05/02/07 — County facing tighter budget

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County facing tighter budget

By Matthew Whittle
Published in News on May 2, 2007 2:06 PM

A formal proposal is still about 30 days away, but at the Wayne County Board of Commissioners meeting Tuesday, County Manager Lee Smith warned members that money is already looking tight for the 2007-08 budget and he didn't rule out the possibility of a tax increase.

He explained that with the county's Medicaid expenses expected to increase and the county Board of Education set to come forward with millions of dollars in school construction needs, there is likely to be little room for expansion -- even if revenues grow by the expected 2.5 to 3.25 percent.

The county's current budget is about $111.5 million, and it must be balanced every year.

"That's only giving you $2 million to $3 million in additional money. Medicaid would get half of that and the rest would barely scratch the first page of the school's request," Smith said.

He estimated that Medicaid will increase by about $1.6 million next year unless the state General Assembly steps in with some sort of relief.

And while there are bills being discussed that would begin to take the burden off the counties, the only one with any real support would simply continue to cap expenses at their 2005-06 levels while providing more funds for counties to draw down once they reach their limit.

Still, Smith is preparing for the worst.

"I do not feel optimistic at all that the state is going to (help with) Medicaid again," he said.

But, he added, even if the cap is continued, the county is likely to find itself in a similar position this year.

"The cap they gave us is first come, first serve. I think we'll get a small percentage of (the draw-down funds), if we get any of it," he said.

He's estimating the county could end up pulling almost $1 million out of its fund balance before June 30 to pay off the Medicaid burden once it hits the cap.

"Even if they do the cap (again), that cap's got to increase by $45 million to $50 million, and I don't think even that'll cover it all," Smith said. "But we can't afford to take anything out of our reserves. We've been trying to build our reserves for the past three or four years in order to handle debt."

The need to handle a significant amount of debt is due in large part to the school system, which is likely to request more than $121 million in its new facilities budget -- $105 for new construction and renovation and almost $16 million for operating costs.

Debt service on that type of project, Smith added, would likely be somewhere around 5 percent interest for 20 years.

The school board also is expected to request $18 million for its current expense budget, as well as another $12.5 million in order to implement several new programs.

But, Smith told the commissioners, they shouldn't expect to see any significant departmental increases as he and his budget team have spent hours scouring every line item of every request and making sure that every cost increase results in more productivity, efficiency and revenue or a cost savings.

"The things we bring to you will be justified," he said. "There's not enough money to do everything people want us to do. We have to prioritize."

One area he does plan to expand, though, is the county's tax office.

He explained that the county needs more people to collect delinquent taxes, which should translate into more revenue.

"We've hit the ceiling on tax collections. We're running at about 96.5 percent and our goal is to get to that 97 percent (collection rate)," Smith said.

He also explained -- in response to questions from the commissioners -- that the Medicaid and school construction costs could impact the county's property tax rate, which is currently 73.5 cents per $100 value.

"That's a three cent tax increase just for (Medicaid)," Smith said. "And you're looking at a 45 to 46 cent increase in the tax rate to cover those two (school) issues."

But he would not say if the county is looking at a tax increase for the next fiscal year.

"I'm trying to find a way to cut back and reduce the impact on taxes. All I have right now is a working budget. It's not even a final working budget since I just got the school's," Smith said. "The next 60 days are going to be tough. This is going to be the toughest (budget) I've had in five-and-a-half years.

"I'm not sure what I'm going to recommend."