Rock Island County Budget Committee met March 29.
Here is the minutes provided by the Committee:
1) Call to order and roll call
Committee members present: Richard Brunk, Nick Camlin, Mia Mayberry, Ginny Shelton, Kai Swanson, Rod Simmer (arrived at 9:08)
Committee members absent: Don Johnston
Others present: Dave Ross, Kenneth Maranda, April Palmer, Amanda Van Daele, Larry Wilson, Dennis Moran, Louisa Ewert, Kelly Fisher, Gerry Bustos, Larry Burns, Drue Mielke, John Brown, Mike Steffen
2) Review FY17 budget and consider options
Mr. Ross noted that there are a couple of things to talk about. In the first packet are the unaudited General Fund numbers for last fiscal year. They are unaudited at this point, but they will be close for the most part. There is only one area Mr. Ross wanted to draw the committee’s attention to. The adopted budget at the beginning of the year was $25,333,000 in anticipated revenues. Expenses were $28,172,000 for a General Fund deficit of $2.8 million. That was the original adopted budget. As they moved throughout the year, the amended budget moved to $22.2 million in revenue, so slightly reduced revenue estimates, and expenses increased to $28.5 million for a deficit of $3.2 million. That, again, is the budgeted amount. The unaudited actuals were $25.4 million in revenues, so the county brought in more than budgeted. Expenses were $26.9 million. The county spent $1.3 million less than the original budget and is $1.7 million better than the amended budget. That’s a General Fund deficit of $1.5 million, which is definitely better than $3.2 million.
Mr. Ross noted he wanted to start with that and call attention to the fact that Department Heads, Elected Officials, etc., through all the efforts they made throughout the year as a team, the county ended up doing fairly well even though there are still significant budget challenges ahead.
Mr. Ross said he’s giving a couple different overviews and then he’ll get into the nitty gritty on some options. He presented a spreadsheet for the General Fund only that lists 2015’s actuals, and the 2016-2018 budgets. The 2018 budget is from the five year projections he did early last year. It has not been updated. They are not accurate numbers, though they’re not necessarily inaccurate. They’re not fine-tuned yet. They’re early projections. Mr. Ross asked the committee to pay attention to 2016 and the difference of $1.5 million. That brings the fund balance down to $2.2 million for the sake of argument. If everything plays out this year as budgeted, the county will be down to half a million dollars in the General Fund budget. Going into 2018, they knew the General Fund wouldn’t survive. That’s why the county went to the electors and asked for the half cent. The county provided all the information as best it could – they were open, honest, and transparent with the public and obviously it did not pass. The county made cuts as necessary as a team this year to get to this point. Through all the expense reduction and revenue generation mechanisms, they’re still at a half a million dollar General Fund balance at the beginning of the year. That will not sustain the county into 2018. To start preparing everybody, for the FY18 budget, unless the county can somehow cut $2 million out of this year’s budget, they will need to do so next year. It’s going to happen.
Mr. Ross noted that he’ll explain where he’s getting that number from, and it’s still a little early, but the longer the county gets through this year and the closer it gets to FY18, the more accurate the numbers will be. The FY18 fund balance is negative $1.6 million. Clearly, they can’t have that. They can’t just cut expenses to get to a zero fund balance. The General Fund needs something there. Ideally, they want the 20-25% they set as policy, but that will mean additional personnel cuts. For the sake of argument at this early point, he’s using $2 million dollars in cuts so the General Fund would end FY18 with approximately $400,000-500,000 in fund balance. It’s early, it’s not policy, it’s just giving a general idea that there will need to be cuts in FY18, more significant ones. As it stands right now with all the other cuts the county has made, $2 million dollars represents approximately 40 employees. The reason he’s using the term employees for cuts is because almost everything Rock Island County does is personnel based. They have cut pretty much everything else. They are providing a service for the public. They are not building things and selling them for a profit. Rock Island County is providing a service as mandated by law for certainly everything in the General Fund.
