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HomeMy WebLinkAboutAgenda - 10-21-2002 - 3 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: October 21, 2002 Action Agenda Item No. 3 SUBJECT: 2002-03 State and County Budget Impacts DEPARTMENT: County Manager/Budget PUBLIC HEARING: (Y/N) No ATTACHMENT(S): INFORMATION CONTACT: As noted in "Background" section John Link or Rod Visser, ext 2300 Donna Dean, ext 2151 TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968-4501 Durham 688-7331 Mebane 336-227-2031 PURPOSE: To receive a preliminary report on how actions taken by the General Assembly during the 2002 session may affect Orange County's 2002-03 operating and capital budgets. BACKGROUND: The FY 2002-03 operating budget adopted by the Orange County Board of Commissioners was profoundly affected by actions taken, threatened, and/or anticipated to be taken by the Governor and the Legislature in their shaping of the State's budget for the same fiscal year. Given withholdings of County reimbursements that were predicted (and have since come to pass), the BOCC was obliged to make substantial reductions in the recommended 2002-03 budget, particularly in allocations to various capital undertakings. There was also very little funding available to address employee pay and benefits, and implementation of the Countywide pay and classification study could not be undertaken at the outset of the fiscal year. During this portion of the work session, staff will make a presentation and review the information in the attachments listed below to provide a refresher on budget actions the BOCC took in June 2002. Given the Legislature's action to accelerate the Article 44 half cent sales tax and the BOCC's adoption on October 15 of a resolution implementing that sales tax effective December 1, the Board may also wish to give some preliminary thought to actions it may consider later in the fiscal year to allocate portions of the expected $1.8 million proceeds to various functions the Board mentioned during budget work sessions. However, no decisions on that point are required at this work session, and the Manager strongly recommends that the Board give consideration to that at a later time in a phased approach as revenues are actually received by the County. Attachment 3a Fiscal Year 2001-02 Financial Update Attachment 3b Fiscal Year 2002-03 Financial Update Attachment 3c Potential Ways to Offset Possible Impact on County General Fund 2/18/02 Attachment 3d Update on Fiscal Year 2001-02 County General Fund Budget 2/18/02 2 Attachment 3e Adjustments to the Manager's Recommended 2002-03 Budget Attachment 3f Potential Uses for Social Safety Net (including State Budget Cuts and Orange Chatham Justice Partnership) Attachment 3g Potential Phased Implementation Approach for Allocating Additional Y2 Cent Sales Tax Effective December 1, 2002 FINANCIAL IMPACT: There is no direct financial impact associated with discussion at this meeting, but the Board will make decisions later on in the fiscal year that will require adjustments to the County's budget and capital project ordinances. RECOMMENDATION(S): The Manager recommends that the Board discuss the information presented and provide appropriate direction to staff. A476co mv4 `.4 10/17/02 Fiscal Year 2001-02 Financial Update June 2001 — BOCC adopted fiscal year 2001-02 budget that included $3.1 million in anticipated reimbursements from the State February 5, 2002 - Due to the State's fiscal crisis, Govemor Easley declares "Fiscal State of Emergency" • He announced plans to withhold a portion of local government reimbursements, totaling $209 million, in fiscal year 2001-02 • The anticipated loss for Orange County was projected at $712,000 \z7 February 18, 2002 — Preliminary year-end estimates estimated a County budget shortfall of between $712,000 and$862,000 at the end of fiscal year 2001-02 • Staff indicated that the County could absorb the potential deficit through the use of fund balance Spring 2002 — The County Manager's recommended budget for 2002-03 appropriated$2.4 million in fund balance • Commissioners appropriated an additional $216,000 in fund balance • Preliminary calculations projected year end fund balance to be about 9.6 percent of 2002-03 budgeted expenditures June 30, 2002 —As indicated earlier, the shortfall was absorbed through the use of fund balance • Presentation of year end audit for fiscal year 2001-02 is scheduled for November 19, 2002 Board of Commissioners meeting tAr 10/17/02 Fiscal Year 2002-03 Financial Update Spring 2002 — Manager's Recommended budget for fiscal year 2002-03 anticipated revenues totaling$3.1 million from State reimbursements. 