It’s interesting to note which political events attract television news coverage.
           When Monroe County Executive Jack
Doyle held a press conference last August to announce sweeping spending cuts in
the face of a massive budget deficit, the carefully coifed, heavily make-upped
TV news reporters swarmed the Public Safety Building on Fitzhugh Street. That
evening, Doyle’s pledge to cut 700 positions in county government, slash
spending on health and social services and the arts, and close county parks on
weekdays, among other austerity measures, was beamed into homes throughout the
area, with attendant footage of outraged critics expressing their shock and
anger.
           Three months later, when the county
legislature met and passed a bipartisan budget that raised taxes and restored
some funding, over Doyle’s veto, the news crews were on hand again to document
the tense vote and the protests that preceded it.
           But when the lej met this June to
debate an equally momentous budget decision, there wasn’t a cameraman in the
chamber. And because county lawmakers made the decision they did that night,
you probably won’t see Doyle or the two candidates vying for his job this year
— Republican County Clerk Maggie Brooks and Democratic Mayor Bill Johnson —
discussing the county’s budget crisis in any substantive detail. Compared to
last year, this fall’s formal budget deliberations in the lej should be a
snoozer.
           The county’s budget drama has been
deflated, but the deep problems that caused it have not gone away. And the pain
from past cuts is still being felt. If anything, say Democratic county
legislators, the administration’s most recent action, supported by the Republican
majority in the lej, will only inflate our budget woes in the future.
It all
happened rather fast.
           On June 3, the news broke in the Democrat and Chronicle: Doyle plans to
use $36 million of the county’s share of national tobacco settlement funds to
close a big budget deficit from last year and an equally large gap anticipated
this year.
           That money is part of $142 million
the lej set aside in 2000 to pay off debt on capital projects and build new
ones. (See “Up in smoke,” below, for more detail on this deal). Fifteen million
dollars would come from funds earmarked for construction of a Juvenile Justice
Center. The other $21 million in tobacco money represents cash already spent on
the county jail expansion and facilities for Monroe Community College. Doyle
would have to borrow $21 million, by selling bonds, to cover the reallocation
of those funds from capital projects to the operating budget.
           Before any of this could happen, the
law the county passed in 2000 that stipulates how tobacco money can be used had
to be amended by the legislature.
           The matter went before the Ways
& Means Committee on June 4, and all hell promptly broke loose. (It’s a
shame the local networks all passed on this meeting — it would have made
great television.)
           Democrats voiced strong objections
to the plan, questioning its legality and necessity, complaining that they had
too little time to analyze its details, and calling the proposal to create more
bond debt an irresponsible scheme that will burden future generations. Exchanges
between Democratic County Legislator Kevin Murray and Republican Committee
Chairman Jack Driscoll were especially heated. Personal objections were lodged
and apologies demanded. Democratic Minority Leader Stephanie Aldersley remarked
that it was the most contentious committee meeting she’d ever attended.
           When the dust settled, the measure
passed the committee on a party-line vote.
           On June 10, just a week after the
plan was made public, the full legislature met and debated the issue anew.
Democrats raised the same objections, but once again, after a prolonged,
contentious debate (none of which made the airwaves), the measure passed by a
party-line vote.
Democrat
Murray’s doubts about the wisdom of the tobacco plan are compounded by
concern over how it’s been allowed to go forward so quickly, with so little
public attention or debate, and in the absence of concrete information
regarding the county’s actual fiscal situation.
           “The reality of this thing is it is
the most important step we’ve taken since the day we passed the budget [last
fall],” he says.
           That budget followed “a
two-and-a-half-month period with lots of analysis and everything else,” Murray
continues. “We just did a major overhaul of that budget… with very little
fanfare. The idea is: OK, we’ll just continue on as if this was a minor
modification of erroneous assessments or something. It wasn’t.”
           The Democrats fear that Doyle’s
tobacco fund reallocation will effectively whitewash the county’s budget crisis
— postponing action on, or even discussion of, real solutions to the crisis.
At the Ways & Means Committee meeting, they expressed shock that the county
was already so deep in the hole.
           “We passed the budget only six
months ago that supposedly was balanced,” Murray says. “Now, we’re told, ‘Nope,
it’s not even close to being balanced.'”
           Democrats have long complained that
the county administration fails to provide them with enough financial data to
make informed budgetary decisions. Those complaints reached a fever pitch
during the Ways & Means Committee meeting earlier this month, as Murray
grilled finance department officials for hard figures to justify the tobacco
money reallocation.