The comparison and analysis he did, comparing Rock Island County to the next four comparable counties by population, the next three highest and one smaller, Rock Island County operates in the General Fund 20.1% more efficiently than they do as far as expenses per capita. Rock Island County is already significantly under what others are spending per capita and is looking at having to cut that even more.
Mr. Ross explained that he did a quick analysis of Cook County in the sense of sales tax. Rock Island County is at 0.25%, which is the lowest under Illinois law. Only Kankakee County is this low. Cook County is 1.75%. Mr. Ross asked the committee if they can imagine if Rock Island County had 600% more in sales tax revenue than it has now. That would compare Rock Island County per capita to Cook County. Cook County is home rule. They set that. The cities don’t get the sales tax. They get a very small percent and the county gets it all. Here the cities get the sales tax and the county doesn’t, but the county still has all of its mandated responsibilities to perform. That’s just the reality. Because of that reality, Rock Island County is looking at in FY18 having to cut even more than it has already. The more the county can keep expenses to a minimum now, the less the effect will be on FY18.
Mr. Ross noted that the Board hasn’t discussed this yet, but he’s certainly going to recommend that the Board consider going back to the voters in the spring of 2018, most likely for the same thing. He’d have to do the analysis and see if that’s where it’s still at. Even if the Board chooses to do that, to go back to the voters for half a cent public safety sales tax for the sake of argument, and the voters approve it, the county wouldn’t start seeing the revenue until late FY18. The county would already be below zero in fund balance and Ms. Palmer cannot allow that to happen legally. There will be cuts in FY18. There are no ifs, ands, or buts about it. He’s just preparing everybody ahead of time. It’s going to continue because of these external threats and the pressures the county has against it.
Ms. Mayberry asked if that is the earliest they can do a referendum. Mr. Ross said he hasn’t checked with legal, but he believes the spring of 2018 is the earliest. He’s not positive, though. Then it would come down to the voters as well. Obviously it always comes down to the voters.
Mr. Ross noted that the last packet is the current fiscal year. The front is revenue. There are some line items on the far left in the 300 series. Mr. Ross said he wants to pay attention to a couple of things for this year. For both revenue and expenses, this is through fiscal year to date as of March 27, which is when he ran it. That doesn’t mean all the revenues and expenses are entered into the system. Through February, and not even all those numbers are in, that would be 25% of the year. They would want to see revenues at at least 25% and expenses at no more than 25%. Mr. Ross drew the committee’s attention to the 335 series. Those are the taxes that the county gets from the state: state income tax, replacement revenue, sales and use, quarter cent sales tax, etc. A lot of those percentages are in the 17% range. Mr. Ross said he pulled those up and looked at them in New World Systems. As an example, for the quarter cent sales tax, the county has collected two months’ worth. That’s been deposited. Two months at 17% is right where the county wants to be for being on budget. They are not out of place on that. It is a cash flow issue because they are not paying in as timely a manner as Mr. Ross would appreciate. Replacement revenue is at 37%. He doesn’t know if they pay that quarterly, but that one is looking good. Ms. Palmer explained that it’s not quarterly or monthly. Certain months are picked out that they don’t pay.
Mr. Ross explained that as he has looked through revenues and expenses and compared budget to actual and nothing stands out as a red flag that would make him worry that the county will finish any worse than anticipated.
Revenues in general are doing well. Property tax money won’t start being collected until June. They are trying to make it until June. One of the higher expenses he was initially a little concerned with was Information Systems had spent $61,000 for outside contractual already. He’s not positive what that is, but he knows that they had to update one of the county’s systems. Ms. VanDaele said it’s the New World Systems contract. Mr. Ross said Mr. Davis had some other stuff too. Even though they may see a 75% used of that budget already when in theory it should be at 25%, not everything is cyclical. It’s nothing he’s worried about.
