Goshen, NY September 28, 2012
Chairman Pillmeier, Majority Leader Bonacic, Minority Leader Berkman, Leader Amo, members of the Legislature, fellow citizens, and taxpayers of Orange County:
As required by the Orange County Charter, it is my duty and obligation to present the budget for the coming fiscal year to you on or before the first of October each year.
This 2013 budget is the 11th budget I have had the privilege to present to the Orange County Legislature.
I am exceptionally proud of our track record of presenting a balanced, common sense budget – on time – each of those 11 years. Over that time, we have presented more than $6 billion in budgets - budgets that this legislature has had a track record of passing overwhelmingly.
Accomplishing that goal – balanced and on-time – is no small feat. A great deal goes into our budget planning each year. The process begins in May. In August, each and every County office, department, and division presents their budget and makes their case to me, my staff, Budget Director Neil Blair, and his budget planning team.
In recent years, especially this year, most department heads have left that meeting with direction to sharpen their pencils, tighten their belts, and think creatively so that they can do more with less once again.
This, however, was not always the case. In preparing for this year’s budget address, my staff and I took a look back at budget addresses from previous years.
There was a time – before we felt the brunt of a global financial crisis that rocked economies around the world, including right here in Orange County - when I stood before you and spoke of spending priorities, hiring plans, and a comfortable surplus in the County’s general fund.
Tragically, this is no longer the case.
On-going financial hardship, the likes of which had not been seen since the Great Depression, skyrocketing fuel costs, and mandates imposed on our County by the State and Federal governments have left each of us feeling the effects where it hurts most – in our wallets, in our pocketbooks - forcing us to make difficult choices.
Each of the past five years, I felt that year’s budget was one of the most challenging ever – even harder to balance than the year before. Each year, we looked for new ways to trim expenses. We implemented hiring freezes, eliminated travel, renegotiated purchasing contracts, reduced overtime, and negotiated new contracts with some of our collective bargaining units so that we could stretch our dollars just a little bit further.
Eliminating the paid lunch hour alone resulted in a savings of more than $9 million over the past nine years.
Everyone has tried new and innovative ways to serve the people. Following last summer’s storms, County Clerk Donna Benson began a project of digitizing records in order to save space and preserve county records. More than $50,000 a year in savings are projected as a result of this initiative.
And when we thought the financial picture couldn’t get any worse, the mandates any more stringent, the demands any greater – when we thought there might actually be light at the end of the tunnel – we were wrong.
If this were a movie, that light would be a train – headed our way.
Our County has not yet recovered from last year’s storms, fuel costs continue to rise, we continue to get pounded by mandates - $22.5 million more of County taxation this year – and the economic outlook continues to look bleak.
And we’re certainly not the only ones to think this or feel the effects of a sluggish economy.
This week, Caterpillar, the world’s largest maker of earth-moving equipment, announced that they expect fairly anemic and modest growth through 2015. Caterpillar is considered a key barometer for measuring the health of the manufacturing, mining, and construction industries.
The company’s announcement and adjustment of their earnings forecast is a sure sign that much remains to be done to heal the economy.
Other indicator companies, including railroad operator Norfolk Southern, as well as FedEx and UPS have also blamed slower worldwide demand on their weaker financial results and forecasts.
If people don’t have money to spend, companies aren’t building, they’re not manufacturing, and they’re not shipping.
It’s a vicious, inter-related cycle.
Fortunately, this administration’s commitment to financial prudence and fiscal responsibility has served us well during these difficult times.
While counties around the state and the nation have been teetering on the brink of bankruptcy, or worse, falling right off that cliff, we in Orange County have been able to hold our own.
We received Triple A bond rating from Moody’s Investor Services for the third year in a row. Moody’s rates 48 counties in New York and 944 nationally. We are extremely proud to be one of only two counties in all of New York to hold this distinction and one of just 87 nationally.
Our experienced Finance team, under the leadership of Commissioner Joel Kleiman, strives to ensure that our County finances and related reporting are in order and compliance with all state and federal regulations.
For 16 years in a row, Orange County has been recognized for excellence in financial reporting by the Government Finance Officers Association of the United States for the presentation of our Comprehensive Annual Financial Report. This recognition affirms that we comply with all generally accepted accounting standards and is the highest form of recognition in the area of governmental accounting and financial reporting.
