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Mark C. Poloncarz, Comptroller

Comptroller Also Confirms 2008 Addition to Fund Balance

Unlike many areas of the country, Erie County ("County") has been the beneficiary of positive sales tax growth during this global recession. However, the effects of the economic downturn are starting to be felt locally as well as today Erie County Comptroller Mark Poloncarz reported that January 2009 sales tax receipts were down 5.05% ($1.4 million) compared to the same period in 2008. The Comptroller also reported that February 2009 sales tax receipts for electronic transfer payments by large vendors are down 4.79% compared to 2008. Because the 2009 County Budget included no sales tax growth compared to 2008, any year-to-year reduction means a negative variance in the County's 2009 Budget.

Poloncarz said, "The drop in sales tax receipts for the first quarter of 2009 reflects the concern my office has expressed for many months now - the reduction in consumer spending will result in less sales tax revenue for the County. Because Erie County's budget relies so heavily on sales tax as the single-largest revenue source, any reduction will negatively impact our 2009 budget and could result in potential multi-million dollar gaps which would need to be closed."

He observed that based on actual results for January 2009, if the County experienced a 5% reduction in sales tax receipts for the entire year, the County would lose approximately $19.4 million in revenue. A 6% reduction would mean $23.3 million less revenue. Poloncarz added that based on recent discussions with the County's Director of Budget and Management, he understands the Collins Administration may be revising the 2009-2012 Four Year Financial Plan to reduce 2009 sales tax receipts by 6%.

Comptroller Poloncarz has been expressing concerns about sales tax revenues since he issued his September 2007 major report on sales tax. In that report he noted that sales tax constitutes about one-third of the County's operating revenues, and that any reduction could adversely affect the County. Poloncarz said, "My office has consistently advised against the over-reliance on sales tax as the County's primary revenue source. Unfortunately, my warning seems to be coming to fruition which will require action by the Collins Administration to address this shortfall."

In addition, he noted that under the County's sales tax sharing agreement, any loss of sales tax will mean that every local government, school district, and the Niagara Frontier Transportation Authority ("NFTA") will also lose revenue. "Unfortunately, less spending and shopping means the County, every local government, school district and the NFTA will experience an adverse budgetary impact in 2009," Poloncarz said.

Poloncarz is not alone in warning about sales tax revenue gaps in counties across the state. Recently, Nassau County Comptroller Howard Weitzman warned that his county faces a potential $100 million gap in sales tax revenue in 2009.

County Closes Books on 2008

Separately, the Comptroller reported that based on preliminary unaudited financial data the County may end 2008 with an approximately $10.2 million increase to the County's general fund balance.

"Following more than two months of accounting activities by County departments, we have preliminarily determined that the County will add just over $10 million to fund balance," said Poloncarz. He cautioned however, that this estimate needs to be confirmed by the County's independent auditors, Deloitte & Touche LLP, which will begin its review in April 2009 and complete its audit work in June.

Poloncarz noted that major positive components of the preliminary increase to fund balance include (1) higher than budgeted 2008 sales tax receipts (which were above-budget in early 2008 and began to drop in the final quarters); (2) significant savings in the Department of Social Services due to over-budgeting of net program costs and salaries by the county administration; and (3) a recent decision by the Collins Administration not to fully close an existing deficit in the County's Road Fund.

"I am pleased that the County will end 2008 in the black and which will result in an increase in fund balance. This is the fourth year in a row, and every year on my watch, in which the County has ended the fiscal year with a surplus. While this is good news, the County does face significant challenges in 2009, though the receipt of federal stimulus aid may help the County cover shortfalls in the budget," said Poloncarz.