County Executive Falk Sets 2003 Department Budget Requirements

May 30, 2002
Sharyn Wisniewski (608) 267-8823
County Executive

Dane County Executive Kathleen Falk today gave county elected and appointed department heads her requirements for preparing agency budgets for 2003. The county’s 31 departments cover everything from highways and human services, to the zoo and sheriff’s department. “I will work to keep spending down while improving services to our citizens,” said Falk. “That is what I have done in the county’s last five budgets, and that is my commitment for 2003.” Falk said preparing the 2003 Budget will be more challenging than in previous years, citing uncertainty over the State’s budget and spending needs in the county. Also, while Dane County’s economy remains strong, Falk sand the reduction in economic growth statewide and nationwide will likely impact some of the county’s revenue sources, such as sales tax. Once a State budget repair bill is enacted, Falk said she will re-evaluate the hiring and spending delay she imposed due to the Governor’s threat of deleting $5.5 million in shared revenue payments to Dane County this year. She will base her decision on whether to extend the hiring and spending delays on the county’s expected shared revenue payments in both 2002 and 2003. On the spending side, demands for county services will increase because of a steadily growing population and continual growth in mandated human services. To prepare for these fiscal challenges and to promote efficiencies, Falk has instructed the Department of Administration to review budgets as submitted, and to return to the department for revision any budget that does not meet the following requirements: -- Departmental base budgets will be adjusted to reflect estimated salary cost increases only. Operating and contractual expenses will remain at 2002 budgeted levels. -- Each department’s general purpose revenue (GPR) base budget will include the 0.75% or 1.5% spending reduction in small and large departments, respectively, imposed in the 2002 budget. Departments can decide how to absorb these cuts. -- No new tax-funded positions should be requested, except through reallocation of already authorized county positions. -- The line item for GPR funded operating capital (equipment, vehicles) will be zeroed out for 2003. The Department of Administration will distribute detailed budget instructions reflecting these guidelines during the first week of June. Department budgets are due in the County Executive’s office on a staggered schedule during July and August. Falk will meet with each department head on their budget, and develop her overall executive budget that she will submit to the County Board by October 1. # # # Attached: Falk memo to Department Heads DATE: May 30, 2002 TO: Elected and Appointed Department Heads FROM: Kathleen M. Falk Dane County Executive RE: 2003 Budget Requirements This memo outlines my budget guidelines for the 2003 Executive Budget and highlights changes in the Department of Administration’s budget instructions, which will be distributed to departments this week. The Department of Administration will notify you when the computer files for budget preparation will be available. Preparing the 2003 Budget will be more challenging than it has been in previous years due to uncertainty generated by the State’s budget problems and expenditure pressures within County government, despite continued economic growth in our county. State Budget Uncertainty State policy makers have not yet passed a Budget Repair Bill. As you know, the Bill proposed by the Governor in late January completely eliminated the County’s $5.5 million shared revenue payment starting this year in 2002. The Assembly passed a version that would retain the County’s 2002 payment, but would reduce it by 65% or $3.5 million in 2003 while the Senate’s version maintains current law and, therefore, retains the County’s shared revenue payment in both 2002 and 2003. A Conference Committee is currently working to reconcile the differences between the two versions, but with no target date of completion. Due to the threat of losing $5.5 million in 2002 under the Governor’s proposal, I imposed a hiring and spending delay to insure that this potential loss would not have a negative impact on the County’s General Fund balance. Once a Budget Repair Bill is enacted, I will evaluate whether these spending and hiring delays should be continued based on the expected amount of County’s shared revenue payment in both 2002 and 2003. Adopting a Budget Repair Bill is also necessary to accurately estimate the amount of general purpose revenue that will be available in the 2003 Budget. Unfortunately, adopting a Budget Repair Bill does not allay additional uncertainty associated with the State’s 2003-2005 Biennial Budget. The State of Wisconsin faces a structural deficit which means that the amount of money needed to maintain current services is greater than the amount of revenue generated by current revenue streams. The Budget Repair Bill should address the deficit in the current biennial budget, but it does not fix the structural deficit that will persist into the next biennium. This means that additional reductions may have to be made to the shared revenue program or any of the other forms of program revenue coming from the State of Wisconsin. Slower Economy Although the Dane County economy remains strong, the reduction in economic growth statewide and nationwide will likely impact a few of the County’s revenue sources. These economic conditions will result in a more conservative estimate of sales tax growth. The past five years’ sales tax receipts have grown an average of 7.9% annually. The 2001 budget showed sales tax growth of 10% over what was budgeted in 2000. The 2002 budget contained a more conservative sales tax estimate of 5% growth, although 2003 estimate may have to be lowered even further depending on collections through first half of this year and predictions for 2003. Slowing economic growth has been combined with lower inflation and lower interest rates. Lower inflation will reduce the amount of property tax revenue generated by my formula for property tax growth that adds the rate of inflation to the rate of population growth. Current estimates of inflation yield an estimated CPI increase of 1.63%. Last year’s population increase was 1.23%. If these factors remain, then