           “I had to ask about 10 times for a
simple question,” Murray says, “which was, ‘What is the county administration’s
projection of the deficit for 2002?’ They gave me ranges and ‘we’re working
that out.'”
           In fact, now over six months into
2003, the administration still hasn’t completed an audit of last year’s
finances. At the Ways & Means meeting, administrators said new accounting
rules, imposed industry-wide after recent high-profile corporate accounting
scandals, are to blame for the delay. Their best estimates place 2002’s gap
somewhere in the neighborhood of $18 million.
           This year’s projected $18 million
deficit (give or take a few million) is also a guess. Future projections are,
by nature, uncertain. But Murray and his fellow Dems are frustrated by what
they perceive to be mixed financial signals coming from the county
administration.
           For example, the 2003 budget, passed
last November, counts on $30 million in savings on social service costs
realized by the reorganization of several county departments. Doyle recently
announced that $18 million in savings has already materialized as a result of that
reorganization, which his administration initiated.
           “We get a report that says we’ve
made $18 million in savings to social services and everything is going great,”
Murray says. “Then we get a recommendation: ‘Oh, by the way, we’re running big
deficits and we need to use tobacco money…’ That is not the way to run an
operation.”
           “Unless we come to grips with what
numbers actually are true of the past, how can we even discuss what is going to
happen in the future?” Murray says.
           Republican Majority Leader Bill
Smith has no sympathy for the Dems’ complaints. “We all get the same reports,
the quarterly updates, the various benchmark memos that come out, and we all
have access to the finance director to ask questions that we have,” he says.
           “I just don’t see what the problem
is,” he continues, then adds, “I guess the problem is that for the last year
and a half or so, none of the answers to questions are terribly happy ones, but
the information’s there.”
The options
for balancing the budget without using tobacco funds are not happy, either
— raise taxes or cut spending. And in this highly political year, those
topics are poisonous. The mainstream media has been content to largely ignore
the issue of tobacco money reallocation, the financial effects of which will be
slow to materialize. But public discussion of tax increases or severe spending
cuts all but guarantees significant media attention — nearly all of it
inevitably negative.
           “Clearly, decisions into the future
are going to be difficult, given what we’re facing now,” says Murray, “because
you’re dealing with both revenue and expenditures. No one wants to raise any
revenues [taxes] and no one wants to cut any expenditures.”
           Majority Leader Smith disputes this.
He says he’s perfectly willing, even eager, to cut spending — and his actions
last year prove this. Smith and most other members of the Republican majority
in the lej supported Doyle’s deep cuts to the county’s social service contracts
with outside agencies right up to the final budget vote.
           “We tried to control spending in the
last budget, and the Democrats defeated that and put a tax increase in its
place,” Smith says. “The very people who are now saying we have to make an
effort [to reduce spending] stymied it the last time around.”
           Smith is already sharpening his ax
in preparation for this year’s budget, despite the prospect that Doyle’s
tobacco fund reallocation will make cuts unnecessary.
           Using the tobacco money “takes care
of the deficit that exists,” Smith says, “but we have to look at next year’s
budget and — as the old saying goes — prepare for the worst and hope for
the best.”
           “Maybe the economy will turn around
and the sales tax revenues will go back up,” he continues, “but we have to be
prepared for another austerity budget. I’m going to work that much harder this
year to get cuts. The taxes that were raised last year were raised to fund
programs that 99 percent of the people who live in Monroe County have never
even heard of, much less have ever relied upon. I’m going to look at exactly
those programs again.”
           As opposed to “those services that
most people use most of the time, like the library and the parks, that kind of
thing,” Smith says, he’s keen to cut “these marginal things,” such as health
and social service programs that the county is not mandated to provide. Though
they’re “worthwhile programs,” says Smith, who represents much of Pittsford and
part of East Rochester, “you have to make decisions and assess just who and how
many people rely upon some of these marginal programs.”
           Based on Smith and his fellow
Republicans’ past budgetary decisions, programs offered by the Urban League of
Rochester would be considered “marginal.” Even with the restorations passed in
last year’s bipartisan budget, the Urban League lost about $250,000 in county
funding.
           Just who and how many people relied
on the “marginal programs” the Urban League is no longer able to provide?
League President William Clark mentions women on welfare and youth in the
juvenile justice system. Programs the Urban League worked on to help women on
public assistance enter the workforce and help juvenile offenders return to
society were among those cut last year.
