HomeMy WebLinkAboutAgenda - 11-01-2016 - 8-b - FY2016-17 First Quarter Financial Report 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: November 1, 2016
Action Agenda
Item No. 8-b
SUBJECT: FY2016-17 First Quarter Financial Report
DEPARTMENT: Finance and Administrative
Services
ATTACHMENT(S): INFORMATION CONTACT:
1. Narrative Gary Donaldson, (919) 245-2453
2. Revenues by Category and Paul Laughton, (919) 245-2152
Expenditures by Functional
Leadership Team Charts
3. North Carolina State Economic
Outlook
4. Investment Summary
5. Cash Flow Position
6. PowerPoint Presentation
PURPOSE: To provide a First Quarter General Fund and Enterprise Funds summary Financial
Report for the period of July 1, 2016 - September 30, 2016.
BACKGROUND: As part of meeting the periodic financial reporting requirements and providing
timely source information in regards to the financial status of the County, staff has developed
financial information related to the FY2016-17 First Quarter General Fund and Enterprise
Funds.
FINANCIAL IMPACT: There is no financial impact in receiving this Financial Report.
SOCIAL JUSTICE IMPACT: There are no Orange County Social Justice Goals applicable to
this item.
RECOMMENDATION(S): The Manager recommends that the Board of Commissioners receive
the FY 2016-17 First Quarter Financial Report and provide staff with feedback.
Attachment 1 2
RANGL. COUNTY
NOR! t..t t:AR()i.JNA..
FINANCE and ADMINISTRATIVE SERVICES
Gary Donaldson,CTP,Chief Financial Officer I gdonaldson @orangecountync.gov I 200 S.Cameron Street,Hillsborough, NC 27278 I 919.245.2151
MEMORANDUM
To: Board of County Commissioners
From: Gary Donaldson, Chief Financial Officer
Date: November 1, 2016
Re: First Quarter FY2016-17 Financial Report-Period Ending September 30, 2016
The First Quarter FY2016-17 report represents the Department of Finance and Administrative Services commitment to
providing important financial reporting to you, the County Manager, and our Residents.
The primary components of the County quarterly financial report are:
• General Fund Financial Performance
• Enterprise Funds (Solid Waste Fund and Sportsplex Fund)Financial Performance
• Economic Outlook Report by Dr. Michael Walden of NC State University
• Investment Portfolio Summary
The quarterly financial performance report is presented with a detailed comparison of FY2016-17 Budget versus Actual
and FY2015-16 Budget versus Actual indicating year to date revenues and expenditures performance. The primary goal of
this quarterly report is to communicate a concise financial status of the County's major operating funds.
General Fund Performance
The FY2016-17 General Fund performance is consistent with historical performance. During the first three months of the
County's fiscal year, expenditures normally exceed revenues due to the timing of Property Tax revenues which are due
September 1. The County's cash flow and ability to cover expenditures during this period is attributed to a strong balance
sheet.
General Fund Revenues
First quarter FY2016-17 General Fund revenues total$24.9 million or 11.5% of budgeted revenues,which is consistent
with 1Q FY2015-16 total of$24.6 million or 11.9% of budgeted revenues. This slight decrease of 0.4%is primarily
attributed to a timing variance,more specifically, the timing of Intergovernmental revenue associated with Department of
Social Services grants and ABC revenue. For 1Q FY2016-17, the Department of Social Service grant revenue was
1.
3
$1,742,466 as compared to $2,581.038 during 1Q FY2015-16,with timing variances in several Children and Family
Services and Economic Services programs. Property Tax revenues, including motor vehicles,reflects an increase of 1.1%
over 1Q FY2015-16,which is consistent with the forecasted 1.3% growth in assessed valuation in FY2016-17.
Summary of Major General Fund Revenues
FY2016-17 FY2016-17 YID% FY2015-16 FY2015-16 YTD%
Category Original Budget Revised Budget YTD Actual Collected Category Original Budget Revised Budget YID Actual Collected
Property Tax $ 149,498,811 $ 149,498,811 $ 20,612,100 13.8% Property Tax $ 147,551,332 $ 147,551,332 $ 18,746,742 12.7%
Local Option Sales Tax 22,066,641 22,066,641 10 0.0% Local Option Sales Tax 20,652,132 20,652,132 - 0.0%
Licenses and Permits 328,000 328,000 1,601 0.5% Licenses and Permits 313,000 313,000 1,207 0.4%
Charges for Services 11,681,503 11,702,503 1,914,848 16.4% Charges for Services 10,766,030 10,772,114 2,363,703 21.9%
Intergovernmental 15,787,579 17,300,131 2,277,038 13.2% Intergovernmental 15,000,278 15,234,098 3,389,114 22.2%
Transfers from Other Funds 2,712,600 2,712,600 - 0.0% Transfers from Other Funds 1,052,600 1,052,600 - 0.0%
Investment Earnings 155,000 155,000 - 0.0% Investment Earnings 52,500 52,500 5,656 10.8%
Miscellaneous 886,734 983,287 112,638 11.5% Miscellaneous 737,468 841,121 190,871 22.7%
Fund Balance Appropriation 12,726,944 12,726,944 - 0.0% Fund Balance Appropriation 10,650,770 10,804,066 - 0.0%
General Fund Revenues $ 215,843,812 $ 217,473,917 $ 24,918,235 11.5% General Fund Revenues $ 206,776,110 $ 207,272,963 $24,697,293 11.9%
Property Tax Revenues
1Q FY2016-17 Property Tax revenues total$20.6 million or 13.8%of budgeted revenues as compared to $18.7 million or
12.7%in the prior year. This increase is consistent with the forecasted 1.3% growth in assessed valuation for the current
fiscal year. It is important to note that Property Tax revenues are due September 1,with interest and penalties accruing
January 2017. The Tax Administration office historical billing versus collection rate is 99%. Property Tax budgeted
revenues accounts for more than 70% of the total General Fund revenue budget. The property tax category includes real,
personal, and motor vehicle taxes. Motor vehicle taxes are payable on the vehicle renewal date and the tax is based on
market value of the vehicle. The State remits this tax to the County on a monthly basis.
Local Option Sales Tax Revenues
1Q FY2016-17 and 1Q FY2015-16 Sales Tax revenues total$0. This is attributed to the timing of receipts from the North
Carolina Department of Revenue. The local government sales tax distributions in any given month reflect actual sales
comprised of up to three months prior collections. For example,August collections reflect July vendor sales,which are
processed and allocated in September,with a local government distribution made on or before October 20. The October
payment is the first month's sales tax distribution allocated to the July-June fiscal year. The second quarter financial
report will include Sales Tax revenues activity following the North Carolina Department of Revenue computation and
distribution to local governments.
The North Carolina Department of Revenue administers the following monthly disbursement of local option sales taxes
recorded in the County's General Fund:
• Article 39 (one-cent) -authorized in 1971, and is currently allocated on a point of delivery basis and proceeds are
allocated with local government units within the County. Food purchases are taxable. There is no restricted use.
2
4
• Article 40 (half-cent) -authorized in 1983, and it is currently allocated on a per capita basis;based upon the
county's population in relation state population total;proceeds are allocated with local government units within
the County. Food purchases are taxable. Thirty percent of this tax is for school capital outlay or debt retirement.
• Article 42 (half-cent) -authorized in initially in 1986, the allocation changed from per capita to a point of delivery
basis;proceeds are allocated with local governments within the County. Food purchases are taxable. Sixty
percent of this tax is for school capital outlay or debt retirement.
• Article 43 (half-cent) -authorized in initially in 1997 for public transportation, and is currently allocated on a per
capita basis. Food purchases are exempt pursuant to G.S.105-164.13B. This tax is restricted to public transit and
is accounted for under inter-governmental revenue in the County General Fund.
Note: Article 46 (quarter-cent) -authorized in 2012 is accounted for in a Special Revenue Fund, and not the General
Fund. The allocation is on a point of delivery. Food purchases are exempt pursuant to G.S.105-164.13B.
Charges for Services
1Q FY2016-17 Charges for Services total$1.9 million or 16.4% of budgeted revenues, as compared with 1Q FY2015-16
total of$2.3 million or 21.9% of budgeted revenues with actual collections in FY2016-17 lower than FY2015-16 due to
lower collections in Sheriff and EMS fees based on volume activity. The remainder of Charges for Services is comprised
of various departmental fees for services including Planning and Inspections, Environment,Agriculture,Parks and
Recreation,Aging,Animal Services, Health, Cooperative Extension, Library, and Register of Deeds.
Intergovernmental Revenues
1Q FY2016-17 Intergovernmental revenues total$2.2 million or 13.2% of budgeted revenues, as compared to 1Q
FY2015-16 total of revenues of$3.3 million or 22.2% of budgeted revenues. As noted in the revenue summary, this
variance is attributed to the timing of grant funds and is not a performance variance. This source of income includes
revenue received from the Federal, State, and other local governments. The Department of Social Services receives 64%
of the total budgeted revenues within this category.