It has been our prudent financial management, and, up to this point, a strong working relationship with our County legislators, along with a measure of good fortune, that has carried us through thus far, providing us with the necessary cushion to see our County through the difficult times.
Those difficult times, however, have carried on far longer than I believe anyone anticipated.
Over the past few years, in order to balance our budget, we have been forced to rely on our general fund surplus. A step that was necessary for us to take once again this year.
A step that we are indeed fortunate to be able to take. However, if we continue in this way, we will no longer have this surplus to rely on during our time of need.
With these thoughts in mind, we have crafted an operating budget for fiscal year 2013 that will allow Orange County to continue to meet the needs of our residents to the best of our abilities, provide critical programs and services, and preserve and protect our County’s long-term financial health as the economic challenges that plague our state and our nation continue unabated.
Today, I present to you, the Orange County Legislature, a proposed Operating Budget for Fiscal Year 2013 in the amount of $715.9 million. This proposed budget represents an increase of just .4% over last year’s approved budget of $712.9 million. Just shy of $40 million in general fund surplus was required to balance the 2013 budget.
The challenges presented to us in preparing this year’s budget were extraordinary and forced us to scrutinize every dollar requested like never before.
As not only the County Executive, but as the Chief Financial Officer, I am committed to doing what is right for the people who call this great County home.
Of this total budget, $375.6 million will be collected locally through sales and property tax.
The Orange County sales tax rate will remain the same at 3 ¾% and is projected to generate more than $263 million in revenue, of which, $193.8 million will be retained by the County. Nearly $70 million of the collected sales tax will be distributed amongst Orange County’s municipalities.
With a 1.75% increase in the tax levy proposed for 2013, Orange County will stay well within the Governor’s 2% property tax cap. The 2013 property tax rate will be $3.55 per thousand. As a result, six municipalities will realize a decrease in their property tax rate.
Of those remaining, most will see an increase of less than 51 cents.
Our residents and taxpayers need to know – have a right to know – where their money goes.
I’d like to be able to say that Orange County taxpayer money is all used right here in Orange County, but the truth of the matter is, it has come to a point where there are fewer and fewer local dollars left to put to work for local purposes.
State and federal mandated programs are eating us alive! They account for $530 million, or 74%, of this $715 million budget. Social Services programs alone require $103 million, or 91% of our total annual collection of County tax dollars of $112.3 million.
While I truly believe that it is our duty as a County to help provide for our neighbors in need, I believe just as strongly that the onerous mandate programs and state imposed property tax cap force us to operate as if we had one hand tied behind our backs – and it has been this way for decades.
Unbelievably, nine New York State mandates consume 90% of the property taxes collected statewide!
In Orange County, these nine mandates account for $255 million of our gross budget.
Medicaid – at $82 million, for Medicaid alone, our required support of this program effectively crowds out additional County services.
The Public Assistance/Safety Net programs cost our County $47 million a year. In recent years New York State has continued to transition public assistance programs to counties by effectively removing all State financial support for program and administrative costs.
Child Welfare Protection and Prevention Services – the State has abandoned its commitment to the safety, service delivery, permanency, continuing care and adoption, and well-being of children by simply cutting state reimbursement by 3%, capping state reimbursement for detention and foster care while adding new mandates at the same time.
Pre-School Special Education and Early Intervention Programs – two more on this list of nine – will cost Orange County $45.2 million combined in 2013.
Rounding out the nine mandated heavy hitters having an impact on our County budget are Indigent Defense at $5.7 million, Youth Detention at $5.1 million, Probation at $10.7 million, and last but certainly not least – Employee Pensions.
Remarkably, employee pension rates have increased yet again – by 11% for 2013. This proposed budget contains $25.6 million for New York State pension costs. That’s following an increase of 12% last year!
Related employee benefit expenses include an additional $45.5 million budgeted for hospitalization costs and $5.9 million for Worker’s Compensation expenses. Total employee benefit costs projected for 2013 are $90.7 million.
There you have it – mandated expenses, primarily these big nine – consume the lion’s share of the total property tax dollars collected by our County, leaving us little say in how we’d like to use the money for the good of our residents.
