04/24/05 — County must make budget decisions

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County must make budget decisions

By Barbara Arntsen
Published in News on April 24, 2005 2:01 AM

For the past three years, County Manager Lee Smith has squeezed every penny the county spends and cut 7 percent of the county's labor force to keep from using money from savings.

Smith and the county commissioners have managed to keep the general fund at a little over $18 million, while still providing necessary services to the public.

But keeping the general fund at a level amount won't allow the county to accomplish long-term projects like building new schools, repairing and expanding water and sewer systems and providing quality health care services.

To adequately prepare for the future, the county has to add to its savings.

That means the commissioners will have some tough decisions to make during budget talks this year.

Can they add to the county's coffers to prepare for the future without cutting services or increasing taxes?

When Smith began his job as county manager in 2002, he found that the county had reduced its general fund balance by almost $12 million over the previous three years.

And, Smith said, the 2002 expenditures were already over the budget projections.

Working with the finance office, Smith cut county expenditures by $6.2 million between February and June 2002, thereby substantially reducing the amount of money the county would have to take from its savings.

Through the budget reductions, he said, the county only had to take about $3 million from the general fund that year, instead of the projected $9 million.

"My goal then was to look at why there was such a drain on the fund balance and figure out how to stop it," he said.

Smith said that fund balances in all counties grew in the late 1990's because state reimbursements for various programs, like Medicaid and Medicare, were always coming in well over budget estimates.

Those hefty reimbursements stopped by 2000, and counties were then faced with offering more health services with less money.

Smith looked at the county's audit figures over a 10-year period and found that expenditures were growing an average of around $6 million per year.

Revenue growth was not keeping up with expenditures, he said. That trend, Smith said, had to be reversed or the county would end up in financial trouble.

"If you use your savings to buy groceries, or to pay the light bill, eventually you're going bankrupt," he said.

Revaluation of county property added almost $3 million to the county's revenues, he said, which helped offset the original $9.5 million over budget expenses.

So, when planning for the next year's budget, he budgeted to use $4.2 million from fund balance, knowing the county would have to bring in revenues equal to that amount or risk draining its savings even more.

"By the next year we had brought in revenues to cover that amount, plus we added $25,000," he said.

Smith said that adding $25,000 wasn't much in terms of "growing the fund balance" but said his goal had been to break even for that first year.

For the last two years, the county has kept its fund balance even at $18.2 million by reducing general fund expenditures by 13 percent, cutting labor by 7 percent and increasing tax collection rates by almost 2 percent.

A budget that once ballooned at $96 million is now at $83.5 million.

By maintaining the fund balance and reducing expenditures, the county was able to maintain its A+ rating when reviewed in 2004 by Standard & Poors.

Standard & Poors is an international company that provides independent credit ratings, risk evaluation, investment research, data, and valuations for government and corporations.

That A+ rating will help the county get the lowest interest rates when borrowing money, but the fund balance also has to increase to accomplish the projects facing the county.

"The more debt that you have, the more savings you must have," Smith explained.

"Three years ago we were $9.5 million off budget, which is 18 cents on the tax rate," Smith said. "Now, at year's end, we're very close to projected expenses."

Wayne County meets the state requirements for the money in its general fund, but is on the low end of what the state recommends.

"We're required to have at least $13 million in there by the Local Government Commission," said Smith. "But they would like us to have between $18 to $22 million."

What the recommended budget will be for the county for 2005-2006 is still not known, because Smith and his staff are still meeting with department heads to hammer out the needs.

And the county isn't expecting to receive the school's final budgetary needs until mid-May.

Some of the schools fiscal needs should become apparent next week when the commissioners and the school board meet for a day-long budget retreat.