General Fund Expenditures
1Q FY2016-17 General Fund expenditures total$50.9 million or 23.4% of budgeted expenditures, as compared with 1Q
FY2015-16 total expenditures of$51.9 million or 24.9% of budgeted expenditures,with actual expenditures in FY2016-
17 less than FY2015-16 expenditures by$1.0 million. The decrease of 1.5%is attributed to the timing of Debt Service
payments,which is $257,143 less in FY2016-17 than in FY2015-16 through the first quarter, the timing of payments to
Outside Agencies and the OPC Area Program,which is $578,719 less in FY2016-17 than in FY2015-16 through the first
quarter, less expenditures in Emergency Services of$398,437 due to less spending in recurring capital and several
operational accounts, and less expenditures in the Sheriff's Office of$296,139 due to less spending in recurring capital,
and the timing of contract services payments.
3
5
Summary of Major General Fund Expenditures
FY2016-17 FY2016-17 YTD% FY2015-16 FY2015-16 YTD%
Category Original Budget Revised Budget YTD Actual Expended Category Original Budget Revised Budget YTD Actual Expended
Community Services $ 13,654,700 $ 13,673,813 $ 3,065,898 22.4% Community Services $ 12,701,367 $ 12,885,239 $ 3,243,629 25.2%
General Government 10,094,440 10,099,440 3,304,161 32.7% General Government 10,017,348 10,106,511 3,123,570 30.9%
Public Safety 24,596,946 24,596,946 4,820,290 19.6% Public Safety 23,316,875 23,513,712 5,519,126 23.5%
Human Services 37,249,977 38,760,969 8,476,906 21.9% Human Services 36,377,062 37,218,040 9,498,524 25.5%
Education 84,259,340 84,259,340 20,226,335 24.0% Education 78,837,341 78,837,341 19,462,335 24.7%
Support Services 14,058,009 14,058,009 3,249,946 23.1% Support Services 13,470,911 13,686,485 2,995,831 21.9%
Non-Departmental 31,930,400 32,025,400 7,851,241 24.5% Non-Departmental 32,055,206 32,324,182 8,108,384 25.1%
General Fund Expenditures $ 215,843,812 $ 217,473,917 $50,994,778 23.4% General Fund Expenditures $ 206,776,110 $ 208,571,511 $51,951,399 24.9%
Please note that the reporting of Budget versus Actual expenditures is reflected by the Functional Leadership
Teams.
Community Services -Animal Services,NC Cooperative Extension, DEAPR, Economic Development,Planning and
Inspections.
1Q FY2016-17 expenditures total$3 million or 22.4% of budgeted expenditures as compared with 1QFY2015-16 total of
$3.2 million or 25.2% of budgeted expenditures. The 2.8%reduction in budgeted expenditures reflects a decrease of
$177,731 in the FY2016-17 budget attributed to reductions in contract services expenditures in Planning and Inspections
of$118,000, and expenditure reductions in all other departments within this functional leadership team.
General Government- Board of Elections, Clerk to the Board, County Attorney, County Manager,Register of Deeds
and Tax Administration
1Q FY2016-17 General Government expenditures total$3.3 million or 32.7% of budgeted expenditures, as compared
with 1Q FY2015-16 total of$3.1 million or 30.9%of budgeted expenditures. The majority of this increase is attributed to
contract services and temporary personnel expenditures in preparation for the upcoming 2017 Revaluation.
Public Safety-Courts, Emergency Services, and Sheriff's Office
1Q FY2016-17 Public Safety expenditures total$4.8 million or 19.6% of budgeted expenditures, as compared with 1Q
FY2015-16 total of$5.5 million or 23.5% of budgeted expenditures. The reductions are attributed to less expenditures in
Emergency Services of$398,437 due to a reduction in spending in recurring capital and several operational accounts, and
less expenditures in the Sheriff's Office of$296,139 due to a reduction in spending in recurring capital, and the timing of
contract services payments.
Human Services-Department on Aging, Child Support, Housing, Human Rights, and Community Development,
Library,Public Health and Social Services
1Q FY2016-17 Human Services expenditures total$8.4 million or 21.9% of budgeted expenditures, as compared with 1Q
FY2015-16 total of$9.4 million or 25.5% of budgeted expenditures. The Department of Social Services comprises more
than 50% of the human services budget, and is the primary driver of the first quarter expenditure reduction. The reduction
is attributed to less recurring capital expenditures in DSS associated with the café(Orange Works) addition at
4
6
Hillsborough Commons,which occurred in 1Q FY2015-16, and to the timing of payments to Outside Agencies and the
OPC Area Program.
Support Services-Asset Management Services, Community Relations,Finance, Human Resources, and Information
Technology
1Q FY2016-17 Support Services expenditures total$3.2 million or 23.1% of budgeted expenditures, as compared with 1Q
FY2015-16 total of$3.0 million or 21.9% of budgeted expenditures. The 1Q FY2016-17 year to date spending rate is
slightly above the prior year. These expenditures include required Finance and Administrative Service workers
compensation,bonds and insurance payments and Information Technology contract payments to service vendors.
Education
1Q FY2016-17 Education expenditures total$20.2 million or 24.0% of budgeted expenditures, as compared with 1Q
FY2015-16 total of$19.4 million or 24.7% of budgeted expenditures. The FY2016-17 Education Current Expense budget
was increased by$3.1 million over the prior year's budget. The Education expenditures are comprised of Current
Expenses to the Chapel Hill-Carrboro City School District and Orange County School District. Current Expenses of$19.3
million or 25% of budgeted expenditures was remitted to the school districts in the first quarter; this was $775,987 more
than the same period in FY2015-16. The remaining Education budget pertains to Fair Funding, Recurring Capital, and
Other Related County Support, specifically support to Durham Technical College(Orange County campus).
Non-Departmental
1Q FY2016-17 Non-Departmental expenditures total$7.8 million or 24.5% of budgeted expenditures, as compared with
1Q FY2015-16 total of$8.1 million or 25.1%of budgeted expenditures. The first quarter expenditures are 1%lower than
the same period in 1Q FY2015-16 due to the timing of debt service payments.
In summary, 1Q FY2016-17 General Fund Revenues and Expenditures are in line with the adopted FY2016-17 General
Fund Budget.
Enterprise Funds Performance
Solid Waste Fund
1Q FY2016-17 Solid Waste Fund performance is in line with the adopted FY2016-17 budget. First quarter revenues of
$1.7 million or 14.9% of budgeted revenues and expenses are$3.6 million or 30.1% of budgeted expenses. This compares
with FY2015-16 first quarter revenues of$1.6 million or 14.6% of budgeted revenues and expenses of$4.5 million or
40.0% of budgeted expenses. The FY2015-16 higher expenses are attributed to the replacement of a front end loader and
a rural curbside recycling truck.
Sportsplex Fund
1Q FY2016-17 Sportsplex Fund performance is consistent with the adopted FY2016-17 budget. The revenue stream is
comprised of Ice Rink-35% of budgeted revenues,Membership and Fitness-32% of budgeted revenues,with the
remaining revenues comprised primarily of Aquatic and Kidsplex. First quarter revenues of$747,781 or 22.5% of
5
7
budgeted revenues and expenses are$816,390 or 21.5% of expenses. This compares with FY2015-16 first quarter
revenues of$735,138 or 23.2% of budgeted revenues and expenses of$835,215 or 25.5% of budgeted expenses.
