Debrief: Schnirman, on Nassau’s instant ‘revenue crisis’

Income outcome: The pandemic is putting a serious dent in Nassau County's coffers, according to Comptroller Jack Schnirman, who calculates hundreds of millions of dollars in lost sales tax revenues.

Released Monday, an executive summary of Nassau County’s sales tax revenues (historically good for 40 percent of total county revenues, Nassau’s single-largest income source) shows a predictable and potentially devastating decline in the Age of Coronavirus: as much as $360 million (28 percent) off county projections for 2020, and maybe $1 billion short for 2020-21, if a second COVID-19 wave forces further shutdowns. Nassau had a running start on another year of handsome sales tax gains, boosted by a new statewide Internet sales tax that kicked in last summer; now Comptroller Jack Schnirman, chief fiscal watchdog for the county of 1.3 million residents and its roughly $3 billion annual budget, laments some “truly troubling” projections. The only solution, according to the public-policy pro, is for governments on every level to ditch politics and help Nassau overcome what is, ultimately, “a revenue problem, not an expense challenge.”

Best guess ever: It’s critical to understand that projections are really just educated guesses. They’re based on the best information available. Our office has made modernization – using better technology in government – a big overall priority, so rather than just do this as a one-time projection, we developed this modeling tool to be able to make better projections on sales taxes for years to come.

Crunch: [The model] breaks down sales tax into dozens of component parts, then breaks those down according to the phased reopening plan and what’s happening in each sector and subsector. It incorporates a variety of inputs and variables. Not only is it more sophisticated than what we’ve had before, but we can rerun the scenario and update it and keep changing the inputs as we go, and better information becomes available.

Test drive: For instance, it will say car dealers are deemed essential or nonessential, they’re not open this month and partially open this month and then fully reopened, and it will model all that out, so you can estimate sales tax from that sector through a range of different impact scenarios. We can really focus and drill down into what matters.

Ouch: When your projections are off by 28 percent or the hundreds of millions of dollars, you’re talking about huge numbers. It’s an unprecedented gut punch to our economy and it creates an immediate revenue crisis for Nassau County government.

Did you say “billion?” We ran that hypothetical second-wave shutdown just to model it out for discussion and understanding purposes – what it would look like if that were to happen. We’re in no way predicting it will happen. Let’s hope it doesn’t. But it’s helpful to look at as a hypothetical.

The long haul: The biggest impact (of a hypothetical second-wave shutdown) is that it pushes out the timing of recovery even longer. The timing then becomes even scarier than the magnification of the numbers. It’s just a reminder for all of us to do everything we can within our power to make sure that scenario doesn’t come to pass.

Hot streak snapped: Before COVID, the county had had several years of strong sales tax growth. And in fact, the first part of 2020 was off to a strong start as well – the January and February numbers were strong, which is a really good indicator, before things began to shut down in the middle of March.

New Internet sales tax to the rescue: It’s definitely helpful, and it’s one of the reasons the (2020) numbers aren’t worse than they are. And yet, these projections we’re putting out now are still troubling, even with the enhanced Internet sales tax.

Domino effect: Locally, a revenue crisis that effects Nassau County government like this forces the consideration of a variety of difficult decisions that folks don’t want to contemplate. We put out about $300 million into the economy each month – that includes county payroll, money we pay to vendors, money we give to nonprofits. If we were to cut that back, that would obviously hurt the economy. We have to be very cautious before we decide exactly what we want to dial back.

Only hope: We absolutely need the federal government to step up and step in here. This is a revenue problem due to lost economic activity, rather than an expense challenge.

No politics, not now: All those who want to debate whether you should help local government or not help them based on politics … look, this is a nuts-and-bolts argument. This has nothing to do with whether you agree with the political priorities of a local government. There is no local government anywhere that has a rainy-day fund or the resources or the bandwidth to handle this kind of gut punch, not on their own.

Interview by Gregory Zeller