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Onondaga County Needs Plan for Massive Budget Surplus

County Executive Ryan McMahon has suggested that the surplus, which has grown to nearly three times the normal reserve, be used to double the New York county’s rainy day fund. But the plan would leave little for spending elsewhere.

(TNS) — Elected officials and residents alike are tossing around ideas for how to make use of New York's Onondaga County’s budget surplus, which has piled up to nearly three times what the county normally keeps in reserve.

But County Executive Ryan McMahon has an idea that will limit these proposals: He wants to roughly double the amount the county saves in its rainy day account, from $70 million to between $120 million and $140 million.

Combined with spending plans McMahon has already announced, that would leave almost nothing available this year for other ideas.

“We don’t see more room this year out of our fund balance,’’ McMahon said.

Here’s how McMahon does the math: He’s asking the legislature to approve $55 million in surplus funds to pay for his proposed aquarium (on top of $30 million already budgeted); he is asking for $10 million to create a fund to subsidize housing development; and he recently won approval for $5.5 million to send checks to senior citizens.

Those expenses would leave the general fund balance at about $130 million – right where McMahon believes it should be. For more than 20 years, the county’s policy has been to keep the fund balance much lower.

There could be room next year for some new ideas, McMahon said. As he prepares a 2023 budget, the county executive has asked legislators for “out of the box’' ideas. But how much money will be available for those proposals depends on how big a surplus the county runs this year, he said. In the meantime, he sees little room for new expenditures.

McMahon’s desire to beef up the fund balance is likely to generate discussion among legislators, several of whom said it was news to them.

Since 1999, the legislature has maintained a policy of keeping unallocated money available each year equal to 10 percent of general fund revenues. In this year’s budget, the targeted amount for that “rainy day fund’' is just under $71 million.

The size of the fund balance is not etched in stone, said Legislature Chairman James Rowley, R- Clay. It varies from year to year depending on the county’s actual revenues and expenses. The legislature’s resolution establishing the 10 percent level is more of a “policy goal” than a formal obligation, he said. But if the goal is to change, the legislature should amend its resolution, he said.

“This hasn’t been an idea that’s been discussed with me,’’ Rowley said.

Under state law, counties (and other local governments) are allowed to carry a “reasonable amount” of unallocated money on the books to provide financial flexibility. The law does not specify what is reasonable. School districts, on the other hand, must limit their fund balance to 4 percent of the budget.

The state comptroller’s office does not offer counties specific guidance on how much to keep, saying only that each local government should set a policy. The closest thing to generic advice comes from the Government Finance Officers Association, a Chicago-based national organization that recommends keeping at least two months’ worth of operating expenditures available. That would be about 17 percent.

But McMahon said the guidance he is persuaded by comes from Wall Street ratings agencies. Their blessing can depend on how much cash the local government has available. Consider, for example, the opening line in Moody’s Investor Service’s recent report, which upgraded the county’s credit rating:

“Onondaga County … benefits from a significantly improved financial position in the last two fiscal years as available fund balance increased to 29 percent of revenues in fiscal 2021 from 13 percent in fiscal 2019. In addition, the county anticipates continued growth in fund balance …”

Several legislators, including some of McMahon’s Democratic opponents, said they see value in maintaining a healthy fund balance. But some have criticized McMahon’s past reluctance to spend the money during times of hardship.

As the Covid-19 pandemic hit a peak in December 2020, for example, Democrats were angry after seeking unsuccessfully to use $1.4 million of the $77 million fund balance to restore 20 positions in decimated social services departments.

“While I like the idea of having a fund balance to be used for rainy days, Ryan (McMahon) was unwilling to touch the fund balance when we had a once-in-a-century pandemic,’’ said Legislator Mary Kuhn, D- DeWitt.

At the time, McMahon and Republicans argued that the fiscal picture was too unsettled to risk adding personnel.

Looking ahead, McMahon said he hopes to win additional upgrades to the county’s credit rating. The better the rating, the less it costs the county to borrow money. Most of the county’s borrowing is to pay for wastewater infrastructure, which affects county sewer bills.

“You don’t want to do anything that’s going to trigger, maybe, an adverse impact on our fiscal rating,’’ McMahon said.

Much of the discussion about how much the county has available to spend is likely to revolve around McMahon’s proposed aquarium. Nine months after unveiling his plan, he has not gained enough support from legislators to approve the $85 million all-cash project.

McMahon said the aquarium is an appropriate use of surplus money at this “unique moment in time,’’ because it’s consistent with the county’s role as the driver of tourism-related development.

“When you look at who is the entity that drives tourism, that’s what we do in county government,’’ he said. “When you look at what entity owns the entertainment infrastructure — we own the zoo, we own the ballpark, we own the amphitheater, we own the war memorial, we own the convention center. That’s what we do.”

Critics of the aquarium say there are more important priorities. During last week’s meeting of the legislature, half a dozen county residents used the public comment period to urge more spending instead on issues related to poverty, including aggressive efforts to reduce lead poisoning.

Legislator Chris Ryan, the Democratic minority leader, said his caucus is discussing a variety of spending priorities to pursue during budget discussions in the fall. They include poverty, lead poisoning, housing, economic development and – yes — tourism.

“I’m very, very much into economic development. But if we’re really going to start subsidizing a lot of this stuff, then we also have to address the poverty issues,’’ Ryan said.

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