Enclosures
6
Attachment 2 8
Revenue by Category(1st Quarter)
Summary-General Fund
FY2016-17 FY2015-16
YTD% YTD
Original Budget Revised Budget YTD Actual* Collected Original Budget Revised Budget YTD Actual Collected
Property Taxes
Property Taxes 137,207,067 137,207,067 17,225,276 12.6% 136,413,322 136,413,322 15,524,040 11.4%
Motor Vehicles 10,064,360 10,064,360 2,846,416 28.3% 8,953,010 8,953,010 2,635,868 29.4%
Gross Receipts 64,634 64,634 26,374 40.8% 55,000 55,000 19,758 35.9%
Gross Motor Vehicle 0 0 0 0.0% 0 0 0 0.0%
Motor Vehicles-Interest 0 0 2,446 0.0% 0 0 984 0.0%
Delinquent Taxes 1,150,000 1,150,000 386,455 33.6% 1,150,000 1,150,000 438,362 38.1%
Interest on Delinquent Taxes 475,000 475,000 61,824 13.0% 450,000 450,000 61,069 13.6%
Late List Penalties 75,000 75,000 13,364 17.8% 75,000 75,000 15,568 20.8%
Animal Taxes 195,000 195,000 49,946 25.6% 200,000 200,000 51,092 25.5%
Beer and Wine 267,750 267,750 0 0.0% 255,000 255,000 0 0.0%
Property Taxes Total 149,498,811 149,498,811 20,612,100 13.8% 147,551,332 147,551,332 18,746,742 12.7%
Sales Tax
Article 39 One Cent 10,048,024 10,048,024 10 0.0% 9,429,650 9,429,650 0 0.0%
Article 40 Half Cent 6,995,840 6,995,840 0 0.0% 6,489,632 6,489,632 0 0.0%
Article 42 Half Cent 5,022,777 5,022,777 0 0.0% 4,732,850 4,732,850 0 0.0%
Sales Tax Total 22,066,641 22,066,641 10 0.0% 20,652,132 20,652,132 0 0.0%
Licenses and Permits
Privilege License 13,000 13,000 1,601 12.3% 13,000 13,000 1,207 9.3%
Franchise Fee 315,000 315,000 0 0.0% 300,000 300,000 0 0.0%
Licenses and Permits Total 328,000 328,000 1,601 0.5% 313,000 313,000 1,207 0.4%
Charges for Services
Aging 90,100 90,100 18,390 20.4% 67,100 67,100 26,901 40.1%
Animal Services 196,850 196,850 43,920 22.3% 193,100 193,100 51,750 26.8%
Asset Management 2,000 2,000 0 0.0% 1,156 1,156 80 6.9%
Board Of Elections 110 110 0 0.0% 54,495 54,495 220 0.4%
Child Support 1,100 1,100 225 20.5% 1,100 1,100 375 34.1%
Cooperative Extension 45,000 45,000 1,375 3.1% 20,000 20,000 1,000 5.0%
DEAPR 335,993 335,993 76,656 22.8% 317,823 317,823 79,164 24.9%
Emergency Services 2,642,215 2,642,215 295,063 11.2% 2,490,215 2,490,215 548,668 22.0%
General Revenue 629,890 629,890 0 0.0% 472,798 472,798 0 0.0%
Health 1,805,877 1,805,877 397,639 22.0% 1,588,127 1,594,211 406,232 25.5%
Library 27,550 27,550 6,824 24.8% 29,850 29,850 6,289 21.1%
OPT 105,100 105,100 7,138 6.8% 114,500 114,500 7,140 6.2%
Planning&Inspections 1,079,017 1,079,017 381,133 35.3% 1,065,865 1,065,865 370,637 34.8%
Register Of Deeds 1,552,000 1,552,000 470,296 30.3% 1,355,500 1,355,500 446,976 33.0%
Sheriff 2,785,000 2,785,000 197,593 7.1% 2,615,700 2,615,700 400,165 15.3%
Social Services 0 21,000 7,549 35.9% 0 0 0 0.0%
Tax 383,701 383,701 11,048 2.9% 378,701 378,701 18,104 4.8%
Charges for Services Total 11,681,503 11,702,503 1,914,848 16.4% 10,766,030 10,772,114 2,363,703 21.9%
9
Revenue by Category(1st Quarter)
Summary-General Fund
FY2016-17 FY2015-16
YTD% YTD
Original Budget Revised Budget YTD Actual* Collected Original Budget Revised Budget YTD Actual Collected
Intergovernmental
Aging 541,605 542,287 21,345 3.9% 532,367 535,185 36,275 6.8%
Animal Services 207,915 207,915 39,593 19.0% 218,218 218,218 500 0.2%
Child Support 1,322,766 1,322,766 143,246 10.8% 1,318,075 1,318,075 243,583 18.5%
County Manager 277,373 277,373 170 0.0% 0 0 0 0.0%
DEAPR 132,672 136,487 0 0.0% 132,838 135,728 2,890 2.1%
Emergency Services 0 0 0 0.0% 0 1,101 1,101 100.0%
General Revenue 152,627 152,627 0 0.0% 400,000 400,000 100,000 25.0%
Health 1,079,093 1,084,093 179,760 16.6% 973,772 1,009,763 278,858 27.6%
Information Technologies 19,645 19,645 0 0.0% 19,645 19,645 0 0.0%
Library 100,000 168,636 26,400 15.7% 100,000 100,000 24,687 24.7%
OPC Mental Health 40,000 40,000 7,994 20.0% 40,000 40,000 7,889 19.7%
OPT 849,783 849,783 44,578 5.2% 844,100 844,100 10,094 1.2%
Planning&Inspections 24,000 24,000 0 0.0% 24,024 24,024 0 0.0%
Public Safety Non-Dept) 277,731 277,731 69,423 25.0% 277,731 277,731 69,420 25.0%
Lottery Proceeds 0 95,000 0 0.0% 0 191,020 0 0.0%
Sheriff 646,469 646,469 2,064 0.3% 364,469 364,469 32,778 9.0%
Social Services 10,048,900 11,388,319 1,742,466 15.3% 9,709,839 9,709,839 2,581,038 26.6%
Tax 67,000 67,000 0 0.0% 45,200 45,200 0 0.0%
Intergovernmental Total 15,787,579 17,300,131 2,277,038 13.2% 15,000,278 15,234,098 3,389,114 22.2%
Transfers from Other Funds
Impact Fees 2,640,000 2,640,000 0 0.0% 1,040,000 1,040,000 0 0.0%
Other 72,600 72,600 0 0.0% 12,600 12,600 0 0.0%
Transfers from Other Funds
Total 2,712,600 2,712,600 0 0.0% 1,052,600 1,052,600 0 0.0%
Investment Earnings Total 155,000 155,000 0 0.0% 52,500 52,500 5,656 10.8%
Miscellaneous Total 886,734 983,287 112,638 11.5% 737,468 841,121 190,871 22.7%
Appropriated Fund Balance
Total 12,726,944 12,726,944 0 0.0% 10,650,770 10,804,066 0 0.0%
Total General Fund Revenue 215,843,812 217,473,917 24,918,235 11.5% 206,776,110 207,272,963 24,697,293 11.9%
10
Expenditures by Functional leadership Team (1st Quarter)
Summary-General Fund
FY2016-17 FY2015-16
YTD% YTD%
Original Budget Revised Budget YTD Actual* Expended Original Budget Revised Budget YTD Actual Expended
Community Services
Animal Services 1,998,579 2,000,979 454,607 22.7% 1,958,791 1,974,159 470,722 23.8%
Cooperative Extension 394,843 394,843 57,286 14.5% 379,843 379,843 72,579 19.1%
Department of Environment,
Agriculture,Parks&Recreation 3,760,893 3,777,606 862,114 22.8% 3,464,888 3,518,842 873,250 24.8%
Economic Development 529,029 529,029 119,533 22.6% 515,575 519,421 125,783 24.2%
Non-Departmental 2,483,505 2,483,505 730,310 29.4% 2,132,837 2,178,372 736,822 33.8%
Orange Public Transportation 1,473,738 1,473,738 215,382 14.6% 1,361,961 1,363,229 229,190 16.8%
Planning&Inspections 2,889,005 2,889,005 591,301 20.5% 2,762,364 2,826,266 699,919 24.8%
Recreation Municipal 125,108 125,108 35,365 28.3% 125,108 125,108 35,365 28.3%
Community Services Total 13,654,700 13,673,813 3,065,898 22.4% 12,701,367 12,885,239 3,243,629 25.2%
General Government
Board of County
Commissioners 882,158 882,158 272,813 30.9% 870,355 870,930 248,101 28.5%
Board of Elections 692,777 692,777 133,025 19.2% 1,063,148 1,063,148 164,901 15.5%
