On Sept. 14 New York State’s Appellate Division handed down a decision that upheld the legality of the Nassau Interim Finance Authority’s March 2011 unanimous vote to impose a wage freeze on county personnel.
That decision was a great victory for Nassau taxpayers because the freeze cumulatively saved over $200 million, and the court’s ruling exonerated the then members of the NIFA board (of which I was one) who squarely met their fiduciary obligations, and did so on the advice of learned and capable counsel.
Here’s the background surrounding this controversy:
On January 26, 2011, NIFA, citing a projected 2011 Nassau County operating budget deficit of $170 million, voted to declare a control period as required by state law.
Several weeks later, the county filed a suit to enjoin and restrain NIFA, claiming the Authority exceeded its statutory powers.
State Supreme Court Justice Arthur Diamond issued a 29-page decision on March 11 ruling that NIFA’s action was neither unconstitutional, arbitrary nor capricious.
The county declined to appeal the case and on March 22, 2011 submitted to NIFA a revised budget that included a request for a wage freeze.
On March 24, 2011, NIFA passed two resolutions; one finding that a wage freeze was essential and the second declaring a fiscal crisis existed and the ordering of a wage freeze.
Reacting, County public employee unions filed lawsuits in federal court claiming NIFA not only did not have the authority to impose a wage freeze, but that the action was unconstitutional because it violated the contracts clause of the United States Constitution.
After the U.S. Circuit Court ordered a lower federal court to dismiss the case because it lacked jurisdiction, the unions filed petitions in the New York Supreme Court claiming the wage freeze was unauthorized because NIFA’s enabling legislation expired in 2008.
Judge Diamond rejected the claim on March 11, 2014 and dismissed the case.
The unions proceeded to appeal to the Appellate Division which affirmed the Diamond decision on September 14, 2016.
Throughout the entire legal process, NIFA attorneys, which included Judith Kaye — the late Chief Judge of New York’s top court, the Court of Appeals — were confident NIFA would prevail on the wage freeze.
Hence the freeze was re-authorized in 2012 and 2013.
However, when John Kaiman was appointed NIFA’s chairman by Gov. Cuomo in September 2013, he decided to take a different tact.
Because of his “vast experience” as a North Hempstead Traffic Court judge, he concluded that NIFA was in danger of losing the wage freeze case, a flawed legal view that he would later foist on all but one member of the NIFA board.
As a result, he took it upon himself to negotiate with the county and the unions a deal to lift the wage freeze which he claimed was cost neutral.
Despite every objective analysis that predicted the union agreement would cost up to $70 million more a year than it would save, Kaiman convinced five of six NIFA board members to endorse his union deal.
Well, it turns out that Kaiman was wrong on every count, as were the board members who followed his lead, perhaps for purposes of finding cover for an otherwise obviously wrong decision.
NIFA has won the wage freeze suit and, sadly, Kaiman’s union deals are costing the county up to $70 million more a year than they are saving.
Had those deals not been approved, the 2011 NIFA plan developed under the leadership of Chairman Ronald Stack would have resulted in Nassau balancing its budget in 2015 or incurring a deficit of less than 1 percent, and the controls would have been lifted.
Instead, thanks to Kaiman, the county has continued to incur large GAAP operating deficits and will continue to do so for years to come.
While Kaiman was the driving force behind the union deals, he did have an accomplice: County Executive Ed Mangano.
It was Mangano who convinced the Republican-controlled Legislature to approve the settlement, even though its own independent legislative review office exposed the flawed financial assumptions, fully and accurately.
With the misguided Kaiman-Mangano fiscal policies now haunting the County, it appears Mangano is in a buck-passing mode.
At a Sept. 14 meeting at County Hall, attended by NIFA Chairman Adam Barsky and legislative leaders, Mangano blamed the county’s continuing fiscal woes on labor contracts approved by the Legislature.
You can’t make this stuff up.
It would be easy for some to minimize my critique by saying that it’s easy to come to these conclusions with the benefit of hindsight.
But they would be wrong, because there were plenty of people with foresight at the time — lawyers, budget experts, and plenty of others.
The fact is that the ill-conceived Kaiman deal, which was cobbled together with guaranteed spending and dubious (at best) supporting revenues was always destined to be a fiscal disaster for the county.
The chickens have come home to roost — first, when the revenues for sales tax and speed cameras failed to materialize, and now, when it is clear that the legal scare was nothing but a red herring.
