The state’s current budget crisis has reminded many people of New York City in the late 1970s, when Richard Ravitch and others helped pull the city back from the brink of bankruptcy.

But few recall Nassau County in the spring of 2000, when in the midst of a booming economy, one of the state’s most populous and wealthiest regions experienced its own financial meltdown.

Those involved in saving Nassau from financial ruin back then say that lawmakers and advocates in Albany could learn much from the county’s surprising recovery. Through a combination of tax increases, workforce reductions, creative accounting and some help from the state Legislature, Nassau was able to pay off
$2 billion in debt, dramatically improve its credit rating and avoid a state takeover of its finances.

“The option of us failing was not plausible,” said Judith Jacobs, a five-term Democratic county legislator. “I think that’s the idea that has to come up in the state, that failure is not an option. It really is not.”

For several years, though, Nassau County flirted with bankruptcy in many of the same ways New York City did during the dark days of the late ’70s. But while Nassau and New York City’s experiences were seen as the result of too much borrowing and too much spending, the state’s current crisis is very much a part of a nationwide economic depression.

Assembly Member Harvey Weisenberg, a 10-term Nassau Democrat, said the state’s financial situation is much worse than what happened to Nassau or New York City because there is no one left to rescue the state.

“They both had a control board, and they both had oversight,” said Weisenberg of New York City and Nassau County. “Who’s going to bail the state out? This is a much more catastrophic environment. This is national.”

Forty years ago, New York City was able to pull itself out of debt thanks to a bailout from the state, fiscal discipline imposed by a control board and cash infusions from city labor unions. And while Richard Ravitch is back in his role as financial guardian, there is less hope that Ravitch can convince his allies in real estate to volunteer to prepay their property taxes like he was able to do during the city’s fiscal crisis 40 years ago.

Besides, there are others who believe the state has more to learn from the rescue of Nassau county 10 years ago.

James Klurfeld, former vice president and editorial page editor of Newsday, said former County Executive Thomas Gulotta’s inability to make the hard decisions, in addition to the county legislature’s half-hearted attempts to cut spending, are what ultimately led to Nassau’s brush with bankruptcy.

Many Democrats blame Gulotta, a Republican who for 13 years refused to raise taxes to pay off the county’s debt, until it was too late. Gulotta was said to routinely balance the budget on one-shots or large unpayable loans, such as
$75 million borrowed from the Metropolitan Transportation Authority. 

“People totally lost confidence in Tom,” said Klurfeld, who now teaches at Stony Brook University. “He just wasn’t up to the job.”

Gulotta’s defenders, though, say expensive union contracts and inadequate tax increases, passed by the legislature, were just as much to blame. (Gulotta did not return a request for comment.)

In May 2000, Pataki offered a
$105 million bailout, but in return created the Nassau County Interim Finance Authority (NIFA) to monitor the region’s accounts, empowered to quickly morph into a financial control board with the power to tell the county what cuts to make or what union contracts to renegotiate if the county executive and legislature faced a stalemate on finances.

That June, Standard and Poor’s downgraded the county’s credit rating to BBB-, the last level above junk bond status.

Frank Zarb, President Gerald Ford’s energy czar during the ’70s and chairman of NASDAQ during the dot-com boom of the ’90s, was tapped to chair NIFA. A Ravitch-esque figure in terms of the respect he commanded among his colleagues, Zarb was able to bridge the acrimony between Gulotta and the Democratic-controlled legislature to begin coming up with solutions.

Zarb found the county’s books to be in total disarray, according to people close to the former NIFA chair. Over the course of several tense meetings with legislators, the county executive and public employee unions, Zarb began to form the outlines of a financial recovery plan.

In 2001, Gulotta was soundly defeated by then-Glenn Cove Mayor Thomas Suozzi, marking the first time in three decades that a Democrat held the top spot in Nassau. The election was seen as a rebuke to Gulotta and the Republicans, who had long considered the county a bastion of political power.

With help from Zarb, Suozzi set in motion a four-year financial rescue plan that would reduce the workforce by 10 percent, revise government operations to create efficiencies, restructure the county’s debt and raise property taxes by almost 20 percent, making it one of the highest rates in the nation. Suozzi sought legislation from Albany that would allow the county to offer early retirement incentives, prevent costly tax refunds by speeding up decisions on assessment challenges and create a new storm water and sewer authority.

All the while, NIFA stood ready to step in and wrest control away from county lawmakers if economic conditions failed to improve.

“We certainly made it clear that if the county didn’t mend its ways, we would take the county over and run it,” said Richard Kessel, the former vice chairman of NIFA. “I think having that leverage was very important.” 

What resulted was a dramatic turnaround. Borrowing declined significantly, and credit agencies upgraded the county’s status almost 15 times during the course of Suozzi’s reign as executive.

What worked for Nassau in the early part of the decade could work for the state, many of those involved in the county’s rescue now say. Even well-worn ideas, such as Ravitch’s plan to borrow
$2 billion to pay off the state’s debt and create a financial review board—something like NIFA, but lacking the authority to take over the state’s finances—to impose financial discipline, for instance, should be given a fair hearing, they say.

“We’ve had a lot of piecemeal and quick fixes, and not a comprehensive plan,” said Suozzi, who lost his bid for re-election in 2009. “We’re starting to hear from the governor and lieutenant governor. Now we need to get the stakeholders, which are really the Legislature and public employee unions, health care and education lobbies, and the public, to all buy into this comprehensive plan.”

Zarb agreed, saying the need to bring everyone to the table when developing a strong fiscal recovery is paramount.

“Maybe it was because it was a crisis and people behave differently in a crisis,” said Zarb, who now works for a private equity firm. “With some leadership and pulling together the disparate parts of stakeholders, you can actually get something done.” 

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ABOVE: Tom Suozzi’s 2001 election as county executive came after a budget crunch nearly bankrupted Nassau. photo by Andrew Schwartz