County Attorney's Office 575,714 575,714 125,591 21.8% 551,501 551,501 123,490 22.4%
County Manager's Office 3,269,489 3,274,489 1,436,859 43.9% 3,009,967 3,025,675 1,492,975 49.3%
Non-Departmental 120,900 120,900 147,226 121.8% 102,000 102,000 66,636 65.3%
Register of Deeds 932,603 932,603 237,324 25.4% 924,165 924,165 191,186 20.7%
Tax Administration 3,620,799 3,620,799 951,323 26.3% 3,496,212 3,569,092 836,280 23.4%
General Government Total 10,094,440 10,099,440 3,304,161 32.7% 10,017,348 10,106,511 3,123,570 30.9%
Public Safety
Courts 81,455 81,455 11,362 13.9% 90,655 90,655 20,141 22.2%
Emergency Services 10,499,901 10,499,901 1,970,975 18.8% 10,146,314 10,234,652 2,369,412 23.2%
Non-Departmental 411,052 411,052 90,088 21.9% 401,052 401,052 85,569 21.3%
Sheriff 13,604,538 13,604,538 2,747,865 20.2% 12,678,854 12,787,353 3,044,004 23.8%
Public Safety Total 24,596,946 24,596,946 4,820,290 19.6% 23,316,875 23,513,712 5,519,126 23.5%
11
Expenditures by Functional leadership Team (1st Quarter)
Summary-General Fund
FY2016-17 FY2015-16
YTD% YTD%
Original Budget Revised Budget YTD Actual* Expended Original Budget Revised Budget YTD Actual Expended
Human Services
Child Support Services 990,868 990,868 213,826 21.6% 965,640 965,640 224,501 23.2%
Department of Social Services 19,001,659 20,362,078 5,089,688 25.0% 18,153,438 18,760,681 5,562,152 29.6%
Department on Aging 1,995,475 2,069,076 397,305 19.2% 1,996,088 2,103,431 525,375 25.0%
Health Department 9,206,976 9,211,976 2,098,346 22.8% 8,600,516 8,724,386 1,938,345 22.2%
Housing,Human Rights,&
Community Development 519,341 519,341 48,912 9.4% 218,823 218,823 45,584 20.8%
Library Services 2,146,214 2,218,186 472,594 21.3% 2,081,930 2,081,930 467,613 22.5%
Library Municipal 568,839 568,839 142,735 25.1% 568,839 568,839 142,735 25.1%
Non-Departmental 1,492,131 1,492,131 13,500 0.9% 2,435,815 2,438,337 253,226 10.4%
OPC Area Program 1,328,474 1,328,474 0 0.0% 1,355,973 1,355,973 338,993 25.0%
Human Services Total 37,249,977 38,760,969 8,476,906 21.9% 36,377,062 37,218,040 9,498,524 25.5%
Education
Current Expenses 77,201,412 77,201,412 19,300,353 25.0% 74,097,466 74,097,466 18,524,366 25.0%
Fair Funding 0 0 0 0.0% 988,000 988,000 0 0.0%
Health and Safety Contracts 3,354,000 3,354,000 0 0.0% 0 0 0 0.0%
Other Related County Support 703,928 703,928 275,757 39.2% 751,875 751,875 187,969 25.0%
Recurring Capital 3,000,000 3,000,000 650,225 21.7% 3,000,000 3,000,000 750,000 25.0%
Education Total 84,259,340 84,259,340 20,226,335 24.0% 78,837,341 78,837,341 19,462,335 24.7%
Support Services
Asset Management Services 4,347,271 4,347,271 1,315,380 30.3% 4,295,957 4,455,287 1,253,571 28.1%
Community Relations 211,430 211,430 22,150 10.5% 188,716 189,941 44,829 23.6%
Finance&Administrative
Services 1,306,220 1,306,220 289,300 22.1% 1,247,920 1,248,482 234,923 18.8%
Human Resources 937,651 937,651 201,780 21.5% 945,127 947,346 165,668 17.5%
Information Technologies 3,209,342 3,209,342 1,195,615 37.3% 2,895,229 2,926,843 1,083,948 37.0%
Non-Departmental 4,046,095 4,046,095 225,722 5.6% 3,897,962 3,918,586 212,893 5.4%
Support Services Total 14,058,009 14,058,009 3,249,946 23.1% 13,470,911 13,686,485 2,995,831 21.9%
Non-Departmental
Debt Service 26,211,196 26,211,196 7,851,241 30.0% 26,913,693 26,913,693 8,108,384 30.1%
Transfers to Other Funds 5,719,204 5,814,204 0 0.0% 5,141,513 5,410,489 0 0.0%
Non-Departmental Total 31,930,400 32,025,400 7,851,241 24.5% 32,055,206 32,324,182 8,108,384 25.1%
Total Expenditures 215,843,812 217,473,917 50,994,778 23.4% 206,776,110 208,571,511 51,951,399 24.9%
*YTD Actuals include Encumbrances
*Divisions that moved between departments are shown in their new departments for both FY2016-17 and FY2015-16
12
Revenues and Expenditures (1st Quarter)
Summary-Solid Waste Enterprise Fund
FY2016-17 FY2015-16
YTD% YTD%
Original Budget Revised Budget YTD Actual* Expended Original Budget Revised Budget YTD Actual Expended
Revenues
Charges for Services 3,921,259 3,921,259 547,287 14.0% 1,840,518 1,840,518 462,351 25.1%
General Govt Revenue 7,386,396 7,386,396 1,205,355 16.3% 7,805,439 7,805,439 1,153,850 14.8%
Intergovernmental 368,000 368,000 28,299 7.7% 353,000 353,000 39,586 11.2%
Contribution from Equipment Reserves 314,300 314,300 0 0.0% 1,362,061 1,362,061 0 0.0%
Revenues Total 11,989,955 11,989,955 1,780,941 14.9% 11,361,018 11,361,018 1,655,787 14.6%
Expenditures
Personnel 4,064,663 4,064,663 830,805 20.4% 3,822,663 3,822,663 855,130 22.4%
Operations 5,782,982 5,782,982 2,778,203 48.0% 5,296,743 5,296,743 2,751,614 51.9%
Recurring Capital 824,281 824,281 0 0.0% 1,244,137 1,244,137 940,075 75.6%
Contribution to Equipment Reserves 1,318,029 1,318,029 0 0.0% 997,475 997,475 0 0.0%
Expenditures Total 11,989,955 11,989,955 3,609,008 30.1% 11,361,018 11,361,018 4,546,819 40.0%
*YTD Actuals include Encumbrances
M
.0 gggggg g g g gggg
g .t3' WCANONN 0 0 V e, 00 .
0 tS (911 (9I ' Pl ° ° glj '■1 (9 ° 14'
;
a.• ,10, QE t4 :, 8
• +, 0
g• .2
,. .2
co
0
7L",q 8
"-'
t
co
=
Cf
V -0 -.
N 44gggg g g 4 AgNN
g .t',
— 81 , 904.1 0 0 4
n -
L'
•, ,, .V, 0L9go 0 0 z.
mo .
+. ri i2, ,I,
.
..,
E
c E
t E E E E FA § E
w 4 14Ugg E 2 A 2
= 0
a ›. m ,-, - 2 - 2 2
a, u .
›
a,
az c°
t qE 0 2 g H9 ' 2
"-'
5
■3' 7.2 2
.t
_ 8 7 E
a
4''
•
x 0 0 0 0 ' 0 0 0 0 0 0 0 a ' ' 0 0 0 0 0 t ' 0 t '
o , 01 1 01 r..1 W O1 O m n V 6 N ° a 4 m m 01 01 O O m LI O l0 N
p : ey N to 01 ey eH e-i eH ,1 N 0 N N m t0 W ey N m ,1 <t ,1 N
n m m m N O d' 1 n 01 m m n LO to 0 n 01 m I,
m 0 N m n V N m 01 CO — <t O n t0 01 O N tO
To• m m o CI m m � 0 c co co to CI N o CI m co O N
*' 01 ' N tD O d' 01 e-i i(1 M. i(1 t, ' 01 O n M.W to e-i to M. M.
a 01 N 0 01 m 0 e-i if1 m m a m m m to n 011 N e1 <t m m
t0 m N W N H N 01 t0 t0 01 m m W
o 4 o ' o o <r
N y N N N N > Ln N
0 N m 0 0 0 0 01 0 0 0 m 0 m N LO N W m 0 0 0 0 0 0
t0 N m n 01 01 d' m n 0 N t0 01 01 n <t N m n
N MI m m CO t0 O m O 01 N N LO N ,1 n t0 N m 01 O 01 N
LL C. v N c to N N if1 <t tD LL Cu Cu N N N N <t N to• •• n O1 O tD O N V to tD m n Ca n O n O 0 <t n 1.0 m n
'j '0 N m eH 01 01 V CO m N .5 a in e■ m ey 01 01 <t m m N
m n o m t e- 1 m Cu m o p m < e-r M.