Leaving us little left over to provide the programs and services the people who live here need, expect, and deserve.
Looking on the bright side – we’re clearly doing things right – Orange County remains one of the fastest growing counties in New York State.
For the third year in a row, we have been recognized by America’s Promise Alliance as one of the 100 Best Communities for Young People. And, our Community College is in the midst of one of the largest building projects of any school in the SUNY system so that our residents have access to affordable, quality higher-education opportunities right here at home.
Supporting the educational needs of our residents will pay long-term dividends for our County. Businesses want an educated work force, a work force that understands technology, communications, not just for today’s world, but a work force that is prepared for tomorrow as well. That’s why we will be contributing $17.6 million to the Community College for the 2013 budget.
To that end, I have also included funding for the library system and Literacy Orange.
It is the unique quality of life we have here in Orange County that make people want to live here, work here, and even play here.
In fact, two of New York State’s most popular tourist attractions are right here in Orange County – Woodbury Common and the United States Military Academy at West Point.
Even in the toughest of economic times it is important that we continue to support and promote those organizations that work with us to ensure that this quality of life is maintained for future generations to cherish and enjoy. And, in the toughest of economic times, it is even more significant when there are opportunities close to home.
While I wish that we could include funding for all of the not-for-profit organizations that made requests, the current economic climate makes that impossible.
We have proposed funding for some that share our commitment to preserving and promoting quality of life – these include the Orange County Land Trust, Orange County Arts Council, Farmland Protection and the Orange County Historical Society, to name a few.
People want to live, work, and recreate in a place where they feel safe from harm. The fact that Orange County continues to be one of the fastest growing counties in New York is testament to our commitment to ensuring public safety.
Sheriff Carl DuBois and his Office work diligently to keep our communities safe. Just last Friday, they acted swiftly following a break-in and burglary at the 1841 Courthouse. Less than 24 hours later, working quickly with the Village of Goshen police and District Attorney Frank Phillips team, a suspect was in custody.
The 2013 proposed budget includes funds in the amount of $16.3 million for the Sheriff’s Office.
Choosing a career in law enforcement takes personal commitment, sacrifice, and a considerable amount of training.
When it comes to fighting crime, there’s no room for mistakes that can mean the difference between life and death – that’s why I’m proud to include $25,000 in the budget for the Police Academy. Thank you to all of our residents who choose this very challenging career path.
We’re proud to continue and enhance our training programs for EMS and Fire Services. Without their invaluable volunteerism, lives would certainly be lost.
Orange County’s three cities – Middletown, Newburgh, and Port Jervis – are the anchors of our County and community life and are home to a large concentration of County residents.
As we have felt the hardships of the difficult economy, it has been compounded for them. To help the cities enhance their budgets and continue programs that are important to their residents, Orange County will contribute $25,000 to each of the cities to support their efforts.
Not only are we a fast-growing County, currently home to more than 372,000 people, Orange is considerable in size as well. Bordered on the east by the Hudson River and the west by the Delaware, we encompass more than 835 square miles and it takes the better part of an hour to travel between our eastern-most city and our western-most.
Of course, with a County of this size comes a great deal of infrastructure that must be cared for and maintained. Orange County’s Department of Public Works is responsible for 315 miles of roadway and 152 bridges throughout the County. The proposed 2013 budget contains funding of $16.6 million for on-going maintenance of our roads and bridges.
When it comes to discussing what makes our County stronger, better, I would be remiss if I did not include economic development. I may sound like a broken record, but it’s all about jobs, jobs, jobs. Even the Governor says that now!
We want job opportunities for our residents. We want our children and grandchildren to be able to live here and work here if that’s their desire. But for that to be a reality, they need to be able to find good paying jobs here.
That’s why Orange County Government works closely with partner agencies, including Orange County Partnership, Orange County Chamber of Commerce, Pattern for Progress, Industrial Development Agency, Business Accelerator, Hudson Valley Economic Development Corporation, and the State Economic Development Corporation to attract and retain businesses here in Orange County.
With those businesses come jobs, construction, investment, and so much more. It’s a ripple effect felt around the County.
For a real life example of one of our success stories, take a drive down Old Mansion Road in Blooming Grove for a look at the new Mediacom headquarters building nearing its final phase of construction.
