The Nassau County Legislature continued a hearing on County Executive Edward P. Mangano’s 2011 proposed budget that went on all day Friday, Oct. 29, and late into Saturday night, eventually passing the $2.6 billion plan along party lines with Halloween approaching and opposing lawmakers accusing that the budget’s “no tax increase” label was just a costume.

As the county executive struggles to keep Nassau County out of bankruptcy with some surprising and painful budgetary moves, several items at the heart of a heated ongoing public debate included the imminent loss of bus service within Nassau, the shifting of tax refund responsibility to schools and local municipalities and a new sewer fee to be imposed on tax exempt entities. These controversial moves and some proposed budget cuts drew a huge crowd to the hearing. Audience members filled the legislative chamber to legal capacity Friday, with many spilling out into the foyer to watch the proceedings on closed circuit TV, waiting hours for a turn to protest inside.

Drawing the most fire was the proposal to remove Nassau’s “guarantee” on tax certioraris, or the refunds given back to taxpayers after they win a grievance determining that their property was assessed incorrectly. Because Nassau County performs the assessments, one of only two counties in the state to do this, it has long stood behind its own calculations when it came to paying for its mistakes. The presiding officer of the Legislature, Peter Schmitt, has explained that this is “bankrupting the county.” He said that the county assesses property, collects the taxes, distributes that money, and then when it comes time to refund mistakes, it has to borrow the money to pay it back. This has resulted in over $1 billion in debt. With the county executive struggling to keep the county out of bankruptcy, it is an easy argument to make that this practice has to come to an end.

What is drawing ire, however, is the abrupt abandonment of the county’s guarantee to pay for its mistakes. Schools, towns, villages, fire districts and libraries must now immediately begin planning – and, some say, taxing – to cover their own refunds when this move goes into effect.

Because this shift does not create any lower cost in the county budget, and certainly will force other entities to raise taxes, opponents are saying it is disingenuous to call it a “savings,” or part of a “no increase” budget.

Presiding officer Schmitt and other Republicans tried to explain the concept to the many protesters. These were mainly representatives from the school districts of Nassau, firstly because school boards are among the only groups that have to present a budget and have it passed directly by voters. And further, tax caps are looming at the state level and staff and service cuts have already begun in response to tough economic challenges. School districts argue that the increase in taxes it will require to cover tax refunds will result in higher losses in teachers, reducing the quality of education in Nassau.

Schmitt tried to explain that the county has no choice, functioning on the brink and trying to prevent the watchdog group NIFA from taking control of county finances, which he said would bring more extreme cuts.

“If this fails, it will trigger a NIFA takeover,” he told the school representatives. “Then, the first thing to go out the window is the county guarantee.” At least, Schmitt argued, according to this scenario, schools and municipalities do not have to start putting refunds into their budgets until 2013 or 2014.

However, Dr. Raymond Malucci, president of the Nassau County School Superintendents Association, voiced the schools’ position, saying, “This affects us immediately. I don’t know what people think will happen in 2013 if we don’t plan ahead. The tax effect will begin next year, in next year’s budget.”

The other disputed attempt to stop a loss in county money related to a new sewer fee. Presently, tax-exempt entities do not have to pay for sewer usage. Presiding Officer Schmitt explained the reasoning behind changing this, saying that large hospitals like LIJ and North Shore, learning institutions like Hofstra and C.W. Post, and the municipal buildings of villages and towns all pay utilities like water, electricity and gas, but get free sewage disposal at the expense of county taxpayers. He said that the Sewer and Storm Water Authority is also on the brink of bankruptcy and this is a necessary move.

Opponents argued that the move, like the shift in tax refunds, is a hidden increase in charges at a time when county Republicans are touting their no increase budget. Further, protesting municipalities and hospitals, and opposing Democrats, point out that there is no way to measure sewer usage right now. The county proposed going off of the water meter, but many say that is unfair as water is used for other purposes. Wendy D. Darwell, chief operating officer of the Nassau-Suffolk Hospital Council, testified that in some hospitals, one quarter or one third of water usage goes to irrigation and cooling systems, never impacting the sewer system. Schmitt said that the county will continue to work on a fair system to gauge usage.

Finally, a Nassau resident came out to plead for support of the Long Island bus system, a service for which the county has budgeted about one third of what the MTA said is necessary to keep buses running come January. With no compromise made, bus service could either cease or go to a private company, with potential cuts in service and hikes in fares.

“I can’t get around Long Island without the bus,” said the man, who has been riding the bus for 40 years. “There are a million of us who can’t.”

Schmitt responded, “This county is in dire straits.”

Legislator Wayne Wink argued that Nassau is at fault for paying so little into its bus system. He said that Westchester and Suffolk pay much more for less service. He also said that the MTA is open to gradually getting more funding from the county, if a plan is in place. He said that with another phase of red light cameras at 50 more intersections, the county could raise the funds required by the MTA and keep service in place.

“All municipalities are tightening their belts,” said Wink. “They are not cutting bus service.”

Legislator Denise Ford, on the other side of the aisle, said she would be interested in working with Wink in exploring this proposal.

Regardless of the arguments for and against the 2011 budget, that could result in painful losses and increased expenses to taxpayers, most can see the dire state of county affairs and the pressure on County Executive Mangano to deliver a plan that stops financial losses and controls taxes.

Celebrating the passage of his budget by the Republican majority, he released a statement Saturday night, saying, “We have addressed Nassau County’s fiscal mess head on. This budget protects taxpayers by holding the line on property taxes and implementing common sense solutions to fix our county’s finances for years to come.” He added that with the passage of his 2011 “No Property Tax Increase Budget,” Nassau County’s finances have begun to be repaired after years of mismanagement, a poor economy and overspending. Mangano praised Presiding Officer Peter Schmitt and the Republican Legislative Majority “for joining him in holding the line on property taxes while adopting reforms to close a $343 million deficit.”

Mangano said he had proposed ending the borrowing associated with the broken property tax assessment system with a large debt issuance that would settle the tax certiorari settlements from the past decade. But the Democratic minority would not approve this level of borrowing. Instead, the county executive said that he, Presiding Officer Schmitt, and Minority Leader Diane Yatauro compromised on $50 million in bonding to pay off debts of the past that are due in 2010 and to continue in 2011 the past practice of approving settlements throughout the year.