N 0 N r..1
N N
O d' v1 01 W 01 0 0 0 m 0 m 0 0 N to W 01 0 0 0 0 0 0
01 N O 01 01 V N m n n O 01 01 < o m n
,1 L.0 m 01 to 0 m o 01 N e1 n to e1 to 0 m 01 N
a o m m ui N ui < 1 - o C Cu o vi o m N vi <f e1•to
• n o O N V t0 tD m n Ca n to in n o N 01 to t0 m n Ea t n co
• 01 01 V m m N 0a'O n <t N 01 01 <t m m N
o N H < - m m N N < M m O m O e-+ O m O t..,
N N
i
L Y
CD L
L RS
CO 'p ' 0 ' 0 ' 0 ' 0 ' 0 ' 0 -p ' 0 0 0 0 0 0 0 0 0 0 0
3 a, N eI co m n CO 0 m to 01 m n Cu <t m to to 01 01 0 to n e� vi vi
-r^p 'o o N o ff ,1 H o m y� ti -o m n co co <t N o 4 e-i o 0
p : ey H n rn N V1 p N N N t0 co N <t m N N
ai
VI 4 �' w ••∎ iy > a
.�
'Q -,F, M O m W M u1 0 CD O V N W -� * m n fM °
— n N i m O
0 01
O 01 m O — N n W m 01 u n W 01 W n 3 0 N N m m 01 m
3 S ' o o ui o d'
n n v o o o N
c m m v U.. 47, <f to 'o e-i m - o N to
01 m o LO W N ey O 0
LL a 01 N m o N n n T › to m o t..., n
to co
N eN-i N M. ey c a O N N ey m
N n tD <t N 0 n 0 CO 0 u1 0 0 L E N n to <t N 0 n 0 m 0 v1 0 0
a) Z C tto N n n N O if1 co N ? C tto N n n N 0 I, W N
3 t/1 N N n tD W V t0 cl t0 m �•,, t/1 N a N n t0 W <t t0 m t0 W
C u Cl C, m N O V W 01 N <t 01 N N LL Cu Cu• m N 0 <t W 01 N <t 01 e 1 N
• •• n 0 Ol m 0 01 t0 m m rn 'p Ca n m o 01 m o 01 t0 co m 01
CD 'j -o <t 01 O m n if1 01 m n -j '0 <t 01 o m n m 01 m n
C
a, m N tp N < y art ¢ m N .s- N <t e-i M
W e M Q1 N
a N
X
N � m 0 0 n 0 CO 0 u 0 0 W N o 0 n 0 n 0 m 0 v 0 0
n d n n O u1 co N v t n n N O v co N
— o n v 0 0 V N 0 0 to m W n W N W < to 01 to W
N m N W V W 0 n < 0 m N C Cu m N f1 o W 01 n < 01 m N
• • < m � < m 0 01 t0 m n Ca <t m 0 m 0 01 t0 00 n
no • W m m n 0 01 m V 0a'O co
m co m n m 01 m <t
N N < e-+ m O N- Mr < e� M.
m H e-+ -r -r
N N
v 'o v 'o
• v m v
• v v v v L.L.v a
,p a -o ,� _ *w' ,p Q v
a o m o
. 0. O O_ m a O O_ @
O N o_'O = a v N O N O.'O 2 a N N
'o : m o v g LL ? '',_ w ii v 4 m p 'o TD,__ 2 T, w w
> mm z v - ,,>,- m v= 2 ` y _ N @ > _ z �
l7 Q2 V S m > l7 Q2 V S Lt m >
0 01 O N m u1 t0 n co 0 e-i m O 01 O N m v1 t0 n W 0 e 1 m
,1 N m CO m CO m CO m if1 m if1 e-i N m m m m m m m m m m
Attachment 3 15
NC STATE
THE NORTH CAROLINA ECONOMIC OUTLOOK
FIRST QUARTER 2016
Prepared by Dr. Michael L. Walden, William Neal Reynolds Distinguished Professor,
Department of Agricultural and Resource Economics,North Carolina State University
Contact Methods: phone: 919-515-4671; e-mail: michael walden@ncsu.edu
EIGHT NORTH CAROLINA ECONOMIC HEADLINES FOR 2016
1. GROWTH WILL CONTINUE: STATE REAL GROSS DOMESTIC PRODUCT WILL RISE
3.5%, FASTER THAN THE NATIONAL RATE
2. 90,000 NET NEW PAYROLL JOBS WILL BE ADDED
3. "HEADLINE"JOBLESS RATE WILL FALL TO 5.1%BY YEAR'S END
4. FASTEST JOB GROWTH WILL BE IN HIGHER-PAYING FINANCIAL,INFORMATION,
AND PROFESSIONAL/BUSINESS SECTORS BUT ALSO IN LOWER-PAYING
LEISURE/HOSPITALITY AND PERSONAL SERVICE SECTORS
5. "HEADLINE"JOBLESS RATE WILL FALL TO UNDER 5%IN ASHEVILLE,
BURLINGTON, CHARLOTTE,DURHAM,RALEIGH, WILMINTON,AND WINSTON-
SALEM
6. "HEADLINE"JOBLESS RATE WILL BE NEAR OR ABOVE 6%IN FAYETTEVILLE,
ROCKY MOUNT,AND RURAL NORTH CAROLINA
7. BIGGEST ECONOMC"PLUS" WLL BE FROM IMPROVED HOUSEHOLD FORMATION
GENERATING NEW SPENDING
8. BIGGEST ECONOMIC"MINUS" WILL BE FROM THE END TO OIL AND GASOLINE
PRICE DROPS—STILL, THOSE PRICES WILL REMAIN AFFORDABLE
1
16
Executive Summary: A Turning Point in the Economy
2015 represented a turning point for the current economy. After delaying for
several years, the Federal Reserve (the "Fed") finally made their move. They raised their
key interest rate by 0.25% points. If the economy continues to perform according to Fed
expectations, there will likely be several move modest interest rate hikes in 2016, resulting
in a federal funds rate of close to 1% by year's end. Still,with the all-items inflation rate
projected to register 2% for the year, the Fed's key interest rate will remain negative in
"real" (after-inflation) terms, so a "loose" or "stimulative" credit policy will still be
maintained—the policy will simply be slightly less loose and slightly less stimulative. In
short, the Fed is still encouraging borrowing and spending.
With inflation tame and labor markets not yet at full-employment levels,why did
the Fed make their move to raise interest rates? There are three reasons. First, the Fed
wanted to signal their confidence in the economy by implicitly declaring economic growth
can continue even with slightly higher interest rates. Second, the Fed wanted to begin the
slow climb to a federal funds rate eventually in the 3% range, high enough to allow the Fed
to reduce the rate when the next recession hits. Third, the Fed wanted to moderate the
advantages of investing in asset markets —like stocks and real estate— during a historically
low interest rate environment—in order to avert, or at least reduce—the possibility of
"asset bubbles". Asset bubbles are one of the prime causes leading to recessions.
The national economy performed rather well in 2015. Broad economic growth
(GDP)was above the post-recessionary annual average, although growth was well short of
the longer run (1990-2010) annual average. Employment growth was actually above the
long-run average growth rate. Productivity growth was better than the post-recessionary
average but under the long-run average. The housing market made strong—but not stellar
— gains.
The most notable differences for 2015 were for inflation, the household sector, and
the dollar's international value. The all-item's inflation rate was only 0.5%, due largely to
the dramatic drop in oil and gasoline prices. Households solidified their post-recessionary
gains,with a 5.3% gain in real (after-inflation) median household income, reductions in
relative household debt and debt payments, and a continued strong savings rate. The
dollar's international value jumped 25% compared to its post-recessionary average.
Driven by continued gains in the job market, average earnings and income, and—
importantly, household formation —the national economy should continue expanding in
2016. Real GDP growth will be slightly better at 2.4% - compared to 2.2% in 2015 —jobs
will increase, and the national unemployment (headline) rate will be under 5% by year's
end. The dollar's international value will peak,which will give some steam to exports and
the manufacturing sector. Improved household spending will propel the economy but also
boost debt loads and reduce savings rates.
The biggest change in 2016 will be in the financial sector with the path of short-term
interest rates on the rise. The rise in rates will have several impacts, including moderation
in asset buying, higher interest payments by households, and higher relative interest
2
17
payments on the federal debt. Still,with the Fed's cautious and measured pace, these
changes will not be dramatic.
North Carolina's economy grew faster than the nation's economy in 2015. Real
GDP growth was 3.4% vs. 2.2% for the nation, labor force growth was 3.2% vs. 0.6%,
household employment growth was 3.1% vs. 1.4%, and payroll employment growth was
2.2% vs. 1.9%. The state's unemployment (headline) rate did not drop consistently like the
national rate— despite the state's faster job growth rates— due to the extraordinary rapid
increase in the state's labor force.
As is North Carolina's tradition once an economic expansion takes hold, the state's
economy should again outperform the national economy in 2016. Labor force growth and
job growth should exceed national gains,with approximately 90,000 payroll jobs being
added. The state unemployment (headline) rate will approach 5% at year's end.
Strongest job growth will be in the upper-paying sectors of financial services, information,
and professional/business services and also the lower-paying sectors of leisure/hospitality
and other services.
The state's regional economic divide will also persist in 2016. Charlotte,
Greensboro/High Point, and Durham had the fastest relative payroll job growth in 2015,
while Fayetteville and Hickory actually lost payroll jobs. Rural North Carolina had a
good 2015,with payroll job growth in rural areas slightly exceeding the state growth rate.
In 2016 several regions—Asheville, Burlington, Charlotte, Durham, Raleigh, and
Wilmington—will have year-end unemployment (headline) rates under 5%. But the rates
in Fayetteville and Rocky Mount will end the year near or above 7%.
The Nation: Growth with a Twist in 2015
Gains in the national economy were strong enough in 2015 that the Federal Reserve made
a turn in their monetary policy. Late in the year the Federal Reserve (the "Fed") announced the
first increase in their key interest rate—the federal funds rate—since before the Great Recession.
The Fed cited the strength in the economy and no signs of an impending new recession for their
move. Analysts also think the Fed wants to moderate recent strong gains in asset markets—such
as the stock market—in order to avert an asset bubble. Asset bubbles are often forerunners to a
recession.