By appealing to Mediacom, the 8th largest cable TV company in the nation, to stay in Orange County, 250 jobs were retained, 150 jobs will be created, and more than $40 million was invested here.
I’d like to thank Deputy County Executive Jimmy O’Donnell for the hard work accomplished to keep Mediacom in Orange County.
Let’s talk about how we were able to balance this year’s budget. The availability of general fund surplus played a significant role. Allow me to explain …
(REFER TO SURPLUS CHART)
Last, but certainly not least – let’s get to the topic that’s weighing most heavily on everyone’s hearts and minds - what’s going to be done about Valley View?
This has truly been the most difficult budget planning process I have ever been through in my 11 years as County Executive. I think Budget Director Blair will agree with me on that.
Just when we think funds couldn’t get any tighter, expenses any greater, mandates any stricter – it gets worse.
And to think, our financial outlook is stronger than most. Orange County is the envy of counties throughout New York State. That’s because we have been conservative in our decision making and planning – fiscal prudence has been our guide.
I’ve made the tough decisions – even when they’ve been displeasing to others – because that’s my job. As not only County Executive, but Chief Financial Officer, I have a financial responsibility to do what is right for ALL 372,000 Orange County residents.
It will come as no surprise to anyone in this room that I believe that the challenges we face at Valley View are at the crux of the financial challenges we face as a County and unless we take tight hold of the reins, we will be heading down a path toward bankruptcy.
But that’s not going to happen on my watch! And, Legislators, you should not let it happen on yours either!
And we’re not in this alone –at least 15 other counties in New York are reviewing their options – just like us. Three have recently sold their facilities.
Every day when we review the news from around the state, we find new stories about counties plagued by challenges with their nursing homes.
Suffolk is working toward privatizing their home, as is Ulster County. Dutchess already sold theirs. Westchester closed, Rockland is exploring their options. Last week, a state panel backed the Health Department’s recommendation to reject Albany County’s bid to build a new 200 bed nursing home.
And just this week, we received notification that Steuben County put their 105 bed nursing home facility on the market, a facility that’s less than five years old.
New York State no longer wants counties in the business of running nursing homes.
For a public entity, they are extremely costly to operate.
They are a heavy drain on county tax dollars and generate little revenue at the reimbursement rates we are forced to accept.
That’s why the 2012 budget de-funded Valley View effective July 1, 2012.
It was never my desire or goal to de-fund or shut down Valley View. The facility has served many Orange County residents, including some of my own family members.
We have provided a great service to the people of this County and we will always be grateful to the men and women who provide quality, compassionate care to the residents each and every day.
Recent events, however, have unnecessarily left some residents and their families feeling uncertain with respect to the future of the facility.
The challenges faced at Valley View should have come as no surprise to anyone who has been paying attention. Valley View administrative staff regularly reports to their legislative oversight committee.
In 2003, I sent a letter to Valley View residents and family members alerting them to the financial challenges we faced.
In 2005, at a meeting of the full legislature, resolutions 116 and 117 received unanimous approval by the legislators – many of whom continue to serve today.
Those resolutions urged the Governor and the Legislature of the State of New York to enact legislation providing for adequate reimbursement for county nursing facilities.
Permit me to read to you a few lines from Resolution 116 …
Whereas, today the Valley View Center for Nursing Care and Rehabilitation is facing a financial crisis; and
Whereas, like public nursing homes statewide, the Valley View Center for Nursing Care and Rehabilitation is being financially hurt by spiraling employee health and retirement costs as well as a decrease in the number of private patients; and
Whereas, even more significantly, the County taxpayers are being victimized by the Medicaid rate system that in effect, imposes an additional tax burden on local residents for the services Valley View provides to those in need; and
Whereas, the State imposes this extra tax by establishing Medicaid rates at a level so low that it is impossible to provide nursing home services to those in need for the amounts allowed even with the most aggressive cost containment measures being imposed by County Administration … it goes on … and I’m happy to provide the complete resolution to anyone who’s interested.
Let me repeat, this was approved by all 19 legislators present at that meeting – 19 to zero - unanimous.
In 2007, presenting the 2008 budget I told you that the cost for the County to run Valley View had hit one million dollars a week and that we must continue to seek efficiencies for the facility.