7 June 2002 — BOCC anticipated that the General Assembly would balance the 2002-03 State budget by withholding reimbursements due to local governments. • The Board adjusted the Manager's Recommended budget downward to reflect the anticipated loss of$3.1 million. September 2002 — The General Assembly approved the 2002-03 State budget. • The State budget withheld reimbursements from local governments. • Reduced funding for certain State departments resulting in a "'trickle down" reduction to County departments—particularly human service related departments. • Authorizes the Governor to make other, yet to be determined, funding reductions totaling $25 million to balance the State's budget. •October 2002 — General Assembly approved Senate Bill 1292 authorizing counties to levy a Third One-Half Cent Local Government Sales Use Tax effective no earlier than December 1, 2002. • Orange County BOCC approved the Resolution authorizing the new sales tax on October 15, 2002. • According to estimates by the North Carolina Association of County Commissioners, anticipated additional revenue for Orange County for the current fiscal year are in the neighborhood of$1.8 million. Compiled by Orange County Budget Office 2/18/02 Potential Ways to Off Set Possible Impact on County General Fund Fiscal Year 2001-02 • As indicated on the attached spreadsheet, the County may potentially face a funding deficit of$712,000 to $862,000 for the current fiscal year. Should this be the case, the County could absorb the deficit through use of fund balance. • Fund balance offers local governments with resources to deal with unforeseen emergencies and revenue fluctuations that entities may experience during the course of a year. • On June 30, 2001, the County's unappropriated fund balance in the General Fund totaled $13.5 million. • It is important to note that the County has received only two quarters of sales tax receipts in the current year. While the first quarter receipts were healthy, receipts for the second quarter reflected predictions of lower than normal receipts. • There is a possibility that the economy and consumer spending may not rebound during the final two quarters of the year. Should that be the case, the potential deficit outlined on the attached spreadsheet may increase. • Potential ways to off-set further deficits include: Cumulative Amount Total Postpone contribution to the Affordable Housing fund $250,000 $250,000 Postpone contribution to the School/Park Capital Reserve Fund $300,000 $550,000 Postpone purchase of some Information Technology related equipment $150,000 $700,000 Reduce school recurring capital allotment (monthly allotment to both districts totals $185,200) $185,200 $885,200 • Over the next few months as the budget process unfolds, staff may identify other potential options to offset further deficits that may not be included on the above list. Compiled by Orange County Budget Office 2/18/02 Update on Fiscal Year 2001-02 County General Fund Budget February 15, 2002 I General Fund Expenditures General Fund Revenues Potential Budget Impact Potential Budget Impact From To From To Underspent Underspent Over Budget Over Budget Comments (Overspent) (Overspent) Comments (Under Budget) (Under Budget) Medicaid State Takes year-to-date 50,000 100,000) Reimbursements As estimated by NCACC (712,000) (712,000 expenditures(through January Takes historical and year-to- Lapsed Salaries Register of Deeds date collection activity into 2 into consideration and 550,000 625,000 Collections consideration 300,000 400,000 Projected allows for historical percentage Other Fees Takes historical and year-to- Underspending in spending during the last five months of the year date collection activity into County consideration Operations 250,000 375,000 100,000 200,000 Investment Takes historical and year-to- Earnings date interest rates into consideration (900,000) (1,000,000) Sales Tax 350,000) (650,000 Total Potential Impact on General Fund Total Potential Impact on General Fund Expenditures 850,000 900,000 Revenues (1,562,000) (1,762,000) From To Net Potential Impact on County General Fund (712,000) (862,000) 6130/01 Fund Balance(General $13.5 Million Fund only) Adjustments to the Manager's Recommended 2002-03 Budget - On June 27, 2002, the Board of County Commissioners approved the annual operating budget for the 2002-03 fiscal year. The budget adoption followed several budget work sessions where the Board adjusted the Manager's recommendations. The information below summarizes changes made by the Board. Revenues Increase Decrease Manager's Recommended Revenue Budget $122,850,400 Reduction of State reimbursements $3,070,363 Decrease Recommended Property Tax Increase by 2 cents(from 4.5 $1,853,600 increase to 2.5'increase making approved tax rate 83 cents[an increase of 2.5 cents over the 2001-02 rate Appropriated Fund Balance $216,063 Reduce funding allocation for the following Capital Projects appropriated in prior fiscal y ears: Equipment and Vehicles $100,000 Equipment Storage $139,150 