           In 2002, Clark says 34 young adults
took part in the Juvenile Delinquency Diversion Program, in which judges
mandated supervision as an alternative to incarceration. Of those 34, 30 have
had no further involvement with the court system, Clark says. The
$60,000-a-year program was eliminated last year. In 2001, the Urban League’s
Kiosk program found jobs for 92 of the 108 social service recipients involved
in it. In the last nine months before Kiosk was eliminated in October 2002,
Clark says 36 of 77 participants found full-time, unsubsidized employment.
           “Just about every service that the
county provided that was not mandated by the state was eliminated,” says Clark.
Cuts to preventative programs are “short-term solutions to long-term problems,”
he says. “If you don’t have preventive services, you’re gonna end up filling up
this expanded jail, because there’s no place for our young people, and people
who are looking for gainful employment, to turn.”
           “If using the tobacco money will
ease the amount of additional reductions that this community would receive, I’m
all in favor of it,” Clark continues. “But at the same point in time, we need
to be looking down the road at how we’re gonna begin to fix this problem.”
That’s exactly
what a
very different public figure has been advocating: Tom Richards, former
chairman, president, and CEO of RGS Energy Group, the parent company of
Rochester Gas & Electric.
           Richards was nominated by Doyle to
serve on the Blue Ribbon Commission formed during last year’s budget crisis to
analyze the county’s finances and make recommendations for balancing the budget
in future years. He sees the problem with Doyle’s tobacco plan as being
two-fold.
           “One is that, unless the deficit
goes away, you’re creating a cliff for yourself,” he says. “It’s only going to
be worse when you have to deal with it next year. And also, when you borrow money
to pay for operating expenses, in the long run, that’s a pretty expensive way
to do business.”
           In a press release announcing his
plan, Doyle wrote that today’s “very favorable interest rates” make borrowing
money through bonding an attractive option. But the total cost in future
interest is difficult to discern, in part because it’s as yet uncertain how
much bonding will be necessary to cover the 2002 and 2003 deficits.
           Spokesmen for Doyle did not respond
to requests from City for a figure.
Republican Majority Leader Smith says he’s seen a figure, but cannot recall it
or provide it.
           “It’s possible that, once you’re in
the jam, using the tobacco money may have been the least expensive option,”
Richards says. “But the real thing to focus on is that we cannot continue to
fund deficits by borrowing money. These budgets are supposed to be balanced,
and they’re not. I know it’s difficult. It’s a hard thing to do. But this is no
long-term course of action, clearly.”
           Asked how he would have voted on the
tobacco reallocation issue, Richards says he would first ask for up-to-date
information on last year’s finances and this year’s projections. But he would
also demand “a plan for how we’re going to do this, so we don’t have to keep
borrowing money.”
           Republicans have expressed hope that
a turnaround in the national economy and efficiencies realized by efforts such
as the reorganization of county social service departments will help balance
the books in future years. While Richards agrees that those developments would
help, he cautions that both factors combined would still do little to keep the
county out of the red.
           For example, he says that unlike the
state and federal governments, which rely heavily on income tax, the county’s
principal sources of revenue — sales and property taxes — would not
increase significantly enough in a rebounding economy to make much a difference
in its finances. He also points out that Rochester’s ailing local economy “has
been affected by some long-term structural changes” — such as the declining
fortunes of the area’s Big Three employers (Xerox, Kodak, and Bausch &
Lomb). “We were having difficulty as an economy before the recession, so we
have some harder work to do here in order to bring back our own economic
growth,” he says.
           Richards is currently serving as
chair of Greater Rochester Enterprise, a public-private partnership dedicated
to fostering economic growth. Earlier this year, his name was widely circulated
as a possible candidate for county executive. Though he ultimately decided
against entering politics, he’s keenly aware of the political pitfalls the
county’s current fiscal situation presents for candidates.
           “This is a year when it’s pretty
important [county exec candidates] be specific, because it’s pretty clear that
it’s a problem we’re not going to be able to avoid,” he says of the budget
crisis. “Even if it can be put off beyond the election by borrowing and doing
other things, it’ll be there with a vengeance right after that.”
           “I think the question to ask the
candidates for county executive, whoever they are, is, ‘Well, how are you going
to balance the budget? What are you going to do?'” Richards continues. “You can
tell us what you’re not going to do, but what are you going to do? And I don’t
mean be efficient and hold a meeting. I mean, what are you going to do?“
           City
tried to ask that question of Johnson and Brooks after the tobacco plan was
announced. Do they think it’s a good idea? What would they do?
