In the coming weeks, Warren County’s Freeholders will have to find a way to eliminate a $4 million deficit projected in the 2013 county budget – preferably without raising taxes.
The three elected freeholders began wrestling with the proposed budget Saturday morning, in the first in a series of budget sessions expected to continue into February.
Their problem is that projected expenses total $106.2 million but projected revenues total only $102.8 million.
The freeholders face a quandary faced by many municipal officials: residents don’t want their taxes to increase, but they also don’t want county services reduced.
The county reduced taxes in three of the last four years, specifically to help families weather the national recession that began in 2008. Officials figured the economy eventually would bounce back but – like the rest of the country -- they’re still waiting for that to happen.
The county would not be facing a budget deficit if taxes had not been reduced in 2009, 2010 and 2011, said Dan Olshefski, its budget analyst. In 2012, he said, the county had to use $1.3 million of surplus funds to balance the budget.
“We have dug ourselves into a hole and it’s gotten deeper every year,” said Charles “Pete” Houck, the county’s chief financial officer. “We’ve made our situation worse now than it has ever been.”
Warren County’s capital fund was at $12 million in 2008 but dropped down to just $5.1 million by 2012. Houck said freeholders adopted a pay-as-you-go philosophy for capital improvements, but did not replenish money spent on capital projects.
“The revenue we’re generating doesn’t equal what we’re spending,” said Houck. “Eventually we’re going to run out of savings. If we have to do a major project, we’re forced to borrow.”
Houck said the county has been spending its surplus funds because in past years freeholders made “short-sighted decisions” to not raise taxes or significantly cut appropriations. He said that’s like residents dipping into their savings account to pay their bills. “If you spend all your savings, you’ve got a problem.”
He told freeholders: “We’re taking money out of our savings account, so to speak, and not replacing it.”
Freeholder Richard Gardner, who has been on the board about 10 years, said: “I don’t think there’s been any irresponsibility here whatsoever.”
However, Gardner acknowledged: “We’ve gotten ourselves to a point where we do have to change direction. The past is over. You learn from it. We’re going to move on to the future. I’m confident we’re going to put ourselves on a good path.”
The Saturday morning budget session in the county administration building near Belvidere was open to the public, but no one except two reporters attended – in a county with more than 108,000 residents.
By law, the county is required to introduce the 2013 budget by Jan. 26, followed by a public hearing within 18 days, followed by adoption by Feb. 25. But that timeline won’t be met, according to county officials.
Houck, who will have to explain the delays to the state, said the budget probably won’t be formally introduced until the Feb. 27 freeholders meeting. He said both the public hearing, which typically generates little public input, and budget adoption could happen on March 27.
Most of the upcoming public budget sessions will focus on individual departments within county government. The next budget session will be Jan. 12, with representatives from the library and open space program, according to a tentative schedule proposed by county Administrator Steve Marvin.
Olshefski said freeholders and county department heads have done an excellent job controlling expenses. He noted the county has a staff of 780 people, down from 841 in 2008. “We’ve streamlined the operation.”
Houck told freeholders no increased expenditures are proposed in areas over which the county has control and “we’ll probably be cutting back on some capital requests.”
Houck indicated the county does not have control over health care costs, expected to be $700,000 higher this year, or salary increases in multi-year contracts. He said pension costs only went up one-tenth of one percent in 2012 because the stock market improved dramatically.
Olshefski said the county also has no control over costs of institutional care for residents. He said Warren Haven, the county’s nursing home, lost more than $1 million in grants in 2012. Grants are going to continue to dwindle, said Gardner.
Olshefski suggested one way to solve the budget deficit would be for residents to pay less tax for open space preservation, but with an equal increase in the amount they pay for the county’s general budget. That shift would put more money into the county’s coffers, but residents would pay no more than they do now. He said the county’s open space fund contains $25 million, but less than $6 million of that money will be spent to buy or improve properties in 2013.
"That’s one theory,” said Jason Sarnoski, new director of the three freeholders, after the meeting. “I think we still have a lot more discussion to do.”
County officials hope they can rebuild the budget surplus in the coming years as the county’s debt payments continue to decrease. Houck said decreasing debt also means the county eventually could borrow more money to make necessary capital improvements. But he warned depleting surpluses could have an adverse impact on the county’s bond rating, which could make borrowing money more difficult.
Gardner said “prudent fiscal management” by the board of freeholders prevented Warren County from having to use a huge percent of its budget just to pay debt, as many municipalities must do. He said using savings for capital expenses to avoid debt is popular with taxpayers. “If we made any mistake, it’s that we just stopped putting money away.”
“I am hoping we’re able to keep the overall tax burden on residents very close to what it is now,” said Ed Smith, who was just sworn in as the newest freeholder. “We may have to reprioritize where those revenues are going. But my goal is to not increase the burden on county taxpayers.”
Sarnoski said he would like to see taxes decrease, but added: “I’m not going to set a goal. I’m going to see where the budget process takes us. We’re going to find a way to manage it.”
Without raising taxes?
“If we can.”