Firearms Training $125,000 Justice Facility $295,000 Recreation&Parks Improvements $75,000 Utility Extension Development $165,000 Loan Pool Reserve $75,000 Orange Enterprises $10,500 Whitted Human Services Center $60,000 Total Revenue Changes $1,260,713 $4,923,963 Revised Revenue Budget 119,187,150 Expenditures Increase Decrease Manager's Recommended Expenditure Budget 1 $122,850,400 Increase funding for Social Safety Net $190,000 6 Month Hiring Freeze $740,000 Defer contribution to School/Park Reserve $308,000 Decrease contribution to Affordable Housing Initiative $190,000 Delay County contribution to School Capital` $924,000 Delay purchase of County vehicles and computer equipment storage $811,250 Reduce funding allocation for the following Capital Projects recommended in FY 2002-03: Information Technology $160,000 Lands Legacy Project $200,000 NHSC $85,000 Orange Enterprises $15,000 Senior Centers $150,000 Southern Human Services $170,000 Whiffed Human Services Center $100,000 Total Expenditure Changes $190,000 $3,853,250 Revised Expenditure Budget $119,187,150 Note:In anticipation of the loss of state revenues,the Board reduced the school recurring capital by$924,000. 10/17/02 Potential Uses for Social Safety Net The list on the following pages outlines State cuts that the County has experienced in the past year or anticipates experiencing in the current fiscal year. While, the General Assembly approved the State's 2002-03 budget in late September 2002, the State budget is not "balanced". The General Assembly has given the Governor the authority to "find additional funding reductions" that total $25 million, and it is anticipated that the majority of that amount would come from the Health and Human Services divisions of State government and trickle down to local governments. In anticipation of these cuts, the Board approved a reserve of $300,000 in the 2002-03 fiscal year budget (Miscellaneous Function) to cover at least some of the cuts that may come our way. A portion of the "reserve" was created by re-allocating funds from the Department of Social Services ($70,000) and the Child Care Challenge Grant ($40,000) that were included in the prior year budget. Since all of the State funding reductions has not been identified at this point, this is not intended to be an all-inclusive list of cuts for next year. It is also important to note that the State budget included funding cuts for Orange-Person-Chatham Mental Health and the Orange County Partnership for Young Children. As the State deliberates further and adopts the budget, staff will provide additional information to the Board. Page 1 10/18/2002 State Funding Cuts Category 1. Reductions that took place with State budget approval in Fall 2002 or enacted mid-year by the Governor's Emergency Budget Actions. These.reductions were absorbed in the individual departmental budgets for the current(2001-02)fiscal year. Department Description $ Impact on 2002-03 Budget Block Grant Reduction -used mainly to offset overall salaries of DSS social work staff $21,851 Program Integrity -offset costs of fraud investigations $25,000 State Adult Home Specialist -offset cost of position related to monitoring rest homes throughout the County $8,087 DSS Carolina Access -offset cost associated with the position who coordinates services for recipients of this Medicaid- related program $22,083 Smart Start -reduction in day care staff and elimination of funding for the adolescent parenting program $35,616 Sub-Total DSS $112,637 iLibrary State Aid to Libraries $17,703 Total Category 1 $130,340 Category 2. Reductions that were anticipated and incorporated into Orange County's 2002-03 Approved Budget Department Description $ Impact on 2002-03 Budget IV-E Administration - result of a change in federal guideline interpretation; offsets child welfare costs $61,585 Smart Start -offset costs of Day Care Social Worker; DSS DSS director has frozen position $40,000 Health Choice -offset total cost of Income Maintenance staff $81,000 Sub-Total DSS $182,585 Health Smart Start Programs -including elimination of Welcome to the World Program and funding for associated position, as well as reductions in other Smart Start programs $63,280 Block Grant- Associated with In-Home Care and Adult Aging Day Care $3,798 Smart Start- associated with literacy program for Latino Library population $1,500 State Aid to Libraries $10;721 Total Category 2 $261,884 Page 2 i I ' 10/18/2002 State Funding Cuts Funding reductions included in the State's 2002-03 fiscal year approved budget that directly impact County departments. In anticipation of these cuts,the Board approved a reserve of Category 3. $300,000 in the County's approved 2002-03 fiscal year budget(also referred to as the"Social Safety Net")to cover some of the cuts that may be"experienced by various County departments. It is