3
18
A look at key economic data in Table 1 supports the Fed's assessment of a reasonably
growing economy in 2015. Real(inflation-adjusted) GDP (gross domestic product)was
stronger than the average since the end of the recession(2010-2014) and approaching the twenty
year average from 1990-2010. A similar pattern was seen for real GDP growth per capita(per
person). Especially bullish were strong gains in both real personal income and real personal
consumption per capita, where 2015's numbers were above both the post-recessionary average
(2010-2014) and the twenty year average (1990-2010).
The national labor market also posted new post-recession improvements. The
"headline"unemployment rate—the rate quoted in the media—fell during the year and
approached 5%. Gains in the labor force and in both employment counts (household and
payroll) equaled or exceeded post-recessionary averages. Inflation continued to be a non-issue,
with the core CPI rate (excluding food and energy) coming in at the Fed's preferred 2%rate,
while the all-item rate was still much below the Fed's target. The all-item rate was clearly
impacted by the sharp drop in oil and gasoline prices. Also, interest rates were at near historical
lows in 2015, reflecting both the low inflationary environment as well as the Fed's continuing
accommodative posture.
Key business sector indicators were also upbeat. Although relative business investment
was below the recent(1990-2010)historical average, there was a gain from the post-recessionary
period(2010-2014). The same trend was seen for labor productivity. The housing market
continued to rebound. While the stock market's gains were considerably pared in 2015, this
result was not surprising considering the market has almost tripled since the bottom of the
recession. An international "vote of confidence"was registered for the U.S. economy with the
4
19
Table 1. Performance and Forecasts of the U.S. Economy.
1990-2010 2010-2014 20151 2016
annual average annual average
GENERAL
Real GDP growth rate 2.5% 2.0% 2.2% 2.5%
Real GDP per capita growth rate 1.5% 1.2% 1.4% 1.5%
Real personal income per capita growth rate 1.7% 1.0% 3.1% 1.6%
Real consumption per capita growth rate 1.8% 1.3% 2.4% 2.0%
Headline unemployment rate 5.8% 8.0% 5.0%2 4.7%
Labor force growth rate 1.0% 0.4% 0.6% 0.7%
Household employment growth rate 0.8% 1.4% 1.4% 1.3%
Payroll jobs growth rate 0.9% 1.8% 1.9% 1.7%
All-item CPI inflation rate 2.5% 1.7% 0.5% 2.0%
Core CPI inflation rate 2.4% 1.9% 2.0% 2.0%
3-month Treasury-bill rate 3.5% 0.1% 0.2% 1.5%
10-year Treasury-note rate 5.5% 2.5% 2.3% 2.8%
BUSINESS
Equipment investment, % of GDP 6.3% 5.6% 5.7% 6.0%
Labor productivity growth rate 2.5% 0.3% 1.7% 1.8%
Residential housing price growth rate 3.4% 1.5% 5.6% 4.0%
Residential housing starts growth rate 6.3%3 -11.2%4 8.7% 11.0%
Dow-Jones Industrial Average growth rate 7.7% 10.4% 1.1% 3.0%
Trade-weight dollar index 90.6 85.0 106.4 112.0
Net trade balance, % of GDP' -2.9% -3.4% -2.9% -3.1%
HOUSEHOLDS
Number of households growth rate 1.2% 1.2% 1.0% 1.3%
Real median household income growth rate 0.08% 0.07% 5.3% 1.5%
Real hourly earnings growth rate Not available 0.3% 1.9% 1.5%
Average weekly hours Not available 34.4 34.6 34.5
Household debt, % of GDP 75.0% 83.9% 80.0% 81.0%
Hsehold debt payments, % of disposable income 11.8% 10.6% 10.1% 10.2%
Savings rate, % 5.4% 5.8% 5.2% 5.0%
FISCAL POLICY
Federal budget deficit, % of GDP 2.5% 6.1% 2.4% 2.3%
Federal debt, % of GDP 62.8% 97.1% 100.5% 98.5%
Federal interest payments, % of GDP 2.2% 1.4% 1.2% 1.3%
MONETARY POLICY
Federal funds rate, % 3.82%6 0.08%' 0.15% 1.00%
Money supply growth rate 3.1%6 11.2%' 7.5% 5.0%
Excess reserves growth rate 0.4%6 181.8' -0.5% -1.0%
Money velocity growth rate 0.5%6 -3.9%' -2.0% -.3%
1 year over year based on the latest data; 'November;31990-2006;4 2006-2014;s`-`indicates a trade deficit; 6 1990-
2007;'2007-2014; Sources: Federal Reserve Bank of St. Louis; U.S. Dept.of Commerce; author's forecasts
5
20
strong gain in the dollar's value. Since a stronger dollar makes U.S. exports more expensive, a
downside of this "vote"was a slight reduction in exports. But with continued domestic oil
production reducing the need for imported foreign oil, the relative trade deficit maintained its
moderate level.
Households continued to improve their economic position in 2015. Due to low inflation,
real median household income grew a strong 5.3%, well above both the twenty year average and
the post-recessionary average. Real hourly earnings increased more than in the years since the
recession, and work hours also edged up. Household debt relative to GDP, which almost reached
100%prior to the Great Recession, moderated close to the 1990-2010 annual average. Low
interest rates also allowed households to post a thirty-year low in their debt service payments as a
percent of disposable income. The personal savings rate, which fell to negative readings prior to
the recession, continued to register above 5%.
With a stronger economy, the fiscal situation of the federal government became less
unbalanced. As a percent of the economy(GDP), the deficit in 2015 was below the 1990-2010
annual average and well under the 2010-2014 average when fiscal policy was used to stimulate
economic growth. The relative size of the total federal debt declined slightly in 2015. And again
— compliments of low interest rates—the carrying cost of the federal debt(federal interest
payments as a percent of GDP) in 2015 was under the post-recessionary average and just over
half of the annual average posted in the two decades from 1990 to 2010.
After almost a decade of first attempting to brake the decline during the Great Recession
and then trying to stimulate the economic recovery, monetary policy operated by the Federal
Reserve turned the corner in 2015. Fed policy was enormously accommodative during and
6
21
immediately after the Great Recession. Table 1 shows the federal funds rate—one of the Fed's
policy tools— averaged 3.8% during 1990-2007 but was virtually zero from 2007 to 2014.
Likewise, the annual growth rate in the money supply—another Fed tool—almost tripled
between the two periods. Two reasons—besides the weak economy—these actions didn't spark
higher inflation (as many feared)were the unprecedented increase in excess reserves held at the
Fed and the dramatic drop in money velocity. The increase in excess reserves was a way for the
Fed to create money as a backstop for the banks, but to keep that money at the Fed so as not to
elevate prices. Also, the decline in money velocity reduced the ability of dollars in circulation
to generate higher inflation.
At the end of 2015 the Fed announced a modest increase (0.25%points) in the federal
funds rate, the first of many expected rate hikes. Growth rates in both the money supply and
excess reserves also moderated in 2015, and the reduction in money velocity was also slower.
All these moves signaled a shift away from economic stimulation toward economic neutrality of
Fed policy.
The National Economy in 2016
The last(far right) column in Table 1 presents forecasts for the national economic
indicators in 2016. In general, the forecasts are upbeat and suggest a national economy growing
at a slightly faster pace than in 2015. Among the General measures, the biggest changes will be
in inflation and interest rates. Oil prices will stop falling— and may even rise modestly—in
2016, which will cause the all-item CPI rate to be closer to 2% - as compared to the 0.5%rate in
2015. Higher measured inflation will reduce some of the real per capita gains in personal
7
22
income and consumption. As a result of the Fed's tightening of interest rates, short-term rates
will certainly move higher. Long-term rates will also move up due to higher expected future
inflation rates and the view the Fed will push interest rates higher over a multi-year period.
The biggest change in the Business environment will be an increase in the rate of housing
starts and a moderation in the rate of housing price increases. The stock market will gain—but
only slightly—and the dollar will continue strengthening. The latter will present challenges for
the manufacturing sector and keep the GDP growth rate from being even higher than 2.4%.
With the Fed's interest rate moves, Households will see higher borrowing costs in 2016.
This will cause the relative size of household debt payments to increase and the savings rate to
fall. But more limited household borrowing will mean only a small increase in the relative size
of household debt. An acceleration in household formation will boost GDP growth.
For Fiscal Policy, faster economic growth producing larger federal tax revenues will keep
lids on the relative sizes of both the budget deficit and national debt. However, higher interest
rates will mean a rise in the relative size of federal interest payments. If the Fed continues
raising interest rates beyond 2016, the impacts on financing the national debt will become a
prominent issue.
The Fed is now on an announced track to be less stimulative in Monetary Policy. The
federal funds rate will jump to 1.00%by the end of 2016. Money supply growth will moderate
and excess reserves will slightly contract. A faster paced economy with higher interest rates
will accelerate money velocity.