the combined levy adjustment would be 2.86%. For the past five years, the inflationary and population growth adjustment has averaged 3.9%. Lower interest rates will have both a positive and negative effect on county revenues. The positive effect is reflected in the Register of Deeds office, where refinancing has increased the number of recorded documents on which the Register of Deeds collects fees. If this trend continues, Register of Deeds revenue will exceed budgeted projections; on the other hand, the negative effect of the lower interest rates is experienced in the Treasurer’s office, where interest income is generated. If lower interest rates continue through the rest of the year, interest income will probably not meet the budgeted amount. As additional information becomes available on these revenue sources, a more informed estimate can be made for 2003. Expenditure Pressures As we begin the 2003 budget process, I am also aware of the typical expenditure pressures facing County government. For example, the cost to continue current services and maintain the current county work force may be as high as $5.7 million, depending on negotiated salary and benefit levels. In addition, Human Service caseload increases, which are mandated by county ordinance and the State and Federal government, could add $4.3 million to Human Service expenditures. The County is also obligated to pay debt service costs of $9.7 million to support principle and interest payments on outstanding general obligation bonds. Finally, the workers compensation fund requires an additional $1.1 million to maintain a sufficient balance to pay claims. These expenditure pressures are not extraordinary. The County faces similar pressures each budget cycle, but external circumstances beyond the County’s control may make these obligations more difficult to manage and may require county departments to seek new efficiencies and pursue additional cost saving measures. Financial Planning Committee Many of the challenges described above were presented to the Financial Planning Committee that I co-chaired along with the then-Chairperson of the County Board’s Personnel & Finance Committee. After reviewing estimated financial pressures facing County government, the Committee proposed a menu of options for consideration in the 2003 Budget. Although the expenditure and revenue estimates presented to the Committee will change as more accurate information becomes available, the options they developed will serve as a starting point for difficult choices that may have to be made in the 2003 Budget. The Financial Planning Committee report can be downloaded from the County’s web page at www.co.dane.wi.us/financialplanningcom/index.htm or can be obtained by contacting the Department of Administration. Requirements To prepare for these fiscal challenges and promote efficiencies, I am issuing the following requirements for the 2003 Budget. As you prepare your budget, you must adhere to the following requirements. I have instructed the Department of Administration to review the department budgets as submitted and to return the budget if it does not meet the following requirements. I will not consider a departmental budget that does not meet these requirements. Base Budgets Departmental base budgets will be adjusted to reflect estimated personal services cost increases only. Operating expenses and contractual expenses will remain at 2002 budgeted levels, and operating capital outlay will be zeroed out. Base Budget Reductions Each general purpose revenue (GPR) funded department’s base budget will include the 0.75% or 1.5% spending reduction imposed in the 2002 Budget. Departments have the opportunity to decide how they will absorb these cuts. In addition, the 60% conferences and training reduction will be retained in each department’s base budget. New or Grant-Funded Positions No new positions should be requested with County general purpose revenue funds, except through reallocations of already-authorized County positions. If you have existing grant positions for which grant funding is expected to lapse in 2003, you will need to identify alternative sources of revenue or use a reallocation of existing funds to continue those positions. General Purpose Revenue Funded Operating Capital No operating capital should be requested using the County’s general purpose revenue funds. Operating capital can be requested using a reallocation of funds from any line item except personal service line items. The reallocations made to purchase operating capital in 2003 will not be zeroed out in 2004. Capital Outlay Threshold The threshold for items to be considered capital outlay will remain at $2500. This will eliminate the need to line item budget many small capital purchases or to seek a budget transfer during the year for equipment or similar purchases as long as they cost less than $2,500. Budget Process Budget Meetings I will hold budget meetings with each department head after the submission of budget requests to the Department of Administration. My office will be contacting you to schedule your meeting. Training The Budget Office will offer training again this year for staff who are new to their budget development responsibilities or for those who need a refresher. Training is tentatively scheduled for the week of June 10. Mandated Service Inventory In February 2002, the Financial Planning Committee directed the Department of Administration to compile a list of mandated and non-mandated services countywide. To update this list and insure accuracy, each department will be asked to characterize each of the services it provides. The Department of Administration will provide a grid to assist you in this exercise. Performance Measurement In 2002, the Department of Administration developed performance indicators for each of its divisions. This data, along with accomplishments from 2002 and objectives for 2003, will be reported for first time in the 2003 budget. This year I have asked the Department of Administration to provide technical assistance to other departments in an effort to expand this initiative. The Department of Administration will distribute detailed budget instructions reflecting these guidelines and process changes during the first week of June. Again, I appreciate your help and cooperation as we work together to prepare the 2003 budget. Thank you. cc: Dane County Board of Supervisors