important to note that this list is a compilation of the items that staff is aware of at this point and is not meant to be an all-inclusive list. Some County departments, such as Health and DSS, expect further funding cuts from the State since, the State's budget is not yet "balanced". The General Assembly has given the Governor latitude to "find additional funding reductions"that total approximately$25 million, and it is anticipated that the majority of that amount would come from the Health and Human Services divisions of State government. This list does not include funding reductions that other non-County agencies. such as the Partnership for Young Children, have experienced, nor does it include potential funding needs that DSS may have regarding emergency energy assistance for clients. Department Description $ Impact on 2002-03 Budget Local DSS Administration -offsets costs of public DSS assistance programs $15,000 Sub-Total DSS $15,000 Case Management Services for Children and Adults - decrease in Medicaid reimbursment rate $45,000 State Aid to Counties -offsets overall departmental costs $8,740 Health Temporary Assistance to Needy Families(TANF) - funding for"Out of Wedlock Births"program eliminated $10,000 Health Promotions -program funding reduced $2,500 Increase in lab rates (for pap smears)charged by State $4,500 Sub-Total Health $70,740 Libra Further reduction in State Aid to Libraries $9,649 Total Category 3 $95,389 Page 3 - 10/18/2002 Orange/Chatham Justice Partnership The approved State budget reduced funding for Orange County's Criminal Justice Partnership and Juvenile Justice programs by about$54,900. In anticipation of State funding reductions, the BOCC included $15,000 in a reserve fund in the County's approved 2002-03 budget for the Orange Chatham Justice Partnership. These funds could be used to make up some of the reductions made at the State level. The Commissioners may wish to request that Chatham County provide a similar funding scenario. Allocation re-I rial Sunstance Total Release Abuse Administra Revenue Program Treatment tion Programs Criminal Justice Partnership State Funds 123,916 60,718 53,198 10,000 0 Juvenile Justice State Funds 248,187 0 0 15,500 232,687 Orange County Contribution (As included in BOCC Approved 2002-03 Budget) 77,867 0 0 11,514 66,353 Chatham County Contribution (As included in BOCC Approved 2002-03 Budget) 59,237 0 0 28,000 31,237 Page 4 10/18/02 Potential Phased Implementation Approach for Allocating Additional 1/2 Cent Sales Tax Effective December 1 , 2002 Date of Receipt from State Date of Receipt from State Date of Receipt from State February 15, 2002 May 15, 2002 August 15, 2002 I o o CD o CD o C o °mam ° 0m Examples of items that the BOCC may wish Examples of items that the BOCC may wish Examples of items that the BOCC may wish to consider funding with additional % cent to consider funding with additional '/2 cent to consider funding with additional %\cent sales tax revenue anticipated this quarter sales tax revenue anticipated this quarter sales tax revenue anticipated this quarter _ ✓ Restore some portion of County's fund ✓ Restore some portion of County's fund ✓ Restore some portion of County's fund balance balance balance ✓ Restore some portion Public School ✓ Restore some portion Public School ✓ Restore some portion Public School Building Funds that were "frozen" in the Building Funds that were "frozen" in the Building Funds that were "frozen" in the State's approved budget for this year(total State's approved budget for this year(total State's approved budget for this year (total amount anticipated in current CIP is amount anticipated in current CIP is amount anticipated in current CIP is around $794,000) around $794,000) around $794,000) ✓ Reinstate some portion of Schools' ✓ Reinstate some portion of Schools' ✓ Reinstate some portion of Schools' recurring capital (amount of reduction recurring capital (amount of reduction recurring capital (amount of reduction reflected in current year budget totals reflected in current year budget totals reflected in current year budget totals $924,000) $924,000) $924,000) ✓ Begin phased-in implementation of the ✓ Offer additional assistance to employees ✓ Other items that the Board may wish to County's classification and pay study (with regarding the pay and benefit package consider possible implementation date of April 14, such as increased funding for dependent 2003 based on information presented at health insurance. the October 21, 2002 BOCC work session) ✓ Other items that the Board may wish to ✓ Offer additional assistance to employees consider regarding the pay and benefit package such as increased funding for dependent health insurance. Estimates prepared by the NC Association of County Commissioners project an additional $1.8 million for Orange County in fiscal year 2002-03. LAO