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INDEPENDENCE – Citing a possible deficit of more than $5.5 million by December, the Grayson County Board of Supervisors has begun crunching numbers for the 2010-11 budget.
County Administrator Jonathan Sweet addressed the board during its first work session last Wednesday night and noted that the goal of the meeting was to give supervisors a broad look at projected revenues and expenses the county will encounter as it moves into a new budget year.
Sweet first asked supervisors to consider informally adopting a budget mission as they begin the three-month process.
The mission stated the goal was “To develop a balanced budget with a focus on stabilizing the fiscal health of the county, while continuing to maintain the delivery of core services through plausible reductions in expenditures and incrementally increasing revenues without the over burdening of our citizens.”
It further defined “core services” as things such as the public school system, law enforcement, fire, rescue and care of prisoners.
Sweet began the work session by providing a financial snapshot of where the county was fiscally and where it is headed.
He first explained that his outlook was based upon returning to a once-a-year tax collection, with real estate taxes due in December.
Sweet said having only one-half of real estate taxes due in October and the other half due in April — along with the personal property tax — caused a significant cash flow problem because most revenue was coming in the second half of the fiscal year.
Supervisors made the change to twice-a-year tax collection last year after being forced to borrow $1 million to pay its bills in the early months of the 2008-09 budget.
Tax collections are slow to date, and Sweet explained that roughly 30 percent of the county’s taxes remain delinquent.
Would it have made a difference if the county kept once-a-year collection, Sweet was asked.
He said there was no way to know that, but that the county would have likely had a larger amount of money in the general fund by December.
Supervisors Chairman Larry Bartlett disagreed and remained adamant that the county made the right decision, from a cash flow standpoint, when it moved the first tax collection up to October and the second to April.
Bartlett added that other reasons may have contributed to slower-than-normal tax collections — such as the newly implemented trash fee, which was wildly unpopular when it passed last year and hasn't gained many fans to this day.
Sweet explained that he was being hypothetical in his explanation and that if all residents had paid their taxes on time, Grayson would have had 100 percent of its real estate taxes — the largest revenue generator for the county — by the end of the calendar year.
Instead, the county now has to wait until April to potentially have 100 percent of its largest revenue source.
He added that changing the collections back to once-a-year would not solve the deficit problem, but would help the county's cash flow.
“Cash flows and deficits are two completely different things,” Sweet said.
Sweet pointed out that in 2008 the county borrowed $1 million to pay the bills. One year later that line of credit grew to $2.35 million and the expectation for the next budget is for that amount to be $3.5 million.
For the current fiscal year, supervisors had budgeted to spend $17.07 million. However, Sweet pointed out to the board, through a detailed analysis of the 2010 budget, that the county is on track to spend roughly $18.8 million.
These numbers are simply estimates and Sweet explained that they could change daily.
The largest addition to the expenditure side of the 2009-10 budget was in community development.
Supervisors budgeted roughly $1.8 million for community development, but will likely spend $3.3 million this year — an increase of $1.5 million.
Of the $3.3 million, Sweet said that $2.3 million will pay back a tax anticipation note the county took out to cover expenses. This amount was never budgeted for last spring.
Not receiving state literary loans and a construction project running above the amount borrowed have put an additional strain on the county’s budget, Sweet said.
“We’ve got some cash flow issues… and we’ve got some deficit issues heading into next year,” he continued.
One way to offset the deficit issue is to decrease spending.
Sweet said hopes are to reduce all county budgets by a total average of 10 percent. However, simply reducing the expenses won’t be enough to cover the large gap.
“We could reduce every expenditure and it wouldn’t fix the problem,” he told the board. “We do not have enough revenue to cover expenses.”
While Sweet said he’d like to think the county is already running a “lean operation,” the objective for next year is to run 10 percent leaner.
During the meeting, Sweet provided the board with a detailed look at each line item on the expenditure side of the budget and at what level he would recommend funding each department.
Most included cuts, while other received some increases in local funding.
Departments receiving an increase mostly came from the constitutional officers pay.