In 2008, in response to the findings of the Berger Commission, we were forced to eliminate 160 beds and close the Parry Building.
Despite the considerable reduction in census capacity, we were able to keep the Parry Building staff on until it became necessary to eliminate 39 positions at Valley View in October 2010.
Soon after, at a cost of $143,000, the Orange County Legislature commissioned CGR, the Center for Governmental Research, an independent, non-partisan agency, to conduct a comprehensive review of the current operations of Valley View, a historic analysis of its financial condition and the County’s role in providing financial support, a benchmark comparison of Valley View to comparable facilities, and a detailed analysis of various options involving potential change along a continuum from internal changes to divestiture from County ownership of the facility and recommendations for the best solution for the County, the nursing home, its residents, and staff.
The final report was issued in August 2011 – 133 pages long. The report was provided to all legislators and posted on the County website as well.
Allow me to read a few excerpts from the report …
From page 122 – “Such an outcome would require significant changes in the current staffing, salary, and benefit structure of the nursing home, along with numerous other changes, as well as being contingent upon the creation of a separate bargaining unit for Valley View employees alone, separate from the countywide CSEA bargaining unit.”
From page 123 – “CGR’s primary recommendation: Put Valley View on the market to determine the level of interest in purchasing the facility and the nursing home license, or in purchasing the license and leasing the facility. It is possible that sufficient changes could be made to justify continuing to maintain Valley View as a County operation.
But the odds are long, and the barriers significantly stacked against a viable possibility of maintaining County ownership at a politically-feasible level of County contribution. If the County were to decide to continue to operate the facility, a number of changes should be made, and some of those should be made anyway, for as long as the facility remains in County hands.
But in the meantime, we recommend that the County make the decision to create an RFP designed to determine whether there are interested buyers of the facility and if so at what price ….”
Even Moody’s told a cautionary tale. In their June and July 2012 letters they highlighted challenges:
- Dependence on economically sensitive sales tax revenue
- Declining state and federal aid
- Inability to absorb unanticipated costs related to possible delays with the nursing home sale resulting in a significant drain on reserves.
It boggles the mind that after all of this, not to mention numerous conversations, briefings, status updates, and more, that there were still those that said the severity of the financial issues we faced at Valley View came as a surprise when I announced the plan to de-fund Valley View from this very same stage one year ago.
As recommended by CGR, we put out an RFP for the sale of Valley View, in order to privatize it so that we could keep the care, service, and jobs here in Orange County for the people of Orange County.
We received four strong proposals from experienced operators of nursing homes in New York State. They were willing to meet our conditions.
They agreed to maintain Valley View under their ownership for a minimum of five years. One, made an offer that would have stopped the bleeding October 1.
The $52,000 of County taxpayer money being spent each day to keep the doors open could have stopped this coming Monday.
In our own efforts to staunch the bleeding over the years, the County, working with Valley View management, has implemented cost-saving measures - $702,000 saved in laundry services, a nearly $290,000 reduction in housekeeping costs, $170,000 annual savings in utility costs, a $101,000 savings on barber and beauty shop expenses, and $25,000 in consolidated purchasing costs.
A total of $1 million.
Just for comparison, a private facility could save $1 million on purchasing commodities alone – because they’re free of the restrictions placed on government facilities.
And what did these really gain us? Grievances, complaints, and resistance from the union.
They also looked for ways to generate revenue. In just one example – 30 long term beds were converted to short term rehabilitation beds in 2010.
This initiative alone resulted in an additional $1.2 million. However, despite the many initiatives undertaken, the reality is – the public nursing home model is broken.
The State and Federal Governments simply do not provide adequate reimbursement.
Following another CGR recommendation, we asked CSEA to make concessions and consider give-backs in order to ease the situation at Valley View.
I invited CSEA leadership to meet with me and legislative leadership for a frank conversation about how they could realistically help make a difference for the sake of all union members, as well as the Valley View residents and their families.
In spite of the sound recommendations contained in the CGR report, CSEA offered confusion, generalities, and, quite frankly, little that would amount to any savings of note.
Instead, they pushed for the start of collective bargaining negotiations and put forth demands that left me speechless in light of our current situation.
