Approaches for Balancing the 2014-2017 Budget Deficit
Administration is striving to make the budget process as clear and simple as possible for the organization. One attempt to achieve this is through the publication of clear budget reduction targets. Administrator Verna McDaniel has declared four target areas in the Updated Financial State of the County:
A multi-faceted approach will be used to identify budget solutions, first and foremost, with a review of revenue opportunities. Counties in the State of Michigan do not have the authority to implement sales or income taxes, and property tax revenues are governed by statute set to limit growth. Revenue increases would therefore have to come from maximizing federal or state funds, or through fee increases. Every County Department Head and Elected Official will be asked to review their services for revenue generation ideas to help address the projected budget deficit of $6.99 million for 2014-2017. During the Updated Financial State of the County the revenue generation puzzle piece has been shaded in to indicate that is has been met as a result of the good news Equalization Director Ramon Patel reported in April. During the 2013 Equalization Report it was communicated that there was a 1.35% increase in taxable value (growth for the first time in five years) that results in additional property tax revenue of $2.4M each year 2014-2017. This new revenue generation and puzzle piece has been filled in to recognize it as being met for the 2014-2017 budget.
Beginning in April of this year, each Department will engage in Base Budget Development with Administration. They will first look at efficiencies or means to reduce the cost of doing business, then evaluate serviceability levels and address creative services towards positively addressing unmet needs in the community. We need to be open to change, continue to transform our services so that we are providing the best services, the right services, in the most cost effective manner possible. This will mean looking at root causes of problems and focusing on outcomes. This organization thrives on continuous improvement. It is through creative strategic thinking and discussions with all of our partners that this will become possible. A target of $1.83 million has been established for Operating Cost Reductions. To meet this target, the Administrator will declare budget targets for each individual department which will be based on the following factors:
- Past Reductions
- Alignment with BOC Priorities and Desired Community Impact
- Serviceability Requirements
- Collaboration Opportunities
- Potential to Evaluate Programs
McDaniel will also review funding allocations to Outside Agencies. A new integrated funding allocation process was adopted in 2009 shifting the majority of these funds to the Office of Community Development. This process provides a competitive bidding process along a set of standard community priorities. McDaniel has identified a $100k target for this area.
In January, 2013, Administration & Human Resources brought to the Board of Commissioners an overview of the collective bargaining process, including the status and process for negotiations with those labor union contracts which were set to expire 12-31-13. During February & March the BOC approved a recommended strategy for negotiations and on March 20, 2013, approved 10 year labor agreements with 11 of 15 union groups and 5 year labor agreements with the two supervisor union groups. The agreements are in alignment with the strategy outlined and results that:
- Eliminate the County’s long-term legacy costs
- Ensure pension funding for retirement
- Work within established budget projections
- Increase general fund reserves
- Ensure the long-term fiscal stability of the organization
- Secure union security with and for union partners
- Negotiated increases will assist with issues of internal compression
- Benefit modification and other policy changes will provide consistency in policy application
As a result of labor negotiations begin completed to the end of the first quarter and publication of the 2013 Equalization Report, long-term projections include personnel costs in alignment with settled labor agreements and the closure of VEBA retiree health and WCERS pension plans effective January 1, 2014. Thus, the final target declared during the Updated Financial State of the County was in the amount of $5.06 million in the area of Pension / Health Care Obligations. Even with the closure of VEBA retiree health care and WCERS pension plans as negotiated a reduction is necessary within this area to address the long-term legacy costs associated with these plans. As a result of the closure of these plans the required contribution to VEBA and WCERS rises substantially the first few years following the closure. Municipal Financial Consultants Incorporated and Buck Consultants have provided contribution rates for 2014 - 2017 which are used in the projections. In addition, there is State of Michigan legislation (Public Act 329 of 2012) that allows local governments to bond for their unfunded accrued liabilities if certain criteria is met and a specific process is followed. Therefore, the county is exploring the possibility of bonding for its unfunded liabilities associated with these plans. At this time long-term projections do not include any anticipated savings from bonding.