Dollars and sense

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By Elizabeth Troutman

Lean government seems like an understatement – Oldham County is trimming expenses for services down to bare bones. A police officer doubles as the county’s Internet technology specialist. The emergency management director also runs dispatch services. Oldham County offers a self-serve recycling center and runs a police force that hasn’t had funding to expand with a growing population in eight years. A nearly $3 million deficit acquired by county government in the past year is the outcome of a simple equation: revenue minus spending. But it’s a complicated problem to solve, with a weak economy and state mandates working against local governments. The state and counties will suffer due to a projected weak economy in 2008, which means the cost to run government will exceed the estimated revenues. And while residents are eager to raise pitchforks against economic initiatives like Oldham Reserve and an airport board, county financial officers say the real enemies are state mandates' that devour more of the county’s budget every year, including the increasing retirement pensions and jail expenses. The Kentucky General Assembly convened in a new year with the leadership of Gov. Steve Beshear Tuesday. Among a list of items on the agenda include evaluating retirement plans for the nearly half-million government employees in Kentucky. Retirement pension plan costs carry over to county governments, and are putting counties millions of dollars in the hole. Beshear announced a state fiscal crisis Dec. 27 – which he attributes to economic downturn and limited growth in state government employment – much worse than anticipated by the previous administration. State Budget Director Mary Lassiter projects a shortfall of $434 million for the coming year’s budget, which means the state won’t be able to pay its bills between January and June with a balanced budget.State officials projected revenues would rise more than 4 percent for the fiscal year of 2007, but the actual increase amounts to less than one percent. And local governments are feeling pinch of a weak economy as well, which keep revenues stagnant while costs peak beyond budgetary limitations. Simple equation, complex solutionShawn Boyle, Oldham County’s chief financial officer, said everyone has their own idea about solving the local budget crisis – familiar rhetoric is “selling” Oldham Reserve, disbanding the airport board or merging police forces. But Boyle and County Treasurer Stan Clark are searching for ideas to reduce costs without sacrificing necessary services. “These are not usable suggestions,” Boyle said of many ideas put forth by residents. “You have to say, ‘Stop and show me a reasonable cost-cutting technique.’”Boyle has beckoned magistrates to discuss the county’s financial status with him privately, and said he is willing to investigate any cost-cutting measure, no matter how far-fetched.Recently Clark researched whether a requirement for officers to leave cruisers at Oldham County Police headquarters would save money, only to discover minimal savings. Oldham County’s revenue increased about $400,000 this year, which falls short of the increase in health insurance and retirement costs. Hazardous duty retirement rates will jump 33 percent this year, which means a hazardous duty employee earning a salary of $40,000 will cost the county $70,000. “The retirement and health costs are tremendous,” Clark said. “Those two items alone are growing faster than the taxrevenues.”Clark stresses that fiscal court has not paid for any expenses linked to Oldham Reserve or the airport board, however, county government is scheduled to pay nearly $2 million for the first stages of development of Oldham Reserve this year, including the construction of Eden Parkway. He believes the economic benefits of Oldham Reserve will trump residents’ criticism when development begins to gain attention from businesses. But with a current budget strain, financial officers are trying to manage payments to limit an immediate increased burden on the budget. “Our goal is that we try to manage that to a point where fiscal court doesn’t have to put up any money,” Clark said. The insurance premium tax doubled in November, a revenue-raising measure necessary to keep the county afloat, Boyle said, but not enough to pull the county out of deficit. Fiscal court has dipped into reserves for the past seven out of eight years to balance the budget. “That money is to sustain what we already have, not to grow,” Boyle said. The county also carries the burden of paying to house inmates in the jail, which costs as much as $300,000 annually.Oldham County Judge-Executive Duane Murner said the Kentucky County Judge-Executives’ Association is lobbying for legislation to reimburse counties for jail expenses.And Oldham County is not the only county sailing a ship that appears to be fiscally sinking. Boyle said that Kentucky County Judge-Executive Association meetings reveal the commonality of a fiscal deficit, and Oldham’s neighbors are desperately finding ways to reduce costs. Oldham County: Not the only sinking ship Boone County Judge-Executive Gary Moore relates to the lean government strategies of Oldham County, even though his 2008 budget will more than double that of Oldham County. He reports that his government faces a $2.5 million deficit, and more than $1 million is attributed to the “pension problem.” Moore’s administration has found that taking time to research cost-saving measures has allowed them to tighten the budget. Magistrates voted to lay off six janitorial workers this year after finding an alternative cleaning service, saving $260,000. Moore said the administration plans