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Mark C. Poloncarz, Comptroller
03/25/11

POLONCARZ WARNS:  ERIE COUNTY’S FINANCIAL FUTURE NOT AS STRONG AS COUNTY EXECUTIVE SAYS

Without Stimulus Funding and Above Budget Sales Tax Revenues, Apparent $23 Million Surplus Quickly Turns to $20 Million Deficit for County

BUFFALO, NY—Today, Erie County Comptroller Mark Poloncarz reported that preliminary unaudited financial data shows Erie County should end 2010 with an accounting surplus of approximately $23.8 million, but warned that Erie County’s financial future isn’t quite as strong as it seems because this surplus is based solely on funding received through the American Recovery and Reinvestment Act (“Stimulus”) and sales tax revenues that were better than budgeted for the year. 

“Apparently the county executive thinks everything is bright and sunny for Erie County, but after reviewing the 2010 fiscal year, there are dark clouds on the horizon,” warned Poloncarz.  “Although a preliminary look shows a $23.8 million surplus, it’s all smoke and mirrors, and we would have a nearly $20 million deficit if not for the County’s receipt of the Stimulus assistance.  This surplus has nothing to do with ‘running Erie County like a business,’ but is based entirely on a one-time-only ‘shot in the arm’ by the federal government. The reality is that without the Stimulus funding, Erie County would have ended 2010 with a large deficit.”

Erie County’s accounting surplus is approximately $23.8 million.  However, that figure is reduced to just under $17.5 million after prior designations are taken into account.  This figure will likely drop even more with the news that the county executive plans to use $8 million from the surplus for additional projects at Erie Community College’s North Campus and the Frank Lloyd Wright Darwin Martin House. 

Poloncarz continued, “The county executive recently announced plans to spend $8 million ‘cash’ from the surplus.  If the legislature should approve such actions, and prior designations of $6.3 million are in fact spent, the $23.8 million surplus will be reduced to $9.5 million.”

In 2010, in addition to the receipt of Stimulus assistance, Erie County benefitted from better than budgeted sales tax revenue of approximately $7.9 million.  In Erie County, sales taxes comprise the single-highest revenue stream to the County.  As such, sales tax revenues are under constant scrutiny by the comptroller’s office, considering it is a revenue stream there is very little control over, other than setting the tax rate.  

Poloncarz later noted, “I am very concerned because, like the previous administration, the county executive’s 2011 budget uses $16.7 million of reserves – a one shot revenue stream – to balance the budget and the County’s 2011 budget is still tied up in legal proceedings after the county executive decided to declare it ‘null and void.’  Use of the County’s fund balance for recurring expenses was one of the key factors that led to the ‘Red-Green’ fiscal crisis. If the Erie County Fiscal Stability Authority doesn’t approve this budget or the administration’s Four Year Plan then there is a very real possibility they will go back to a control status.”

Erie County’s final fund balance amount will be confirmed by its independent auditors, Deloitte & Touche LLP, who should complete their review of the County’s finances in June, 2011.  Various adjustments may be necessary based on what the auditors find in their independent review later this spring.