Last updated: Sep 4, 2022
Aug 31, 2022. What to cut? County council begins work on 2023 budget, adoption scheduled later this fall
- The county council will meet on Sept. 12 at 6:30 p.m. for the budget hearing and members are expected to make cuts to requests then.
County Council – Budget Hearings – Aug 16-18, 5:00 p.m – 8:00 p.m. Additional hearings will continue in September and October. The final budget is due to the State by Nov 1.
- Next Steps. The Council needs to reduce the budget to eliminate the deficit. In the past, the commissioner’s budget accounted for the majority of the reductions.
The primary revenue sources for county government are income tax and property tax. The county also receives revenue from the gas and excise taxes that fund road maintenance.
The Overall Process: Councilman Critser shared his experience that the State always underestimates the revenue available to the county from income tax, property tax, gas, and excise taxes. The county also routinely underestimates expenses. The budget always gets “balanced” per statute by Nov 1. During the year, when expenses exceed budget, the needed changes (new appropriations and transfers) have to be advertised in the paper and approved by the council. The state also holds back county funds in cases of emergencies.
- State Board of Accounts Section K “County Council Meeting” There shall be a meeting of the county council not later than the last meeting in September, of every year, for the purpose of fixing the rate of the tax levy and making appropriations. [IC 6-1.1-17-5]
- The Ordinance for Appropriations and the Ordinance of Tax Levies must be read upon at least two (2) separate days before adoption. [IC 36-2-5-11] Therefore, the council must be in session for at least two (2) days at the regular annual meeting.
- Budget Consultant. One of the key worksheets (below) that kick off the discussion is provided by the county’s consultant, Jacque Clements, Association of Indiana Counties. The following “Worksheet” identifies the funds that the State Reviews. 2022 County Budget Worksheet
- Terms and Acronyms on the Worksheet:
- CCD – Cumulative Capital Development Fund. A remonstrance was filed against this tax increase in 2022. What is the status?
- Mental Health Obligation Fund (Health). Required by statute.
- Development Disabilities Budget – optional.
- Bond $2. The 3 million capital improvement loan (debt).
- Jail Bond. – Mortgage payment on the Jail. (debt).
- Cumulative Bridge Fund (Cum Bridge).
Indiana Fund Types and Fund Numbers – Chart of Accounts – 2021. (PDF. 2021-AIM-BudWrkshp-May2021-FINAL-LIVE)
Budget Deficit. The current draft of the budget is indicating a deficit of $943,970 (see Worksheet). The first drafts of the 2023 budgets submitted by the respective departments identified an increase of approximately $1, 026,100.00 or a 5.7% increase from 2022. Council members are provided a “budget book” that identifies the requested budget for the next year, the current year’s budget by Department (fund manager), what has been increased, and what has been reduced. The projected end-of-year balances for the current year are also helpful.
- A Budget Books is available to the public at cost – generally around $14-16 dollars.
- During the hearings, the council has asked for additional information to include reviewing the budgets for the past few years going back to 2020. This should help identify savings and trends in expenses.
Unfunded Requirements. There are always unfunded requirements. It helps to separate the “essential costs” (must-haves) from the costs of the “good to have if there is money” items. An easy way of planning for unfunded requirements is to ask the department to identify, justify, prioritize, and document their “unfunded requirements.” Then if money becomes available during the year, the council is not surprised and can be asked to fund the items based on county priorities. For example, the council will cut expenses this year by about one million. Might be useful to maintain a record of what was cut.
County Comprehensive Financial Plan. Unlike last year, the update to the plan was not available prior to the Budget Hearings. It is expected to be finalized within the next few weeks.
- An ending fund balance of 15% is the recommended goal. An opportunity for improvement in the county is to review these balances on a quarterly basis.
- It was suggested that each council member be assigned to review the performance of one or more of the departments’ budgets (actual to expected spending) during the year.
- Included in a quarterly or semi-annual review would be a review of the status of meeting the 15% funding balance objective.
- Performance Plans. The county does not have a formal plan where departments identify their vision (ideal/desired outcomes), goals, objectives, and accomplishments. An exception is the Highway Department for Roads and Bridges.
- Brown County Leader Network (BCLN ). The BCLN supports methods for making systemic improvements by reducing variation. Variation is a natural part of creation and represents the gap between the ideal or target and the actual situation. The quality profession through the Taguchi Loss Function has validated that the closer any product or service gets to the ideal/target, the higher the quality (more needs met) and the lower the cost (tangible and intangible) to the individual and society (community).
- System and Process Capability. I would assess the county’s budget process at a Level 2 – meets basic requirements.
Health insurance has been the most problematic (unpredictable/out of control) expense. Brown County opts to be self-insured which adds risk. The county is liable for the first $60,000 (?) of expense per person and is reimbursed for costs over this amount. Like any other insurance, higher expenses increase insurance costs.
- Actual expenses have routinely exceeded what has been budgeted. (600K last year, 400K this year). Changes have been made this year and were expected to result in significant budget savings. Savings are not reflected in the first version of the submitted budget thus the request for additional information from prior years. The “savings” could contribute to reducing the need to increase the funding while not reducing the budgeted amount from the previous year.
- County and Brown County Schools – Health Insurance – For the Record
- Conflict of interest? A few years ago, the commissioners and council extended the health insurance benefit to cover part-time employees including themselves. Not all of these elected officials have opted for the coverage. The health insurance cost and benefits would likely be considered among the best in the country. In 2022, Councilman Dave Redding led efforts to make needed changes in order to better manage risk and costs.
