Consumers probably won't generate the sales tax fortune expected.
Wall Street's credit agencies won't like Erie County's latest use of reserves.
And the county must ease away from tobacco-settlement money.
County Comptroller Nancy A. Naples issued those cautions Thursday in her review of the budget that County Executive Joel A. Giambra has proposed for 2005.
"A recipe for disaster," she calls it in a report submitted to Giambra and the County Legislature.
"There's a little more to the story than she has suggested," responded Giambra's budget director, Joseph Passafiume, explaining in detail why he thinks that money will flow in as expected.
Regardless of who's right, Giambra, Naples and Passafiume hope that legislators adopt something other than the proposed budget they were given Nov. 4. Giambra's proposal would cut spending by about $140 million from this year's level; close libraries, parks and golf courses; and lay off an estimated 3,000 employees, including prosecutors, sheriff's deputies and probation officers.
In his proposal, Giambra "devastates" myriad county services -- a word used by his own department heads -- as a roundabout way to prod the County Legislature, and then the State Legislature, to let him raise the sales tax to 9.25 cents on the dollar, starting March 1.
That would generate the money needed to restore most functions, Giambra says. He is lobbying for the 10 votes required in the County Legislature, making regular calls even from Florida, where he is vacationing this week. His aides call the trip a much-needed respite for Giambra before he renews negotiations with lawmakers next week.
Each year, the comptroller weighs in on budget proposals. In recent years, she warned against the use of reserve money to meet recurring expenses.
Naples does so again for 2005.
"Wall Street will notice the use of reserves once again, and they will not like what they see," she said, noting that Passafiume pulled $28 million from reserves to meet next year's bills.
Passafiume, however, said $18 million of that is the reserve from 2003, and he must budget it two years later, after an audit ensures that it is an accurate number. An additional $10 million will help pay the unemployment costs of workers to be laid off, and is not a recurring expense, he says.
Heeding Naples cautions about reserves, the Democrats insisted during Thursday's meeting of the Legislature that Giambra's Public Works Department find a way to pay for its recent $400,000 purchase of road salt with something other than reserve money.
Over Republican objections, Democrats who control the Legislature said Giambra must find $400,000 in savings before closing out the 2004 budget, which Naples says is on target to overrun its general fund personnel accounts by $29 million.
Along with her cautions about reserves, Naples said the 2005 budget proposal would use $12 million in tobacco-settlement money to pay off old debts. The county each year is setting aside more money to repay more debt, she says, so it will be looking for cash when the tobacco money runs out.
Passafiume said that after the 2005 budget is in place, he will work with Naples to restructure existing loans. He predicts that this could save enough in 2005 so that the $12 million in tobacco money could again be available for long-term projects.
Naples also cautioned that it is "very optimistic" to assume that sales tax revenue would grow by nearly 5 percent next year -- not including the new penny. Sales tax revenue has fallen slightly in 2004 and could end the year $13 million behind projections.
Passafiume said 2004 has been an unusual year for sales taxes since Albany held back millions of dollars to correct for overpayments in previous years. He figures that the year will end with sales taxes $10 million short.
The budget director says that a stronger Canadian dollar could bring more shoppers into the United States and that with the sales tax on higher gas prices, "we are going to see more growth than usual in 2005."
Similarly, he predicts that higher interest rates will lead to better interest income for the county. Naples had said Passafiume arbitrarily increased her estimates by $2.2 million.
Naples and some county lawmakers say Passafiume might have underestimated the cost of laying people off when figuring in their unused leave and unemployment wages. But Passafiume said that many employees targeted for layoff will opt to retire and receive health care benefits for life -- an incentive offered under current contracts.
"If you are 55 or older, you are not going to take unemployment if you can get health insurance for life," Passafiume said.
"Never has there been a more threatening or challenging tentative budget," Naples told Giambra and legislators in her review. "Extremely important decisions must be made in a very short time frame. Again, I urge you to work together to create a fiscally sound, balanced budget."