Cut, raise or punt?
Washington County’s tough decisions lay ahead
The leaders in Washington County government have before them an unenviable task. They’re in a budgetary hole, sort of, and some of them have participated in the excavation. The approaching challenge for the 2018 budget year is to determine whether the county can slow or even stop the digging.
For 2017, the Quorum Court budgeted more than $65 million in spending overall for services like the Road Department, the Sheriff’s Office and county jail, animal control and sheltering, the courts, juvenile detention, employee health insurance, the 911 system and others. The problem for justices of the peace, who develop and approve each year’s budget, is the projected revenue for 2017 came in around $61 million.
That’s not necessarily a crisis. After all, state law prohibits the county from budgeting more than 90 percent of anticipated revenue, so there’s a built-in cushion of sorts. In addition, the 2017 budget anticipated ending the year with nearly $12 million in unappropriated reserve. We suspect a lot of counties would love to have that kind of money in reserve.
But what worries county officials is the trend. In 2010, the unappropriated reserve overall totaled more than $25 million. It’s gotten smaller and smaller each year as annual spending chipped away at what, in overly simple terms, might be viewed as the county’s savings account. Operation of the county jail and county employee insurance coverage has gotten more expensive, as have a lot of expenses.
The concern? Eventually, outspending annual revenue will whittle away reserves until there’s nothing left.
A county without any reserve has little flexibility, a reduced ability to respond to the unexpected. And not everything can be anticipated. For three year’s running, county officials have discovered budgeting errors that required mid-year adjustments, for example. Early this year, the assessor discovered an error that required the Quorum Court to allocate an extra $1 million out of reserves.
Back in 2012, justices of the peace felt comfortable enough with county finances to reduce property taxes by half a mill, dropping the county’s discretionary property millage from 4.4 to 3.9 mills. Cutting taxes is fun and popular, and one could reasonably argue that the county had enough money coming in. So the Quorum Court that year set the county on course for a tighter budget. That’s a fine budgetary philosophy — the idea that building too much in reserves really means the county is overtaxing its residents — but as costs continue to grow, it demands a day of reckoning at some point.
Is 2017 that day of reckoning? The other day, this newspaper reported County Judge Joseph Wood’s staff plans operational and staffing changes to save money. “It’s all money-orientated,” Chief of Staff Carl Gales said during a Public Works Committee meeting. “We do need a lot of fixing.”
The county judge oversees 15 departments. Wood took office in January. Other parts of the county budget is directed by other elected officials, such as the sheriff, assessor, collector, prosecuting attorney, county clerk and circuit clerk. Each elected official submits a budget to the Quorum Court annually.
Gales said the county judge is, for example, looking into using a contracted veterinarian at the animal shelter rather than having one employed by the county. Also, would leasing heavy equipment, such as for the Road Department, be less of a burden on the budget than buying and maintaining equipment? And can the county increase revenue by leasing some of its property at market rates?
Those are certainly the kinds of questions county officials need to be asking.
Wood’s predecessor, however, warned the Quorum Court last year that cutting costs won’t solve the county’s financial challenges. “A large part of the problem is your conscious decisions to continue to spend while refusing to replace the revenue you cut four years ago,” Edwards wrote at the start of last year’s budget work. “You cannot cut your way out of the county’s budget issues.”
Of course, you can. But the question is whether the public will accept the kind of cuts to personnel and services that would be required to get there.
Good news comes by way of sales tax and property tax numbers, both of which have posted a good showing so far in 2017. That could help close the gap between spending and revenue, but a big gap will remain. So will the choices: cut spending further, dip further into reserve to cover the gap, or raise tax rates so more revenue will come in.
So, taxpayers, what would you do?
Certainly, there’s no magic number that dictates how much the county should maintain in unappropriated reserves. Once the staterequired holdback is set aside, the Quorum Court could legitimately spend all of the other money. It wouldn’t be wise, but they could. The question every year is what’s an appropriate number to keep in reserves. Every dollar set aside in reserve is a dollar not spent for county services, at least within that budget year.
Cutting budgets is a responsible approach, to a point. Raising taxes is a politically unpopular solution. The former usually needs to happen before the public will ever feel good about the latter.
Of primary concern in the near future are the anticipated effects of the 2020 U.S. Census. In all likelihood, Washington County will see its revenue drop as a result, as growing cities make up a larger portion of the county’s population. Those numbers determine how revenue from the county sales tax is distributed. According to Washington County Treasurer Bobby Hill, it took the county until 2016 to get back to revenue levels it saw before the 2010 Census.
Quorum Court members have authority to impose up to 5 mills in property taxes. That’s the tax that members reduced back in 2012. Raising it to the full 5-mill level would generate another $3.7 million a year.
So Washington County isn’t in a financial crisis. Its leaders just have some hard decision to make: Cut spending, raise taxes or limp along again by allocating money from reserves in what can be considered only a temporary fix.
Getting 15 members to agree on any approach may prove challenging. Hopefully these local representatives can find a spirit of collaboration that often escapes our nation’s leaders. We recommend the Quorum Court act to build reserve rather than spend it, because it looks like the next Census will mean leaner times ahead when reserves will be needed. That’s something the county should make plans for.
Will the Quorum Court be able to look that far into the future and prepare Washington County for it?