8
23
The "R" Word
The current economic expansion, which began in mid-2009, is already longer than all but
three of the eleven post-World War II expansions. Hence, there is understandable concern about
the imminent possibility of a new recession.
Although no economic forecast is absolutely certain, all signs point to no recession in
2016. However, odds suggest a likely recession before the end of the decade. While the next
recession will be not be as severe as the Great Recession of 2007-2009, it will require
retrenchment by households and businesses for at least half a year. The best guarantee of a
moderate recession is modest debt loads by households and businesses going into the downturn.
The North Carolina Economy: Ahead of the Pack—But Not Everywhere and for Everyone
Table 2 shows the recent performance of the North Carolina economy on key indicators.
Compared to both the longer(1997-2010)period as well as the more recent post-recessionary
period(2010-2014),North Carolina performed much better on all measures.1 In particular, both
real GDP and real GDP per capita had growth rates 50%higher than the national rates. Labor
force growth was an astonishing 5 times faster than the national rate, and job growth from both
the household survey and the payroll survey were stronger than the comparable national growth
rates. Rapid labor force growth was likely due to in-migration of new households from other
states as well as a return of"discouraged workers" (unemployed individuals who had stopped
looking for work and therefore are not counted as officially unemployed) to the active
1 1997 is the beginning year of the longer period due to the unavailability of state GDP data prior to that year.
9
24
Table 2. Relative Performance of the North Carolina Economy.
1997-2010 2010-2014 2015 2016
annual average annual average
NC US NC US NC US NC US
Real GDP growth 2.5% 2.1% 1.3% 2.0% 3.4% 2.2% 3.5% 2.4%
rate
Real GDP growth 0.8% 1.1% 0.2% 1.2% 2.7% 1.4% 2.7% 1.5%
rate per capita
Headline 6.0% 5.8% 8.2% 8.0% 5.5% 5.0% 5.1% 4.7%
unemployment
rate
Labor force 1.1% 0.9% 0.06% 0.04% 3.2% 0.6% 3.0% 0.7%
growth rate
Household 0.6% 0.5% 1.4% 1.4% 3.1% 1.4% 2.9% 1.3%
employment
growth rate
Payroll jobs 0.4% 0.4% 1.9% 1.8% 2.2% 1.9% 2.1% 1.7%
growth rate
Sources: U.S. Dept.of Commerce; author's forecasts
labor force. The fact that the labor force grew faster than employment in North Carolina
explains the rise in the state jobless rate during some months in 2015.
Figure 1 shows the performance of the North Carolina economy and the national
economy on the broadest economic indicator- gross domestic product(GDP). The actual
quarterly rates are shown with the solid lines, and the trends in the rates are depicted by the
dotted lines. There is a definite pattern to North Carolina's growth relative to the nation. First,
the two are connected-analysis shows North Carolina's and the U.S's growth rates move
together two-thirds of the time. Said, another way, two-thirds of North Carolina's growth is
linked to national growth. Second,North Carolina's movement through the business cycle is
10
25
Figure 1. Quarterly Growth Rates (%) in Real GDP, North Carolina and the U.S, 2006-
2015.
2
1
1
ci N co c-I M c-I N c-I M ,: tti
-1
-2
-3
NC US Poly.(NC) Poly.(US)
Quarterly values at annual rates. Source: U.S.Dept.of Commerce
more volatile than in the nation. This can be seen with the smoothed growth rate patterns
(dotted lines) in Figure 1. North Carolina had higher growth rates prior to the recession (before
11
26
2008), lower growth rates during the recession and in the immediate aftermath, but higher
growth rates again as the economic recovery lengthened(2014 and 2015). This same pattern
has been observed during previous business cycles. The main explanation for the state's more
volatile growth pattern is its over-reliance on manufacturing. The relative importance of
manufacturing to North Carolina's economy is 70%higher than for the nation. But since
manufacturing follows more of a"boom and bust"pattern during the business cycle—due to
purchases dropping significantly during recessions but then returning strongly due to pent-up
demand in recoveries - states, like North Carolina, with larger manufacturing sectors also follow
more of a"boom and bust" economic pattern.
The state is expected to out-perform the nation again in 2016. The forecasted 2.1%
growth in payroll jobs will boost non-farm job numbers by close to 90,000. The state's
"headline"unemployment rate will drop to near 5%by year's end. Yet job growth will not be
evenly spread among sectors and salaries. Figure 2 shows the annual percentage increase in
employment in major economic sectors for the 2010-2014 and 2015 time periods. The
economic sectors are ranked from those with the highest average salaries at the top of the graph
(financial services is the top paying sector)to those with the lowest average salaries
(leisure/hospitality has the lowest average salaries). In general, during both periods the fastest
growth has been in the top and lowest paying sectors, and the slowest growth has been in the
middle paying sectors. This is a pattern that has been observed at the national level and is one
contributor to widening income inequality among households. The pattern will continue in 2016.
For decades a geographic divide in economic performance has prevailed in North
Carolina. Figure 3 shows annual average payroll job growth for the 2010-14 and 2015 periods
in the state's regions. In 2010-2014 the metro areas of Asheville, Charlotte, Durham, Raleigh,
12
27
Figure 2. Annual Percentage Change in Payroll Employment by Sector,NC.
financial sery
information Mk
prf/bus sery
manufacturing
government
construction
edu/hlth care
trd/transp/util
other sery
leisure/hosp
0 1 2 3 4 5 6
percent
•2010-2014 •2015
and Wilmington clearly outpaced other regions in growth. In 2015 the leaders were Charlotte,
Durham, Greensboro, Winston-Salem, and—perhaps surprising—rural North Carolina.
However, even with the relatively positive performance of rural regions of the state in 2015,
broad economic forces still point to further urbanization and faster population and job growth in
metropolitan regions of North Carolina in the years ahead.
Regional unemployment rate forecasts are given in Table 3. All regions are expected to
register lower jobless rates at the end of 2016 compared to late 2015. The metro regions of
Asheville, Burlington, Charlotte, Durham, Raleigh, Wilmington, and Winston-Salem will have
13
28
Figure 3. Annual Percentage Change in Payroll Employment in NC Regions
state
asheville
burlington
charlotte
durham
fayettevi{�■
greensboro-hp
greenville
raleigh
wilmington •
winston-salem
rural
-1.5 -1 -0.5 0 0.5 1 1.5 2 2.5 3 3.5 4
•2010-2014 •2015
Source:U.S.Dept. of Commerce
Table 3. Regional Unemployment Rate Forecasts, % (not seasonally-adjusted)
Region Actual October 2015 Forecasted December 2016
Asheville 4.4 4.1
Burlington 5.1 4.9
Charlotte 5.3 4.2
Durham 4.8 4.5
Fayetteville 7.3 6.9
Greensboro-High Point 5.7 5.3
Greenville 5.9 5.4
Hickory 5.5 5.3
Raleigh 4.7 4.3
Rocky Mount 7.7 7.4
Wilmington 5.3 4.8
Winston-Salem 5.2 4.8
Rural 6.2 5.8
Source:U.S.Dept.of Commerce;author's forecasts
14
29
year-end 2016 jobless rates under 5%. This rate has traditionally been considered "full-
employment". Due to military downsizing, Fayetteville will end 2016 with an unemployment
rate near 7%. Issues related to restructuring their economies for the 21'century will keep
Rocky Mount's jobless rate above 7% and rural North Carolina's rate near 6% in 2016.
Watch for Unknowns
A major problem with economic forecasting is the threat of the unknown—unpredictable
events that can erupt and disrupt economic conditions. There are two varieties of these
unknowns—those we know exist but can't predict their behavior, and those we don't even know
exist! In the first category are the obvious examples of severe weather, international hotspots
(North Korea, the Middle East, terrorism), and domestic disruptions like power outages or
medical epidemics. In the second category are—well, that's just it, we don't know!
As 2016 begins there are new concerns about the Middle East and the stability of China's
economy. Of course, these will require watching and monitoring. And at the end of 2016 we
will have the uncertainty, anticipation, and expectations associated with a newly elected
President. It will be an interesting and memorable year.