On the back page, the expense totals are on the middle of the sheet. The total General Fund expense is at 27%. That’s right where it should be. It’s right in range. He’s not worried about that. Revenue totals are at 17%. Again, those revenues, because property tax money is not coming in yet, are naturally going to be low. Under year to date transactions, revenue totals are $4.5 million and expense totals are at $7.3 million, the difference being $2.8 million. That’s what’s drawing the cash balance down at this moment. As of Monday, the General Fund had about $495,000. On a positive note, the county is authorized to borrow 85% of the corporate levy, the General Fund levy, which is about $5.1 million. The county has yet to borrow. They made it through the first quarter without any borrowing. Ms. Ewert said they borrowed $750,000 March 1. Mr. Ross said he missed that. So, with that $750,000, regardless he still estimates about $2-2.4 million to be borrowed to get through the end of June. That’s well below the amount the county is allowed and they will have that paid off by the end of the year. Again, that brings the fund balance down to the half a million dollar range.
Ms. Ewert noted that the General Fund is already in debt $1.4 million. There’s the $750,000 outside, $525,000 from working cash, and deferred payments.
Mr. Ross explained that with the year to date transactions, they’re currently at $2.8 million of expenses over revenues, which is natural at this point. That’s why, from a financial management side, they want to maintain a 20-25% General Fund reserve to make it through these periods of these first several months of the year without having to borrow. That’s from a proper financial management perspective. They’re just in a position where in order to accomplish that, it will mean reducing the various budgets even more just to accomplish the minimum that they need to do. These are the challenges the county faces and again. That comprehensive budget they put forth with the half cent public safety sales tax would have allowed them to accomplish the absolute minimums and the deferred maintenance and the capital improvement projects they identified. They could have paid cash for them and built up the General Fund reserve to the amount that met the minimums the County Board set. He thinks it would have actually been higher than that in five years. The plan is thorough; it’s just whether or not they can get the revenue source to accomplish it.
Mr. Swanson noted that in the meanwhile, if they’re talking about $2-2.4 million in additional borrowing, he assumes that’s through the tax anticipation warrants. He asked what the average interest is on that. Ms. Ewert said it’s 2.375% now. Mr. Swanson said it might be interesting to know the cost of the situation. They talked about the would’ves, could’ves, and should’ves of the referendum, but there’s no margin in doing so. It failed; that’s the thing. It might be more realistic to look at the costs of the failure of that referendum and what that will cost the county this year in terms of interest payments. He doesn’t want to add more work onto the great things the Treasurer and Auditor are doing, but if they could have an estimate of what the failure is...Ms. Ewert said she has a spreadsheet downstairs of the debt that estimates when they borrow...They do pay down principal first and pay interest at the end. Mr. Ross said if its $2.5 million, which is a loose number, and if it’s all year, which it’s not, at 2.375% it’s $59,375 if it’s all year. It would be slightly less than that, but that’s an employee right there.
Ms. Mayberry asked if it’s $2-2.4 million in addition to what they’ve already borrowed or including. Mr. Swanson said it’s in addition to funds that are owed. Mr. Ross said his estimate is bank borrowing, not working cash, from that point forward, so it would be in addition. Again, it’s an estimate.
The county is in a situation where he anticipates they will make it through this year in the General Fund. They need to start preparing themselves for when they get into the FY18 budget that there will be additional cuts. The extent of those...the further they go, it will make it a little better. Mr. Ross noted that he hasn’t created a budget calendar. He’s going to do so next week. He’s going to suggest that they maybe bump it up a little so that the County Board is talking final action a month ahead of what they did last year. That will give them wiggle room for notifications if they have to provide those. There is always the option that the County Board could reallocate the budget now. He doesn’t recommend that. They can reallocate and cut expenses now, mandating it. The county is at bare bones and the Elected Officials and Department Heads are doing a fantastic job. The County Board can always choose to start cutting now and force it, but he doesn’t recommend that insomuch as he’d rather cut what they need to for FY18, and the closer they get to there the more accurate his, Ms. Ewert’s, and Ms. Palmer’s estimates will be for what they’ll need to cut. Again, the county is a service industry and is already below minimum staffing. This will just make it worse. As long as everybody is prepared...There will be cuts in FY18 unless they somehow trim $2 million from the budget that they have already cut significantly. His advice would be, at this budget meeting, not to proceed with any additional cuts mandated but to continue to allow the Elected Officials and Department Heads to continue to do the great job they’re doing and analyze it in three months again. By that time, they’re also going to be within the budget cycle and starting the internal work amongst themselves for the FY18 budgeting process.
