reserve levels. Fitch Ratings also rates Suffolk GO bonds at A-minus.

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