| December 11, 2012
Mr. Dale Copedge, Chairperson
Ingham County Board of Commissioners
Ingham County Courthouse
P.O. Box 319
Mason, MI 48854
Dear Chairperson Copedge:
I am pleased to present for your consideration the 2013 Ingham County Budget as adopted by the Board of Commissioners on October 23, 2012. The total recommended budget is $208 million, a $5.03 million or 2.48% increase from the 2012 amended budget. The general fund budget is recommended at $72.6 million, a $619,000 or 0.85% decrease from the 2012 amended budget.
In April, the Board of Commissioners passed a resolution setting priorities for the 2013 budget. This budget reflects those priorities including ensuring the long-term and short-term stability of the County’s finances, providing access to health care, supporting public safety, encouraging the use of appropriate sanctions for adult offenders, providing appropriate treatment and sanctions for at-risk juveniles, promoting recreational opportunities and fostering economic well being. However, as spending pressures mount and general fund revenues decline, it becomes increasingly more difficult to fund all of the Board’s priorities at serviceable levels.
The 2012 adopted budget assumed the County would be successful in bargaining short and long-term economic concessions with our unions. With the exception of only a few bargaining units, the County has been unsuccessful in negotiating settlement agreements in the open contracts. Based on the lack of bargaining progress, this budget assumes the status quo in that collective bargaining agreements are not in place. The County will continue to negotiate in good faith and ask our union employees for their assistance in resolving the ongoing budget challenges. Should any savings from union negotiations materialize, the savings could be used to offset some of the reductions included in this budget.
Similar to most units of government, a significant portion of the County’s budget is used to support employee compensation costs. In Ingham County, approximately 65-70% of the general fund budget is personnel related. Unfortunately, it is not possible to continue to balance the declining general fund budget, on an annual or ongoing basis, without reducing these employee compensation costs. Such expenditure reductions might include reductions in salary rates, an increase in employee pension contributions, health care savings, or the elimination of existing positions.
Contained is this budget is the discontinuation of the hiring freeze and hiring delay policies that have been in place since 2010. Hiring freezes cannot be used as a long-term budget reduction strategy. In addition, many departments have lost significant portions of their labor force over the last several years, and have had to perform their core functions with reduced staffing levels. Therefore, this budget gives departments the ability to replace employees as vacancies occur in 2013 in order to maintain their already reduced workforce.
The total property tax levy supporting the recommended budget will be 10.1863 mills. The proposed levies for County operations, 911, juvenile justice, Capital Regional Airport Authority, Potter Park Zoo, indigent veterans support, and Farmland and Open Space remain unchanged. The special transportation millage is increased slightly from a total of .48 mills to .60 mills, due to an increase approved by voters earlier this year. A new health care services millage of .52 mills was also approved by voters in November.
The single largest contributor to the County’s multi-year budget shortfalls is the decline in property tax values. Property tax revenues have traditionally accounted for approximately 60% of the overall general fund revenues. Property values declined for the fourth year in a row, and will likely continue to decline through fiscal year 2014. From 2009 through 2013, taxable values will have declined by 15%. In Ingham County, property taxes supporting the general fund have declined by $7.5 million since 2009. The recommended budget assumes that the property tax levy for county general operations will remain at 6.3512 mills. This operating levy will generate $40.58 million, a decline of $756,000 or 1.8 percent, from the 2012 adopted budget.
During the initial stages of the budget process, the Controller’s Office estimated the general fund shortfall for 2013 at $3 million. The shortfall is the difference between projected revenues and what it would cost to fund services at current year levels. Overall revenues were estimated to be $1.3 million below the 2012 projections. This includes a decrease of $1.34 million in property tax revenues, a $125,000 increase in state revenue sharing, a $305,000 increase in state liquor tax receipts, and a $450,000 decline in department generated revenues.
Overall expenditures were estimated to increase by $1.7 million in order to cover the cost of current services. The expenditure increases include adding back in the concession savings
upon which the 2012 budget was based; a projected increase in pension costs; eliminating savings from the hiring freeze; a substantial increase in the general fund contribution to the parks fund; and increasing chargebacks from the network, LOFT, and imaging funds. These increases were offset by savings in the indigent attorney fee accounts, assuming suspension of step increases, reduction in costs for foster care and juvenile placements, and not having to run a major election.
Solutions to the budget shortfall included the recognition of $335,000 in grant revenues not included in the Health Department’s request, recognition of a net $346,000 increase in Health Plan Management Services revenues associated with the proposed contract with the newly established Health Care Cooperative, a funding shift of $123,000 to the juvenile justice millage for the intensive probation program, and various revenue increases and cost savings totaling approximately $200,000. This left a $2.0 million shortfall that could only be realized with program and position reductions that are summarized below.
· $200,000 – Savings from contracting out jail medical services – elimination of 9 FTEs
· $1.24 million – elimination of an additional 24.0 FTEs in the following departments
- Health Department - 6.5 FTEs
- Circuit Court – 4.5 FTEs
- Cooperative Extension – 1.5 FTEs
- Central Services – 3 FTEs
- Sheriff – 3 FTEs
- Parks – 1 FTE
- Prosecuting Attorney – 2 FTEs
- Drain Office – 1 FTE
- District Court – 1 FTE
- County Clerk – 0.5 FTE
Overall, the proposed budget would result in the elimination of 33.0 FTEs, of which many are currently filled. With the cooperation of the department heads, elected officials, and the unions it should be possible to minimize the number of layoffs to less than 10.
The largest single budget reduction included in the Controller Recommended Budget was the proposal to close a post of the Jail at a net savings of approximately $512,000. This would have resulted in the elimination of six corrections officers. Due to the immense impact this reduction would likely have had on the entire law enforcement community and judicial system, the Finance Committee voted to use the entire $300,000 in unallocated strategic planning initiative funds as part of a solution to keep the post open. The remainder of the cost was offset by reopening the currently closed post of the Jail and renting the beds to the State of Michigan for a net revenue increase of $150,000, with the remaining balance coming from the 2013 contingency fund. This will leave a contingency balance of $353,259 for 2013. The Finance Committee also approved several other proposals presented by departments in order to restore some of the positions recommended for elimination in the Controller Recommended Budget.
As we look ahead, we should assume that property values will continue to decline with a corresponding reduction in property tax collections. More specifically, it is estimated that the property tax collections will decline in fiscal year 2014 by an additional $635,000 before stabilizing in 2015. State and federal revenue sources are also likely to decline, putting even more pressure on the County’s future budgets. Therefore, the County needs to continue to plan ahead and implement long term cost savings ideas in order to get through the next few budget cycles without decimating program priorities.
Despite all this discouraging news, the County’s reserves remain steady. The general fund undesignated fund balance at the end of fiscal year 2013 is projected at $14.5 million and the budget stabilization fund at $10.6 million. The cash provided by these reserves allows the County to operate without issuing annual tax anticipation notes. If these reserves were not available, the County would need to borrow a substantial amount each spring to provide cash for operations until property tax revenue is received in September. The time and interest costs associated with these borrowings would be substantial.
I would like to thank the elected officials and judges, department heads, agency directors, budget staff and all others involved in the budget process for their assistance and cooperation in the development of this difficult budget. The cooperation and sacrifices of county employees and unions have also been essential in this time of fiscal crisis. The acknowledgment of the County’s financial constraints on the part of all involved will enable Ingham County to continue to provide the quality of services expected by its residents.
Mary A. Lannoye
Mary A. Lannoye
Ingham County Controller/Administrator