Mr. Brunk opened the floor to questions and comments.
Mr. Simmer said it’s time to put their big kid pants on.
Mr. Camlin asked how much they would ask the voters for in March. Mr. Ross said he doesn’t know yet. This summer, when he’s starting to put this all together, he will be able to come up with the number. He can’t imagine it would be anything less than they asked for before because the situation is even direr now since they’re having additional interest expenses. Most likely, it will be the same dollar figure.
Mr. Simmer asked what it failed by last time. Mr. Ross said he didn’t know. Mr. Swanson said a lot. Mr. Ross said it was pretty significant. Mr. Simmer said he wouldn’t plan on any of that. They need to plan it for not. If they get it, great. Mr. Ross said if they get it, they’re still going to have to cut. There are no ifs, ands, or buts about it. They’d be able to then revert back to 2016 staffing levels. That’s when the analysis was that the county was already 20% below the other comparable counties. At least they could go to that point and stay there. Mr. Simmer noted that Rock Island County is also one of the poorest in the state and they are comparing...Mr. Camlin asked where he got that data. Mr. Simmer said last year they were second or third worst. Mr. Ross said he has no idea. He compared Rock Island County by population to Sangamon, McLean, Tazewell, and Peoria. Mr. Simmer said maybe they could do it by income levels. Mr. Ross explained that the purpose was to see how efficient Rock Island County is compared to the other counties. It showed Rock Island County is very efficient.
Mr. Steffen said his constituents ask him how much the balance sheet would improve if the county sold Hope Creek. He thought he heard Mr. Ross say half a million dollars once and asked if that’s still it. If they sold Hope Creek, would they only improve by about $500,000? That number stuck in his mind. Mr. Ross said he has a bunch of numbers in his mind and isn’t sure exactly what the question is. Mr. Steffen asked how much it would improve the General Fund if they sold Hope Creek. Mr. Brunk explained that the $500,000 is the Maximus payment Hope Creek pays in to the General Fund. The sale of Hope Creek would actually...the General Fund would lose a half a million dollars there. He doesn’t know if they want to go into that right now, but there are some internal discussions that will be taking place over the next few days. If Mr. Steffen wants to follow up with him in the next week, he may be able to...
Mr. Steffen noted that Mr. Ross talked about Cook County being home rule and asked what it would take to change Rock Island County to home rule like Cook County. Mr. Camlin said a vote of the people. Mr. Steffen said it sounds like revenues would increase, so why don’t they pursue that. Mr. Camlin said because they’d be handing the county a blank check. If they won’t hand the county a check for half a penny, they aren’t going to hand them a blank check. Mr. Ross confirmed. He noted that it is true that home rule would be nice in the sense of then the Elected Officials are responsible to the voters and if the voters don’t like what they’re doing, they’re out. Ms. Shelton said she doesn’t think the voters understand home rule. Mr. Ross said from a political perspective, it would be very challenging. If they won’t approve a half a cent, why would they give a “blank check,” as it were? That would be the challenge, though that would solve it.
Mr. Swanson noted that there’s a move in Springfield right now that would reduce the size of municipalities seeking home rule. A challenge the county faces now in seeking home rule that works against it is there are two home rule municipalities in the county that both have dramatically higher sales taxes then the rest of the county. If the measure that’s currently in Springfield is approved and signed into law, they could see three or four more municipalities in Rock Island County getting home rule and past indicators would be that they would move their sales taxes up just as rapidly, making it yet harder for the county to get a half penny, which was the purpose of the exercise to begin with.