to eliminate 20 other positions in 2008 as employees retire. “We’ve always been seen as a wealthy community,” Moore said of Boone County. “But when the economy goes down and expenses go up, we are not insulated against that.” Moore said the Boone County Sheriff’s Department had hoped to replace vehicles this year, but a tight budget wouldn’t fund upgrades. They were also unable to hire additional deputies and reduced the staff of their golf course. Even so, Spencer County’s fiscal court passed insurance premium and occupational taxes last year. With a $450,000 deficit – nearly a quarter of the county’s annual budget – and a depleted reserve fund, the last resort was passing fiscal burden to taxpayers. Spencer County Judge-Executive David Jenkins said county employees didn’t receive raises in 2008, but will pay a 4 percent occupational tax and 4 percent insurance premium tax. He attributes the budget crisis in Spencer County to several factors, but says the most devastating costs come from state mandates. Until last year, the county depended on property taxes, which generate about $600,000 in revenue, to fund services. Now, revenue from property taxes isn’t enough to fund the county’s emergency services department. About 10 percent of Spencer County’s budget funds the jail, which Jenkins said could cause insurmountable damage to any county’s budget. It costs about $25 to house an inmate at the jail, but if an inmate has a health condition that needs attention, the county is stuck with additional medical bills. Jenkins wants the state to assist with jail costs and retirement pensions.“The legislature is going to have to do one of two things,” Jenkins said. “They are going to have to meet their obligations — or they are going to have to give local governments more options.” State Local Finance Officer Lonnie Campbell says county governments struggle to maintain a balanced budget every year, but it is illegal to enter the coming fiscal year without a balanced budget. Oldham County magistrates will review spending in the coming months, and will submit a proposal for the budget to the state in April. The state requires a balanced budget by June 30, and keep tabs on every county government by reviewing quarterly spending reports. “We always have problems out there,” Campbell said. “It’s not uncommon that each budget year we have to go in and assist counties on balancing their budget.” If a county cannot balance the budget, the state can basically shut down county government operations. He said three possible solutions to an unbalanced budget are increasing insurance premium taxes, occupational taxes or the county’s property taxes which is limited to a 4 percent increase each year. “As time goes by, revenues stay and expenditures go up,” Campbell said. “We give counties all their options – we show them what they can cut out of their budget.”Dodging budget woes in a tough economy Judge-Executive George Lusby of Scott County isn’t afraid to share his secret to keeping Scott County’s finances in order. Lusby, who has served as judge-executive for 18 years, is proud to say he sniffed out problems – including jail expenses and retirement pensions – before they took a blow to his budget. He said looking to the future and preparing for state mandates has prevented county’s $31 million budget from plummeting into a deficit. Additionally, Scott County has been blessed with Toyota, he said – an industry that elevates county funding with occupational taxes. Toyota’s plant in Georgetown contributes 7,000 jobs to the local economy. Occupational taxes alone produce 60 percent of county revenue. “It’s not that we’re smarter than anyone else, we’ve got a good financial stream,” Lusby said. Scott County’s $17 million reserve fund is a safety net that most judge-executive administrations dream about. Oldham County’s reserve is about $5 million. Lusby admits that jail expenses consume about $2 million of his budget, but Scott County owes only two payments for development of a government building.“You have to adjust your taxes to the community you live in,” Lusby said. “You can have all this money and still be in trouble.” Murner said his goal is to have county finances in order by June 30, 2009. The county endures a burden created by a domino effect from state government. A bad economy prevents an increase in state revenues. As long as the state is dealing with a budget deficit, counties may be forced to foot the bill for jail expenses and retirement pensions. Rising gas prices and cost of living hit every level of government as well. Murner and county financial officers aren’t finished making room in the budget. He plans a study of the planning and zoning office to examine whether there are cost-saving opportunities within the department. He estimates the county has saved about $400,000 already with cost-saving initiatives, including refinancing the aquatics center pool and eliminating 10 government positions in May. Murner moved the jail administration to a vacant church on Jefferson Street in La Grange and renegotiated contracts with the telephone carriers. Cell phones provided to government employees are given only if necessary on a case-by-case basis. Murner has contacted other judges-executives in the state for ideas to reduce costs and trim expenditures. “We’re all kind of copying one another right now,” Murner said of other judge-executives. “The biggest expense we are facing is unfunded mandates from the state.” Murner hopes in 2009 the county will not need to borrow reserve money just to balance the budget.“It’s my objective that on July 1 that we will start living under a budget that is balanced – and that we can make that budget come true.”

E-mail us about this story at: elizabeth@oldhamera.com.