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GIAMBRA'S POINT OF NO RETURN <br> FACING A $130 MILLION BUDGET GAP AND LACKING STATE APPROVAL TO INCREASE SALES TAX, COUNTY EXECUTIVE PREPARES TO CUT SERVICES DRASTICALLY AND ELIMINATE ENTIRE AGENCIES

The Erie County executive has drawn his line in the sand: He tells friend and foe that this is no game of chicken. Since he's barred from raising the sales tax to close a projected $130 million budget gap next year, county government will shrink to a wisp of its former self.

Joel A. Giambra says he must jettison services -- indeed, entire agencies -- at a huge cost to culture, human needs and public safety. Though Erie County taxpayers pay some of the nation's highest taxes, the county faces its worst financial crisis in a generation after shaking its piggy bank far too often.

So, what should residents expect as officials head toward an ugly confrontation and county government heads toward a possible crash? In the short term, expect more of the same:

Giambra will toss new victims into the stew of agencies that evoke gasps when denied the money they need. Next on the chopping block: The Commission on the Status of Women, the Veterans' Services Agency and any other unit not mandated by Albany or Washington.

Giambra will direct any public outcry at the County Legislature and at state lawmakers from the region. He needs both to approve the penny increase in the sales tax that he says would save county government. If they don't go along, he will blame them for the problems.

A counterstrike will come from Assemblyman Sam Hoyt, D-Buffalo, a Giambra rival. He wants to convene hearings by the Assembly Ways and Means Committee into Erie County's finances, creating a soapbox for complaints about Giambra's budget miscues.

Town and village leaders will try to put Giambra in a room with state legislators to voice their differences.

County Legislature Democrats will quietly try to strike a compromise. They meet today with a key state lawmaker, Assembly Majority Leader Paul A. Tokasz, D-Cheektowaga, to discuss small increases in the sales and property taxes, plus $20 million in cuts.

All of this occurs as county officials try to agree on a 2005 budget that must be in place by Pearl Harbor Day.

"We are preparing what's commonly referred to now as the scorched-earth budget," Giambra said this week, adding that he has assured Legislature Chairman George A. Holt Jr., D-Buffalo, that he's not bluffing.

"I'm quite comfortable proposing a budget that cuts all nonmandated functions," Giambra said, angry that few county lawmakers have offered solutions.

Democrats who control the County Legislature and often spar with Giambra over the scant financial information he provides say they want to see the budget he will propose by Nov. 10 before deciding how to deal with it.

But they have privately discussed blending a smaller sales tax increase with cuts in spending, the use of reserve dollars if available and a higher property tax, an option Giambra so far rejects.

"It's going to be the Legislature that's going to have to seal the compromise," said Finance and Management Committee Chairman Albert DeBenedetti, D-Buffalo, "because Joel has put himself in a position where it's going to be hard for him to compromise."

DeBenedetti said the $130 million deficit forecast for 2005 might be closed this way: reducing county spending by $20 million, including through layoffs, and raising the property tax 20 percent, which would increase the bill on a $100,000 home from $460 to $552 a year.

Then the county could raise the sales tax by three-quarters of a penny, hiking it to 9 cents on the dollar, not 9.25 cents as Giambra wants.

Since political reality seems to dictate that the new sales tax income must be shared with other governments, the county would share proceeds from a quarter of a cent and keep proceeds from the remaining half penny.

Then there's a search for $17 million in reserves, which DeBenedetti says can be found. If not, the county can find $14 million next year by refinancing existing debt -- an idea from Comptroller Nancy A. Naples.

Like other counties around New York, Erie County's recent ailments can be traced to Medicaid, which will cost local taxpayers $200 million next year. But Erie County has reached its predicament through an unusual route -- from riches to rags.

Giambra was swept into office in 2000 after promising to return millions of dollars to taxpayers, and he made good on his promise. He and county lawmakers cut property taxes in 2000 and 2001 and held them flat ever since. Erie became the only county in New York to go so long without a tax increase.

To meet everyday expenses, budget officials drained millions of dollars in once-ample reserves left by former County Executive Dennis T. Gorski.

Meanwhile, this region did not shake off a recession like other regions of the country, so Medicaid rolls swelled. And the fizzling stock market meant New York's public employee pension fund would bill local governments millions more to cover losses.

But the county isn't facing a 2005 deficit because overall expenses will be $130 million more next year. It's facing a deficit because Erie County can no longer tap reserves without further risking its credit rating.

The county executive says higher sales taxes are easier on the economy than higher property taxes. He threatens to withhold county money from special interests as a way to persuade them to rally around his cause.

First up were the public employee unions, told they might suffer layoffs and no raises next year. But if they exerted their formidable pressure in Albany, he told them, a new sales tax might be won, saving the day.

Giambra then drafted human service agencies and cultural groups into his campaign by threatening to pull back $11 million in aid next year. He incited library patrons by saying he will close libraries, and he roused town and village officials by saying he will curtail sheriff's patrols in towns without their own police and reconsider whether to use town crews to plow county roads.

At a meeting Saturday, town and village leaders told Giambra they were angry that he would throw their budgets into doubt to solve the county's problems. But they agreed to ask Tokasz and State Sen. Dale Volker, R-Depew, to explain their resistance to a higher sales tax when the Association of Erie County Governments meets again.

Tuesday, Giambra went back to Local 815, Civil Service Employees Association, the county's largest union, telling its leaders he might idle 1,000 workers next year unless something is done. He asked the CSEA to put its political muscle in Albany to work.

"We told him we will," said the local's president, Michael Bogulski, who represents some 4,400 county workers.

Bogulski, though, has a caveat.

"Before we make a full-fledged effort, there has got to be a home-rule message from the Erie County Legislature," Bogulski said.

e-mail: mspina@buffnews.com

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