           Neither candidate responded.
           Privately, several Dems expressed
hope that Johnson would comment on the tobacco plan, and frustration that, thus
far, he has not. His campaign has, however, posted City‘s first article about the plan (“Borrowing time,” June 4) on
Johnson’s campaign website — a site that, naturally, only contains news clips
that contain real or implied criticism of Brooks’ and/or Doyle’s actions.
           Interestingly, two Republican county
legislators whose support for the tobacco plan was particularly vocal in the
lej chambers — Jack Driscoll and Sean Hanna — also failed to respond to City‘s requests for comment. Driscoll is
challenging Republican Henrietta Town Supervisor Jim Breese this fall for the
town super post, and Hanna is rumored to be considering a run for the top spot
in his town, Webster.
           Murray and his fellow Dems aren’t
totally opposed to Doyle’s tobacco plan and, again, they realize the other
options are unpalatable, politically and otherwise. But, like Richards, they
also want the administration to develop a plan to balance future budgets.
           Toward that end, the Dems submitted
several referrals to the administration last February, requesting that it
implement the recommendations of the Blue Ribbon Commission it created. For
example, Murray submitted a referral on February 10 requesting that the county
exec provide a comprehensive, multi-year revenue and expenditure plan with his
budget proposal.
           To date, the administration has not
responded.
Up
in smoke
In
2000, fearing that cigarette companies could go bankrupt before all the tobacco
settlement money was realized, Monroe County sold its rights to $761 million in
future settlement payments for $142 million in cash. That money was set aside
to pay for past and future county projects.
           County Executive Jack Doyle now
wants to use $36 million of that money to cover deficits in the 2002 and 2003
operating budgets. Over half of that money, $21 million, has already been spent
on expanding the county jail and constructing new facilities for Monroe
Community College. Doyle would borrow $21 million, by selling bonds, to cover
those funds in the capital improvement project budget.
           At the county legislature’s June 4
Ways & Means Committee meeting, Democrats expressed suspicion of the
legality of this fiscal maneuver. The name “Enron” came up a few times,
eliciting grumbles of protest from Republicans across the aisle, who are
comfortable with the plan and feel that’s an unfair comparison.
           Is the plan legal? The county’s
finance department believes it is. That belief is based on the legal opinion of
the county’s bond counsel, which in turn has noted the precedence set in Nassau
County.
           Because the tobacco settlement money
is tax-exempt, counties had been limited in the ways they could apply those
funds without paying a hefty tax penalty. But Nassau County had recently used
some of its tobacco money to help close a huge deficit in its operating budget,
and given that county’s financial distress, the Internal Revenue Service had
allowed the transfer to happen without imposing a penalty.
           During the Ways & Means meeting,
administrators revealed that they’ve been watching the situation developing
downstate since February, with an eye toward whether a similar maneuver would
be allowed in Monroe County.
           (In theory, using tobacco funds to
cover operating deficits or debt on projects with for-profit elements was
always legal, but the tax penalty resulting from such use would make it unwise.
Finance officials also said during the meeting that they previously considered
using tobacco funds to pay down the debt on Frontier Field. But since Frontier
is home to for-profit sports franchises, they doubted the IRS would let them do
that without a penalty.)
           Thus far, Monroe is apparently the
only other county in the state to propose using its tobacco funds in this
manner. But it most likely won’t be alone for long.
           Robert Gregory, Executive Director
of the New York State Association of Counties, says other counties are becoming
increasingly aware of the option, and given their common fiscal stress, will
almost certainly consider it.
           “I don’t have a list,” Gregory says,
“but I certainly can tell you that counties across the state have difficult
financial budgets, and many were put in a position where they had to raise
property taxes significantly last year. Given the fact the IRS’ review [of
Nassau’s situation] cleared the way to use some of these funds in that way,
counties may look at that as a method of dealing with this.”
           Former State Senator Rick Dollinger,
a lawyer who’s currently advising Mayor Bill Johnson’s campaign for county
exec, says he’s been looking into the legality of Doyle’s plan. “I’m not
100-percent convinced the county can do it,” he says, “but I have not [yet]
found a smoking gun.”
           No pun intended.
—
Chris Busby
This article appears in Jun 18-24, 2003.