- Tax Increase. The increase in the property tax rate is determined by the Maximum Levy Growth Quotient (MLGQ). The estimated amount to be generated from the allowed higher tax rate is $176, 574.00. (Calculation is the MLGQ of 3,708,061 minus Normal Maximum Levy of 3,532, 487.) This increase is “optional.” The council has to vote to accept. In the past when Keith Baker was president of the council, the allowable increase was not accepted every year.
- “A tax rate is the percentage used to determine how much a property taxpayer will pay. A levy represents the total amount of funds a local unit of government may collect on a tax rate. In other words, the levy is a cap on the amount of property tax dollars a local government is allowed by law.” Ref: Indiana Gov FAQ
Tax Policy and Revenue Source. Counties have the option of allowing for relying on revenue from income tax or property tax but not both. Brown County opted for the local income tax (LIT) option.
- Brown County doubled the income tax rate in 10 years and recently shifted to freezing the income tax rate and shifted to relying on property tax.
- The maximum state income tax rate is 2.5% BUT the law allows for increases based on a growth quotient. Some counties have an income tax rate of over 3%.
- Brown County’s income tax rate (0.025234) is among the highest in the state but is among the lowest on the property tax rate.
- Tax Rates by Indiana County
Cost of Living Increases. County employees have been receiving cost of living increases that have ranged from 1-3%. It was 3% last year and likely this year. There have been years where no increases were provided. The council (Dave Critser) has estimated that the cost at one percent is about 35K.
Retirement Buyouts. The county offered employee buyouts this year. The cost (15k?) was anticipated to be funded by the respective reduction in payroll costs as a result of the temporary vacancy. Many of the vacant positions have been filled. Some offices (Auditor) chose to re-distribute the workload and pay stipends vs hiring a new person.
- Savings can be identified by the reduction in payroll costs from the prior year.
- A report on the results of the strategy has not yet been published.
Salary Increases. Departments can ask for higher grades and salaries. They need to do this is no later than the June Council meeting. The County approved several increases for the Sheriff’s Department and the Court. When considering the increases, the “total costs” including benefits, retirement, social security, etc are often not identified. These costs do become a factor in the budget.
American Rescue Plan Act (ARPA) Funding Spreadsheet. ARPA Spreadsheet
- Covid Premium Pay – ARPA funds. The county approved $700,000 for a $2.00 an hour increase for the “essential” county employees that worked with the public during Covid. This will be paid out over 3 years. These employees will not get the projected 3% cost of living increase during these years and would need a “9%” increase in year four to bring their salaries up to the respective current rate. How will this be budgeted?
- County Offices receiving ARPA and the 3%
Debt. The county also routinely maintains a debt (Increased from 2 million to 3 million to cover operating expenses and capital improvements (infrastructure) costs. The 3 million dollar loan was approved in 2021.
Capital Improvement (Asset) Management Plan. The county does not publish a plan to cover needed capital improvements (infrastructure) costs. Capital Improvements include maintenance, repairs, and replacements. The county currently has 14 buildings. Consequently, expenses that could have been anticipated and budgeted come as a surprise during the year. The council has identified the development of a plan as a priority for 2023.
Leases. A published plan is also needed for leases that would include technology. Total leased amounts can exceed a million. The Sheriff’s office has at least one 10-year lease at a cost of $500,000.
- A rationale for “No Plan.” A plan identifies expected infrastructure repair and replacement costs. An item could include parking lot paving, roofs, boilers, generators, air conditioning units, etc. For example, this year, over 500K was identified (a surprise to the council) as being needed to replace air conditioning units at the Jail. When anticipated expenses can be ignored, then funding can be spent on other favored initiatives such as additional healthcare-related benefits. For example, the Health Clinic benefit was expected to result in at least a 2-1 return on investment. This has yet to be achieved. No report on the status has been published.
- Commissioner Pittman identified 40 million dollars in unfunded costs for roads and bridges. County roads with high traffic typically need re-paving on a 10-year basis.
- Gas and excise taxes contribute to road and bridge maintenance. Other funding sources are Community Crossing grants (up to a million a year?) and taxpayers. For example, on the 3 million dollar loan, the “hope” was that 1.6 million could be spent on roads. What percent if any, is going to roads?
Grants and Risks. County also manages a variety of grants. The grants and amounts are not published but need to be managed. Failure can result in the county having to pay back the grant.
Convention Visitors Commission (CVC) Budget and the Brown County Music Center (BCMC). Revenue from the innkeeper’s tax is expected to be around 1.2 million. The mortgage (500K a year?) is paid through the Brown County Building Corp. Profits can also be applied to the mortgage and other operating expenses. Any excess profits go to the Community Foundation (70%) and then the county (30%). The county received 54K in lieu of property taxes (which are not required on a government building).
In 2022, the county also provided a 239K subsidy. (GUEST OPINION_ What’s been happening with your county’s finances – Brown County Democrat,)
The BCMC also received about 2.7 million in federal grants. In 2023, the Convention Visitors Bureau (CVB) receives $712,500. The CVB budget identifies $225,000 in salaries, 58,000 in rent, and 417,000 – for Other – which would include marketing.
- Options? Can more of the innkeeper’s tax revenue be used for the mortgage and operating expenses and would this lead to an increase in profits? Could the Admin Agreement be changed so that 100% of the excess profits could be used by the county for roads and bridges? On the CVB and marketing, Social Media has become the primary means for advertising. The CVB was created in 1984 when Print, direct mail, TV, and radio were among the advertising options. Can the CVB be self-supporting? They own the visitors center. If not, what would be the minimum financial requirement?
- The BCMC is managed by the Maple Leaf Management Group. The group includes one commissioner and one councilman. Updates by these representatives have not been (but can be) provided at commissioner and council meetings. These representatives are accountable to the voters.
IU – SPEA MPA Students Reports – Brown County Government – Financial Decision Support