The New York Times reports:

A state oversight board has seized control of Nassau County’s finances, saying the wealthy and heavily taxed county had nonetheless failed to balance its $2.6 billion budget despite months of increasingly ominous warnings.

The 6-0 vote here on Wednesday afternoon by the Nassau County Interim Finance Authority gives it veto power over the county’s budget, labor contracts, borrowings and other major financial commitments.

The board cited a deficit that reached nearly $350 million at one point last year but that was not fully closed, it said, despite assurances to the contrary by the county executive, Edward P. Mangano, a Republican.

It was only the second time a county had been taken over by New York State… 

The move effectively puts the finance authority board, a six-man panel of state-appointed financial experts and other professionals, at the bargaining table opposite Nassau’s civil servants, police officers and other labor unions.

The board also could unilaterally impose a freeze in wages, a strong club for Nassau, which has been sapped by lucrative salaries, benefits and costly work rules for its police and other workers. But the board chose to stop short of that for now, saying it would try to work with the county first.

Nassau Couny is practically iconic for its high public-sector employee pay. Pensions are so generous that openings in the police department are known to induce, in the words of the New York Times, a “stampede” of out-of-county, and even out-of-state cops. In 2007, more than 28,000 police officers signed up to take the Nassau County police exam. 

Because of that, despite the second highest property taxes in the country,and a six-figure median family income (Nassau is the third-wealthiest county in the U.S.), the Long Island suburb has endured severe budget shortfalls in the last decade. And now, according to E. J. McMahon, a New York state and local policy expert with the Empire Center, it is facing a crisis from “the projected cost of scheduled wage increase in a county that already pays its employee handsomely (county cops, for example, make an average of $126,000, and few employees contribute anything to their health coverage).”  Nassau has long been something of “an outlier” thanks to “to the free-spending traditions of the Republican machine that controlled the place for decades.” In McMahon’s words, “it takes work to be both wealthy and broke.” The Nassau County Interim Finance Authority (NIFA — the board that is seizing control of  Nassau’s finances), in fact, was established in response to a similar crisis in 1999.

I spoke with County Executive Ed Mangano a couple of weeks ago about Nassau’s budget crisis. At that time, he had three intended courses of action: Plan A was to get the unions to voluntarily renegotiate their contracts, in accordance with the normal procedure — but union leaders announced their refusal. Plan B was to pass legislation called the “Taxpayer Relief Act,” which would authorize Mangano to unilaterally reopen county labor contracts  to order givebacks. And if that was prevented by a legal challenge, Plan C was to start firing public employees in 2012 (that power was contracted away for 2011). 

Evidently NIFA found these inadequate, possibly because the 2011 budget was, according to the Times reporter, cooked: 

Mr. Mangano inherited a growing deficit when he took over in January, but his first action worsened it: he eliminated a tax on home heating fuel that would have reaped $40 million in revenue. His 2011 budget also counted on $60 million in phantom concessions from labor unions, more than $20 million in state aid that has not materialized, and $100 million in new borrowing for operating expenses.

Keep your eye on this as it unfolds. Other local governments in New York and elsewhere are approaching similar crises. Nassau’s resolution could set the pattern.