15
Attachment 4 30
Portfolio Balance-As of September 30,2016
Investment Jul 2016 Sep 2016 Fund Type Rates
1 North Carolina Capital Management Trust-Cash Portfolio
2 Cash $ 44,501,968 $ 10,073,310 Operating 0.27%
3 Term - 18,011,919 Operating 0.61%
4 Total NCCMT $ 44,501,968 $ 28,085,229
5
6 SunTrust
7 Sportsplex Fund $ 1,669,083 $ 1,744,777 Operating *
8 Balance Account 1,899,820 1,899,820 Operating *
9 General Account 2,076,822 7,558,090 Operating *
10 Money Market 4,300,403 4,300,679 Operating 0.04%
11 Total SunTrust $ 9,946,127 $ 15,503,366
12
13 BB&T
14 Lockbox $ 4,619,055 $ 4,618,960 Operating *
15
16 Finistar
17 Finistar $ 1,653,955 $ 1,654,878 Operating 0.33%(net rate)
18
19 Total Cash and Investments $ 60,721,105 $ 49,862,433
20
21 Commercial Paper
22 CP JP Morgan $ 5,000,000 $ 5,000,000 0.83%
23 CP Toyota 5,000,000 5,000,000 0.86%
24 CP JP Morgan 5,000,000 5,000,000 0.96%
25 Total Commercial Paper $ 15,000,000 $ 15,000,000
26
27 Total Investment Portfolio $ 75,721,105 $ 64,862,433
*These funds represent amounts to meet liquidity requirements.
Prepared by:Davenport Company LLC 10/24/2016
Attachment 5 31
General Poseiteion
Jul-16 Aug-16 Sep-16
BEGINNING CASH BALANCE $ 64,834,252 $ 53,190,205 $ 53,346,963
RECEIPTS $ 292779993 $ 1493899946 $ 892309545
DISBURSEMENTS $ 1399229040 $ 1492339188 $ 1499309882
NET CASH $ (1196449047) $ 1569758 $ (697009337)
ENDING CASH BALANCE $ 5391909205 $ 5393469963 $ 4696469626
The first quarter of the fiscal year specifically the month of September represents
the lowest cash balance period.
Attachment 6 32
A-
ult E6 No
Vo-RT 1 A
DEPARTMENT OF FINANCE AND ADMINISTRATIVE SERVICES
FY2016-17 FIRST QUARTER
FINANCIAL REPORT
33
Quarterly Financial Report Contents
• General Fund Revenues and Expenditures Analysis by Major
Revenue Categories and each Department by Functional
Leadership Team
• 5-Page Narrative explaining Major variances (1St Attachment)
➢ Narrative delineating any material variance by either
Performance or Timing
• Detailed Comparison of FY2016-17 Budget versus Actual and
FY2015-16 Budget versus Actual Table (2ndAttachment)
• NC State 2016 Economic Outlook (3rdAttachment)
z
34
General Fund Revenue Overview
• Solid revenue performance consistent with improving
economy and consumer confidence
• Property tax revenue performance reflects Tax
Administration's Office collection efforts; improved
processing of returned mail and increased taxpayer
participation in payment plans; property tax revenues
comprise 70% of Budgeted General Fund revenues
• Sales tax revenues accounts for three months of economic
activity; these revenues are the next largest revenue source
accounting for 10% of Budgeted General Fund revenues
• Remaining 20% of revenues consists primarily of
Intergovernmental and Charges for Services
3
35
General Fund Revenues Budget versus Actual
Comparative Analysis
FY2016-17 FY2016-17 YTD % FY2015-16 FY2015-16 YTD%
Category Original Budget Revised Budget YTD Actual Collected Category Original Budget Revised Budget YTD Actual Collected
Property Tax $ 149,498,811 $ 149,498,811 $ 20,612,100 13.8% Property Tax $ 147,551,332 $ 147,551,332 $ 18,746,742 12.7%
Local Option Sales Tax 22,066,641 22,066,641 10 0.0% Local Option Sales Tax 20,652,132 20,652,132 - 0.0%
Licenses and Permits 328,000 328,000 1,601 0.5% Licenses and Permits 313,000 313,000 1,207 0.4%
Charges for Services 11,681,503 11,702,503 1,914,848 16.4% Charges for Services 10,766,030 10,772,114 2,363,703 21.9%
Intergovernmental 15,787,579 17,300,131 2,277,038 13.2% Intergovernmental 15,000,278 15,234,098 3,389,114 22.2%
Transfers from Other Funds 2,712,600 2,712,600 - 0.0% Transfers from Other Funds 1,052,600 1,052,600 - 0.0%
Investment Earnings 155,000 155,000 - 0.0% Investment Earnings 52,500 52,500 5,656 10.8%
Miscellaneous 886,734 983,287 112,638 11.5% Miscellaneous 737,468 841,121 190,871 22.7%
Fund Balance Appropriation 12,726,944 12,726,944 - 0.0% Fund Balance Appropriatio 10,650,770 10,804,066 - 0.0%
General Fund Revenues $ 215,843,812 $ 217,473,917 $ 24,918,235 11.5% General Fund Revenues $ 206,776,110 $ 207,272,963 $ 24,697,293 11.9%
• FY 2016-17 General Fund revenues are on target with the adopted budget; through the first quarter of $24.9
million or 11.5% of budgeted revenues has been collected as compared to $24.6 million or 11.9% in the prior
year
• Property Tax revenues totals $20.6 million or 13.8% of Budgeted Revenues compared to $18.7 million or
12.7% in the prior year; increased property values.
• Sales Tax revenues reflects three months of activity; the NC Department of Revenue (NCDOR) remittances
to local jurisdictions has normally lagged up to three months throughout the State; attributed to the time to
process and remit distributions to local governments
• Charges for Services revenues collected are $1.9 million or 16.4% of Budgeted Revenues compared to $2.3
million or 21.9% in the prior year. The decline is attributed to lower volume activity for EMS and Sheriff fees
• Intergovernmental revenues which includes grant remittances are $2.2 million or 13.2% of Budgeted Revenues
compared to $3.3 million or 22.2% in the prior year
36
General Fund Expenditure Overview
• Expenditures are indicated by the Functional
Leadership Teams
• Department Expenditures remain within Budgeted first
quarter appropriations
• 1 Q Spending accounts for 23.4% of Budgeted
Expenditures as compared to 24.9% in the prior year
• No significant variances attributed to Performance
• Debt Service payments are budgeted in Non-
Departmental
5
37
General Fund Expenditures Budget versus Actual
Comparative Analysis
FY2016-17 FY2016-17 YTD% FY2015-16 FY2015-16 YTD%
Category Original Budget Revised Budget YTD Actual Expended Category Original Budget Revised Budget YTD Actual Expended
Community Services $ 13,654,700 $ 13,673,813 $ 3,065,898 22.4% Community Services $ 12,701,367 $ 12,885,239 $ 3,243,629 25.2%
General Government 10,094,440 10,099,440 3,304,161 32.7% General Government 10,017,348 10,106,511 3,123,570 30.9%
Public Safety 24,596,946 24,596,946 4,820,290 19.6% Public Safety 23,316,875 23,513,712 5,519,126 23.5%
Human Services 37,249,977 38,760,969 8,476,906 21.9% Human Services 36,377,062 37,218,040 9,498,524 25.5%
Education 84,259,340 84,259,340 20,226,335 24.0% Education 78,837,341 78,837,341 19,462,335 24.7%
Support Services 14,058,009 14,058,009 3,249,946 23.1% Support Services 13,470,911 13,686,485 2,995,831 21.9%
Non-Departmental 31,930,400 32,025,400 7,851,241 24.50%. Non-Departmental 32,055,206 32,324,182 8,108,384 2
Fund Expenditures $ 215,843,812 $ 217,473,917 $ 50,994,778 23.4% General Fund Expenditures $ 206,776,110 $ 208,571,511 $ 51,951,399 24.9%
• 1 Q FY2016-17 expenditures are $50.9 million or 23.4% of Budgeted Expenditures compared with $51.9
million or 24.9% in the prior year. The variance is attributed to the public safety and human services
• Community Service includes Animal Services, NC Cooperative Extension, Economic Development, and
Planning and Inspections; spending rate of 22.4% of Budgeted Expenditures is lower than the prior year at
25%
• General Government includes Board of Elections, Clerk to the Board, County Attorney, County Manager,
Register of Deeds, and Tax Administration; spending rate of 32.7% of Budgeted Expenditures is slightly
higher than the prior year reflecting elections preparation and revaluation expenses.
• Education expenditures in line with prior year and represents Current Expenditures, Fair Funding, and
Recurring Capital; School Debt Service of $16 million is budgeted in Non-Departmental
• Support Services includes Asset Management, Community Relations, Finance, HR, and IT; spending rate of
23.1% reflects the payment dates for workers compensation, bonds/insurance, and IT contracts 0
38
•
conomic Summary
• NC State 2016 Economic Outlook indicates:
— Economic growth in North Carolina forecasted to continue; adding
86,000 payroll employment and another 90,000 forecasted for 2017
— By end of 2017, several regions Asheville, Charlotte, Durham, and
Raleigh- will have unemployment rates below 4%
— Key state-wide economic issues include preparing workforce through
training for Technology sector jobs
— Public policy question of balancing attracting businesses and
employment to regions lagging in economic growth juxtaposed with
developing skills of individuals living in lagging regions
— Continued widening income inequality between highest average salaried
sectors of Financial Services and Information Technology
— The lowest average salaries are in Leisure and Hospitality, Trade, Utility,
and Transportation sectors
Questions