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HomeMy WebLinkAboutAgenda - 04-24-2012 - 1 � 1 ORANGE COUNTY BOARD OF COMMISSIONERS • ACTION AGENDA ITEM ABSTRACT Meeting Date: April 24, 2012 Action Agenda Item No. SUBJECT: Fiscal Year 2012-13 Budget Drivers DEPARTMENT: Finance and Administrative PUBLIC HEARING: (Y/N) No Services ATTACHMENT(S): INFORMATION CONTACT: Frank Clifton, 919-245-2306 Clarence Grier, 919-245-2453 PURPOSE: To receive information in regards to the budget drivers for the upcoming fiscal year 2012-13 General Fund Budget. • BACKGROUND: At the Board of County Commissioners (BOCC) Retreat in February 2012, we provided information on possible budget impacts, based on the information available at that time, while anticipating the affects on the upcoming FY2012-13 budget process. The information presented at this work session will update the previous information based on the budget requests submitted by each County department and both school districts. We currently anticipate the FY 2012-13 General Fund budget to be approximately $178 million. Although we anticipate this to be the approximate amount of the budget, we are aware of several major budget drivers that will need to be addressed as we formulate and finalize the budget. The known budget drivers for the FY 2012-13 budget are as follows: • Medical Health Insurance increases — up to 11.5% $ .75 million • Retirees Health Annual Funding Requirement 5.20 million • Emergency Services Requests 1.80 million • School Districts Budget Requests — up to 6.10 million • Total budget drivers/impacts $13.85 million This represents 9.01 cents on the current property tax rate for the FY2012-13 budget. • I 2 Health Insurance Currently, the County pays approximately $6.6 million for health insurance across all funds for • employees ($5.5 million for the General Fund) each fiscal year. Additionally, the County pays approximately $1.4 million per year for all retiree health insurance related costs. For the upcoming budget year, Mark III Benefits and United Healthcare have informed us that we can expect up to an 11.5% increase in health insurance for employees and retirees for the fiscal year ending June 30, 2013. We estimate the increase and the effect on the FY2012-13 budget to be as follows: • Employee health insurance $.75 million • Retiree health insurance .85 million • Total $1.60 million Additionally, we anticipate, based on past experience that our health insurance costs will continue to increase by 15 to 20 percent per year as a result of claims paid in previous fiscal years, and the current average age of the County's workforce. Annually, this would represent an increase of $1.1 million to $1.5 million per year in health insurance for current employees and retirees. We must continue to explore options related to both funding and cost sharing health insurance expenses for employees and retirees going forward. Existing coverage and/or rate of increases to premiums are not sustainable within existing county revenue resources. • In the next few months staff and County insurance consultants will be bringing forth proposals from which the Board of County Commissioners can select an appropriate course of action. This will be a difficult decision for the Board. Other Post-Employment Benefits (Retirees Health Insurance Funding) As previously discussed, the County currently funds post-employment benefits/retirees' health insurance (OPEB) on a pay-as-you-go basis. Our required annual actuarial contribution is approximately $5.1 million per year. As a result, this leaves the County with a funding deficit and an unfunded OPEB liability of $62.8 million, as of June 30, 2011. Putting this in perspective, we recently issued debt to fund an elementary school, equipment, and refund existing County debt that totaled $58.9 million which represent the County's largest, most current, combined debt issuance. Our current unfunded OPEB liability is greater than that debt issuance. We will be proposing an approach to fund the liability beginning in the FY2012-13 Manager's Recommended Budget. If we do not start addressing this issue, it can and will, impact discussions with the bond rating agencies, impact our bond rating and the ability of the County to issue debt in the future. Additionally, as previously mentioned, the annual cost is increasing proportionately with the number of retirees. • 3 • Emergency Services We will be proposing increases in expenditures for Emergency Services (911 and ES) in FY2012-13. These proposals will be provided prior to completion of the effort of your appointed Emergency Services Work Group and the expected consultant's report. The final allocations can be adjusted based on later input, but considering the importance of these services to the public, necessary increased financial commitments are a reality. School Districts and Education Requests for Funding Both the Orange County and the Chapel Hill — Carrboro City Schools districts have requested increases in the per pupil allocation that the County provides to each district in the FY2012- 2013 budget. Orange County Schools is requesting an increase in the per pupil allocation from the County that would increase the current expense allocation $220 per pupil. This would raise the County's current expense allocation for both school districts to $3,322. This would represent an increase of$6.07 million based the projected average daily membership (ADM) provided by North Carolina Department of Public Instruction (NC DPI) for both systems. This funding request would represent 3.95 cents on the current property tax rate. Chapel Hill — Carrboro City Schools is requesting an increase in the local per pupil allocation • increase of $67. This requested increase in the local per pupil allocation for current expenses would increase the per pupil allocation to $3,169. This funding level would represent an approximate increase in the current expense for both school districts of $3.05 million, which would represent 1.98 cents of the current property tax rate based on the projected ADM provided by NC DPI for both systems. Employee Compensation A budget driver that has not been quantified, but is an issue across all of the departments of the County, is employee compensation. As we are interviewing and attempting to fill vacant positions, we are experiencing difficulty obtaining and maintaining employees due to the constriction of employee compensation. County employees have done an outstanding job of responding to increased demand for county services, provided by a smaller workforce, under difficult conditions. We will try to address this issue as we formulate the FY2012-13 budget. FINANCIAL IMPACT: There is not a financial impact as a result of accepting this information. The financial impact will result from funding decisions made during the FY2012-13 budget process. RECOMMENDATION(S): The Manager recommends that the Board receive the information and provide guidance to staff in regards to preparing the FY2012-13 Annual Operating Budget.