Mr. Mielke noted that if they are going back to the voters in 2018, he would suggest they don’t call it a public safety tax. He thinks maybe an operational tax. Some of the public don’t really ... one question he had brought to him when he was talking to people was, “Well, we’re already paying for those services.” They’re right. Maybe, since the goal is to increase the General Fund, they should just say operational tax or something a little...Mr. Ross said certainly when it gets to that point later this year, that’s a discussion they will have. Mr. Mielke noted that they did that a couple years prior to Mr. Ross coming on and that was an issue because the Sheriff then wasn’t on board because his budget wasn’t being increased.
Mr. Ross noted that a challenge the county faces is the fact that they are in Illinois. If they look at the way Iowa funds their schools, they do a lot of it through income tax. Illinois does it through property tax. It makes it much more challenging when they are seeing that their property taxes are too high, so why in the world would they want to approve a half a cent extra sales tax. They say, “I don’t want to. I already pay too much.” The state of Illinois, and this is an external threat they can’t do much about, makes it very challenging for a non-home rule county to do the absolute minimum it’s supposed to be doing for the public. That’s a threat they face.
Ms. Mayberry noted that in GHA, they have been talking about pending legislation to help revenues. She said Mr. Ross created that list and asked if there is anything on there or anything else that they haven’t looked at that could help the county and might get passed quickly enough to help. Mr. Ross said no. He could expand on that, but it’s a very quick no. There’s nothing on there that is going to solve these issues. This is a significant financial issue for the county. There are little things on there that definitely would help, but he also has little faith that the legislature will move quickly enough on anything.
Mr. Simmer asked the Sheriff if he’s been renegotiating with some of these smaller towns to try to increase for the coverage when they’ve taken over these little towns. He asked if it’s possible to open that up. He knows with the dog shelter, they aren’t getting payments from any of the cities and she’s struggling out there. He asked if that could that help lighten that. Sheriff Bustos explained that all the villages they provide direct police protection for, they do have contracts with them. At the expiration of those contracts, they renegotiate for the next few years. For example, right here is Port Byron and Cordova. They increased that a total of 7% over the next three years: 3%, 2%, and 2%. Mr. Simmer asked what the total is to cover them. When they want police coverage compared to what they are doing now, are they anywhere close to that? He asked if there’s room to move without squeezing. Sheriff Bustos said he doesn’t quite know what Mr. Simmer means. Mr. Simmer said for the cost of three to four officers, squad cars, radios, all that stuff, it had to be expensive to get in. He asked if they are comparable or anywhere close to that on what they charge them. Sheriff Bustos said it certainly helps the villages quite a bit when the county takes over, certainly with the quality and volume they’re getting. They’re getting better-trained people. The reality is that if the small police departments would be certified, the sheriff’s department would have to provide police protection anyhow, so it is a win for the county. He and his staff work diligently with these villages to make sure they are happy and get what they are looking for, especially with their ordinances and the police protection they want and certain times they want. Schools are involved. Mr. Simmer said he knows they’re strung thin and asked how much they are close on that. The villages had to save a ton of money on that. Sheriff Bustos said they did. To say that his department is spread thin is kind of an understatement. Any thought that they’d go less than they are now, frankly he can’t do it. They are doing their best. Mr. Simmer said he just wondered how much more is on the table. Sheriff Bustos said they increase the contracts a little bit. It’s a few thousand each year. Everything they are discussing now, the villages were in the exact same position. They are scraping by to make their budget work as well.
Mr. Ross added that they have all been looking at existing vendor contracts to see what they can re-open. They did the one for managed print services and saved give or take $4,000 a month to get the same services. They did the elevators and just got a 27% savings. They are doing a lot of these things. Nothing is the magic bullet. Sheriff Bustos noted that they are also about to change the garbage collection which will save thousands of dollars between now and the end of the year. They’ve always done what they can to renegotiate contracts.
3) Committee member opportunity for brief comments (no action can or will be taken based on any comments from committee members but the matter might be placed on a future agenda for consideration)
There were no further comments.
4) Adjourn
Meeting adjourned at 9:34 a.m. by Chair Richard Brunk
http://www.rockislandcounty.org/CountyBoard.aspx?id=40517
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