The County's Reliance On Sales Tax Is Detrimental During A Pandemic

SUFFOLK CLOSEUP

By Karl Grossman

 Suffolk County government is in terrible shape financially. As it has for governments widely, the COVID-19 pandemic has had a huge impact on Suffolk, more so because almost 50 percent of the county government’s budget is based on the collection of sale tax monies—and people are spending less in Suffolk.

Even before COVID-19 hit, Suffolk government was in fiscal trouble. 

New York State Comptroller Thomas DiNapoli emphasized in a recent report that the pandemic “could push more local governments into serious fiscal stress.” He noted that for “2019, pre-pandemic,” only four municipalities in the state were in “significant stress” financially: the cities of Poughkeepsie, Niagara Falls and the counties of Westchester—and Suffolk.

Mr. DiNapoli said “the pandemic has dramatically altered the fiscal landscape, and many communities are struggling to provide critical services and pay their bills.” He declared that “without aid from Washington the options are bleak for local governments trying to stay in the black, and many more local governments may be pushed to into serious fiscal stress.” 

The basis for the comptroller’s “Fiscal Stress Monitoring System,” explained a statement from his office, involved “year-end funding balance, cash-on-hand, short-term borrowing, fixed costs and patterns of operating deficits.” 

A centerpiece of the campaign of Suffolk County Comptroller John M. Kennedy for Suffolk County executive last year was his charge that the incumbent, Steve Bellone, was a terrible fiscal manager. Mr. Bellone denied the allegation.

In any case, already in fiscal difficulty, in this pandemic period the county’s financial situation is more severe. Mr. Bellone says Suffolk government faces a two-year $437 million budget gap and he has just submitted an operating budget for 2021 of $3.1 billion that includes cutting 500 county employees—out of a current 8,797—and elimination of nearly half of county bus routes. John Corrado, president of Suffolk Transportation Service, says this would be “devastating” to riders.  

Mr. Bellone says the cuts could be rescinded if the federal government provides sufficient financial assistance in the months ahead. The cuts are not to take effect until July 1 and before then could be cancelled. 

However, governments all over the nation are making desperate pleas for federal aid beyond the funds they received—Suffolk got $257 million—under the federal CARES Act of months ago. The U.S. Conference of Mayors, for example, last month issued a statement declaring: “American cities continue to face devastating budget shortfalls as a direct result of the pandemic and the COVID recession” and the “shortfalls threaten our ability to meet essential needs.” Many industries, too, are making urgent pleas, as are small businesses and people hurt financially by the pandemic.

Suffolk County government has plenty of competition.  

Also last month, the president of the Long Island Rail Road said without a $12 billion federal bailout the MTA would be forced to make draconian cuts—reducing LIRR service by half, eliminating branches and enacting substantial fare hikes.  

For Suffolk County government, it isn’t people not taking trains that is causing economic pain—much has to do with the sale tax issue. Mr. DiNapoli also just released the latest state figures on sales tax collections. For the most recent months tabulated, in June money received in Suffolk dropped 9.2 percent from last June, from $157.5 to $143 million, and in May the drop in Suffolk was 33.5 percent from last May.

We’ve long written in this column about the perils Suffolk County government was facing in depending, increasingly, on the sales tax—and quoting criticism in report after report by the Budget Review Office of the Suffolk Legislature of this ever-greater sales tax use.

Suffolk is among the counties in the state leading in high utilization of the sales tax, a tax that began here in 1969. Many Suffolk elected officials have preferred it because constituents are taxed slowly and don’t get the shock of one big property tax bill. But the problem with depending on the sales tax to run government is that it’s unreliable. In good economic times, sales tax collections are flush. With economic downturns, they suffer a corresponding decline. 

Now Suffolk County government is not just having a financial rainy day—it’s being hit with months of fiscal rain. Short of a federal umbrella, its financial condition is perilous.

Karl Grossman is a veteran investigative reporter and columnist, the winner of numerous awards for his work and a member of the L.I. Journalism Hall of Fame. He is a professor of journalism at SUNY/College at Old Westbury and the author of six books.