- 5 per cent salary increases each year for the next three years;
- No doctor’s note until 10 days out sick; and
- A guarantee of no lay-offs at Valley View.
To think that this is what they’re asking for in this economy! Where is the reasonableness? Where are the givebacks? C’mon CSEA, let’s face reality!
For comparison, let me tell you the agreements we were able to reach with some of the other collective bargaining units in County Government …
The Superior Officers Association ratified a contract that agreed to NO wage increases for 2012 and 2013, as well as health care contributions of 14% by 2013.
The Deputy Sheriff’s Police Benevolent Association unanimously agreed to no raises for the years 2012 and 2013, health care contributions that will increase to 13% of the premium for members who currently pay health insurance effective December 31, 2013, and all members will contribute 14% toward the health care insurance premium, regardless of years of service - a critical element given the rising cost of health care.
Even Governor Cuomo was able to get CSEA to agree to two years at zero per cent – the very same union that we have here in Orange County.
Then, in the midst of our earnest efforts to preserve the care and service at Valley View, certain members of the legislature, who clearly did not understand or chose to ignore the years of information provided as well as their own resolution regarding a fiscal crisis among public nursing homes in New York, chose to launch a special investigative committee to gather information and collect facts in order to determine the best way to proceed regarding the future of Valley View.
At the cost of considerable time lost and at least $50,000 of County taxpayer funds. That final number is still being tallied.
This committee was anything but unbiased. They knew from the start where they wanted to go. I know for a fact that one member of the committee sat on this stage and told a witness “that’s why we’re all here, to save Valley View.”
One committee member said the committee would redefine the role between the legislative and executive branches of government. How does that fit into the role of this committee?
They brought forth witnesses who delivered opinion and conjecture. The information presented was never fact-checked.
The credibility of many witnesses never established. Many thousands of dollars were spent by this committee to issue a report filled with opinions, generalities, and vague findings.
The lawyers were the only ones who received any benefit from convening this committee.
Not the residents of Valley View, not their families. Not the people of Orange County.
Now, we find ourselves even further in the hole. A strong contender to purchase Valley View walked away. And residents, families, and staff still find themselves facing an uncertain future.
What I submit to you today, I deeply regret. As I stated before, this issue is bigger than me, the legislature, or the employees.
And I, in no way, fault the employees for where we are today. But the inaction of some legislators has forced my hand. We no longer have time to delay.
The time has come for me to make the tough decisions I was elected to make.
The proposed 2013 budget includes funding for Valley View for just one month in 2013, as well as legacy costs.
In order to protect the fiscal health of this great County, in order to avoid another step toward bankruptcy, a very real scenario for some our neighboring counties, NINE LEGISLATORS have forced me to begin the necessary process to submit a closure plan to the State of New York for their approval - effective immediately.
This is not the budget I wanted to present today, but I was left with no choice. If we continue in the direction we’ve been heading we will severely hamper our ability to support other critically-needed county programs.
It is my responsibility to do what’s right for ALL people of Orange County.
There is talk out there of counter-proposals that will allow us to maintain Valley View. Some legislators have suggested …
- Revising the sales tax agreement with our 42 municipalities – leading to
- Reducing support to our cities – leading to their bankruptcy
- Reducing staff from other departments.
I can’t imagine how our County could even continue to function if 306 positions are cut from other County departments when our staffing is already cut to the bone.
- Closing County programs. Maybe we can offer one DMV location, like most counties have, instead of the three that we currently operate. Or let New York State take over DMV services?
- Eliminating support to not-for-profits in our County.
- Cutting back on the maintenance of our roads and bridges.
- Raising property taxes by double digits – 17%.
- And depleting the surplus and bringing our County to the brink of bankruptcy.
None of these are especially appealing options. And listen to me loudly and clearly - raising taxes and taking a step closer to bankruptcy are NOT options that I will ever consider – NEVER!
I believe with all my heart that Orange County is the greatest place in New York, maybe even the nation, to live, work, and raise a family. It’s my home and yours – a place of which I am exceptionally proud.
I want my children and my grandchildren to be able to succeed and thrive here.
I urge you to do what’s right for all of our family, friends, and neighbors and approve this budget.
Thank you. God bless you – God bless America, our great state of New York, and the people of Orange County.