Although the county treasurer’s investment strategy was “an accident waiting to happen,” Baldassare points to a two-decade trend of voter initiatives to simultaneously minimize tax increases and control the allocation of state tax funds . . .
Now one might presume that the above excerpt is referring to today’s news courtesy of the New York Times that the State of New York has “seized control of Nassau County’s finances, saying the wealthy and heavily taxed county had nonetheless failed to balance its $2.6 billion budget despite months of increasingly ominous warnings.”
Sadly, it is not the case as it is an excerpt from the 1998 book When Government Fails by Mark Baldassare, in which he reviews the bankruptcy proceedings for Orange County in 1994.
Orange County has the dubious distinction of being the largest US county to ever seek bankruptcy protection, which in conjunction with other factors was the result of questionable investment strategies by its long time treasurer Robert Citron that ultimately left the county with inadequate capital to allow for any raise in interest rates for its trading positions. Citron ended up pleading guilty to six felony charges.
No such malfeasance was at play in the Nassau situation, and it should also be noted that the County has not at this point in time sought bankruptcy protection. However, and similar to Citron’s investing acumen (or lack thereof), Nassau’s County Executive Edward Mangano has been called out for making a series of blunders such as his decision to eliminate a tax on home heating fuel, that worsened an already precarious financial position.
In all fairness to Mangano, he did inherit an already listing ship in which wasteful spending and a broken assessment system that overtaxed residents, and then piled up a massive $1.13 billion taxpayer debt when refund payments were delayed, put him behind the proverbial eight ball out of the gate when he assumed office on January 1st, 2010.
The fact that the county has a history of financial mismanagement, the most recent meltdown prior to this one being in 1999, which required a $100 million bailout by the state, speaks to a much larger question . . . are governments good and reliable stewards of the citizens’ money?
Besides having a negative impact on the services it provides to taxpayers, the possibility of wage freezes and outright defaults on pension fund contributions looms large for many states and municipalities.
So what’s happening to government in America? Are the finances of governments in reality nothing more than houses of cards vulnerable to being blown over by a light to moderate breeze of unfavorable conditions? These problems did not just happen over night as municipalities like Detroit will likely seek bankruptcy protection in 2011 and States such as Illinois, whose Governor admitted that its reputation as a deadbeat state is warranted, demonstrate that the problem is far reaching, spanning years if not decades. Who is minding the store and the interests of the public?
In all fairness, it should be noted that financial meltdowns are not the sole domain of the public sector as a recent inquiry into the 2008 financial crisis found that it was an “avoidable disaster” fueled largely by corporate mismanagement and heedless Wall Street risk-taking. The fact that government regulators failed to provide the necessary checks and balances was also highlighted . . . can you say moderate breeze?
Whether an isolated act by a single culprit or a conspiracy of incompetence and greed both within and external to government itself something has to give, otherwise and in line with Arianna Huffington’s dire prediction, America could over the next 50 years (maybe sooner) become a third-world country. After all, wasn’t the Roman Empire at one time the greatest in the world?