Nassau County Goes Belly Up

The lead story in today’s New York Times, “Nassau County has its Finances Seized by State,” may be the first of a series of stories of government units in such deep financial distress that they go through, either voluntarily or involuntarily, the equivalent of an individual declaring bankruptcy.

The article describes the takeover of Nassau County by the NIFA (Nassau Interim Finance Authority) after a 6-0 vote declaring the county’s budget was out of balance by almost six times more than the statutory authority they required to act. The NIFA was originally created in 2000 after a similar problem with Nassau County’s finances requiring a $100 million state bailout.

The County Executive, a Republican, Edward Mangano, protested the takeover declaring that everything was fine. But the article makes clear that it was far from that — despite the County’s intake of $1 billion in sales taxes and $800 million in property taxes. The government refused to raise taxes or cut services (Republicans in Washington, listen up!) and relied on one-shot revenue enhancements instead. And the Board observed that even by the County’s liberal accounting standards, it had the power to act.

The Board will remain in control until the County rewrites its budget, mandated by February 15th. But one can’t help but wonder if this is the first in a series of events across the nation of local, county and state units going belly up.