Because of the drastic cuts from state funding to those offices, Sweet said he felt it was necessary to step in from the county’s perspective and help fund those departments.
The state made cuts to the departments this year and planned to continue those cuts into the 2010-11 budget, along with an additional cut.
Sweet said it would be his recommendation for the county to make up for that additional cut projected for next year.
Because the budgets are already so lean, Sweet explained that additional funding would drastically affect the ability of the departments to operate.
Some expenditures saw drastic decreases, such as the assessor, which saw a reduction of $170,255. This, however, was simply because the county paid for a reassessment during the current budget and won’t have to do it again next year.
Care of prisoners was another area that had a large cut.
Though the numbers only show a reduction of $27,858, it is actually larger than that.
Sweet explained that the proposed budget also includes a full-time salary for the Day Report Center Manager that was not included last year and that the program is also creating some revenue for the county.
Additionally, Sweet recommended reducing the refuse disposal line item by $10,500 and the refuse collection line item by $25,565.
The recreation center also managed to reduce its proposed budget by roughly $20,000 through the use of various programs that put volunteer and/or employees paid through other monies than local.
“I’m real proud of that,” Sweet said of the decrease in proposed funding needed.
The hot topic of debate between the school system and supervisors in recent budget discussions was how much the county will fund education.
Members of the school board are adamant that schools should be funded above the minimum funding, while supervisors have argued otherwise.
In the proposed budget, Sweet recommended the county fund the required $4.1 million to bring down the minimum state funding.
He added, however, that this recommendation could change over time.
Though the school board approved a budget with $4.1 million from the county, it requested an additional $900,000 for items such as new buses, adding back five school days to the calendar and the reinstatement of a few teachers.
“If we were in a better position, my recommendation may be very different,” Sweet said of his alma mater, which he noted holds a special place in his heart.
Sweet added that, while it can be argued that the county is only minimally funding the school system, they are actually spending above the minimum amount on education.
With debt obligations and a constant loss in ADM (the average number of students in the school system, which is used to determine funding requirements), the county is paying well above the minimum required.
The revenues in the county continue to lag behind expenditures in terms of growth.
For the current budget, Sweet passed out a detailed analysis of revenues and noted the alarming number of negative adjustments to the categories — in other words, less money is coming in than was budgeted.
Some of these are grant monies that weren’t received, and therefore weren’t expended. Sweet pointed out that while $17 million was budgeted, it looks like the county will only receive roughly $14.8 million — a shortfall of $2.3 million.
Sweet again pointed out that these numbers were extremely fluid and could change on a day-to-day basis.
In the meantime, the county is projecting a revenue of $18.14 million for the 2010-11 budget. That number is inflated, however, because $3.5 million of that is an anticipated tax revenue note the county will likely use to cover additional expenses, meaning the county will really only have $14.6 million to spend.
Overall, a draft cash flow analysis provided to the board shows a current deficit balance as of March 31 of $652,167. A side note shows the county general fund to be carrying a negative balance of this amount as of the end of March.
With an anticipated deficit from April 1 through June 30 — which includes school construction costs — of just over $2 million, the county is likely to end the fiscal year more than $2.6 million in the hole.
The projections continue into the next fiscal year and show an additional growth of $2.8 million to the deficit through November, with the total projected deficit as of December 1 surpassing $5.5 million.
Of that amount, the analysis broke it down as $1.9 million in funding of school construction and related interest costs and the other $3.5 million as operations — including repayment of the county’s line of credit.
Sweet pointed out that the numbers were simply projections and that they could change daily.
The bottom line, however, is that the county will have to make up the money somewhere. Whether that means tax increases or not has yet to be determined.
Once the county’s budget is proposed, it can be plugged into the financial forecast being developed and a tax levy needed to cover the costs will be formulated.
Sweet said that number will come from a third party and that it will be the real number needed to cover the growing deficit.
Supervisors will then be able to make adjustments to the budget and watch the needed tax levy increase or decrease with each change.
No mention of any tax increases was made during the meeting, and the supervisors will meet again on April 21 at 6:30 p.m. in the board room to continue working on the budget.
The board will also hold a public hearing on the school board budget that night.