Erie County's $41 million scare has been quelled, largely through semantics.
The federal government will not expect Erie County to return the bounty it received under an economic stimulus category last year.
Erie County collected $41 million under a stimulus program that helps counties pay their Medicaid bills. As it turned out, County Executive Chris Collins needed none of it to balance the 2009 budget.
So he's free to spend the money as he wishes paving roads, fixing bridges and putting people to work. He has chosen to bank as much as he can to buff up the balance sheet and stabilize the county's finances for whatever lies ahead.
He recently proposed placing about $28 million into two new reserve funds, one to pay off debt incurred for Erie County Medical Center, the other to soften the need for some future tax hike.
That's when alarms rang at a federal agency monitoring the money, the Centers for Medicare and Medicaid Services under the Department of Health and Human Services.
The federal stimulus money distributed under the American Recovery and Reinvestment Act may not go into reserve or rainy day funds. Warning letters soon arrived in the Rath County Office Building with the underlying threat that the federal government could take back the millions.
Collins and Budget Director Gregory G. Gach quickly abandoned plans to set up the reserve accounts. They assured the federal government they would designate the $28 million as "unreserved" fund balance. It was a change in terminology but not substance.
With Legislature consent, Collins can spend the money on an array of needs, like paying off debt incurred for the Medical Center, or softening the need for some future tax hike.
Gach weeks ago thought the arrangement would satisfy the federal government. This week, the federal agency signed off on the solution in a letter that said, "Thank you for working with us to resolve this issue."
Gach agreed the money can still be used for ECMC's debt or to keep the property tax rate stable.
"That's a decision for the budget process, and for whatever the county executive and the Legislature want to do," he said.
Sen. Charles E. Schumer, D-N.Y., said he helped broker the outcome. Schumer had championed the recovery act provision that helps those counties that shoulder a piece of their Medicaid programs -- as all New York counties do. Schumer had said county governments should not have to "raise property taxes" or "lay off vital workers" in the historic recession. He did not expect that the Medicaid-related dollars, which still flow from Washington, would have to go toward new programs that create jobs.
"For the federal government to take back $40 million from the county when there are difficult times on the horizon would have been devastating and could have very well led to higher property taxes in the future," Schumer said in a prepared statement.
Rep. Louise M. Slaughter, D-Fairport, had alerted the federal Department of Health and Human Services to Collins' decision to bank much of his stimulus money. She did so after Collins boasted of an almost $44 million surplus for 2009 -- $41 million of which could be traced to stimulus aid.
Slaughter, chairwoman of the House Rules Committee, voted in favor of the $787 billion recovery package when it passed in a partisan vote in February 2009. With the news that Erie County was in the clear, Slaughter wrote the Republican Collins a pointed letter.
"The intent of ARRA funding is to put people to work now and to support job seekers as they look to secure employment, not to pad the bank accounts of local governments," she wrote.
She reminded Collins that even with the money, he cut day care subsidies to working-poor families, closed county-run health clinics that serve Buffalo residents and refused to pay out all the cultural aid the County Legislature granted for 2010.
"What the county lacks is not reserves but rather sustained economic growth. The City of Buffalo is the third-most-impoverished city in the nation, and earlier this year the local jobless rate hit its highest levels since the mid-1980s, underscoring the need to use this surplus to create jobs now," Slaughter wrote.
A Slaughter aide said copies of the letter went to Health and Human Services Secretary Kathleen Sebelius.
Gach and Collins say their goal is to hold down county property taxes. Erie County's tax rate of $5.03 for every $1,000 of assessed value -- before certain charges that vary by town -- is among the state's lowest for a county government. Meanwhile, Erie charges upstate New York's highest sales tax, 8.75 percent.
Some County Legislature Democrats agree with Slaughter. Democratic Leader Maria R. Whyte of Buffalo says Collins should be releasing more of the millions into the local economy. She's looking for a way to force his hand when the Legislature takes up a measure today to shuffle money between numerous accounts before closing the books on 2009.