Fund Balance in Jeopardy
Posted 12-18-1998
At the end of this month the County Commissioners will vote on the final adopted budget
for 1999, and I am happy say there will be no tax increase. Pennsylvania law requires us
to pass a balanced budget and to adopt a budget for only one year at a time. However, the
budgeting process is truly complex, and responsible management causes us to look at the
budget for several years in advance as we make decisions for 1999. I would like to share
with you some of the aspects of the 1999 budget, and some of the potential consequences of
future years.
As Westmoreland County has been doing for a
number of years, 1999 will show another deficit operating budget when comparing the
expected revenues versus expected expenses for the General Fund. The General Fund is the
part of the budget the Commissioners have direct control over and where our tax revenues
go. We are looking at about a $2 million operating deficit, with expected General Fund
revenues at about $74.6 million and expenses at $76.5 million. Fortunately we have a fund
balance (reserves) that allows us to balance the budget as we are required to do.
Since I have been a Commissioner I have
worked hard to build discipline into how we spend money, and find ways we can be more
efficient. We are making some progress each year. In the 1997 budget, we cut a total of
$1.5 million from our operating and capital budgets. In 1998 we cut $1.2 million, and this
year we’ve cut $109,000 so far, and capital budget requests are actually $82,000 less
than 1998 requests.
One of the other reasons we have a break in
1999 is that we have done some restructuring of our debt so that 1997 through 2000 has
allowed us to enjoy a reduction in debt service payments. We are looking at debt service
payments in 1999 of $385,327 and in 2000 of $2.27 million. This year we did a forward
refinancing of some outstanding debt that will allow us an immediate savings of $1
million.
The restructuring of debt is helpful in the
short term, but when we did it in 1997 we added two years of debt service payments in 2018
and 2019. That is why I opposed it. We passed off debt to future generations for what is
making our 1997 through 2000 budgets more attractive.
2000 still appears to be a decent year for
the county budget, though the projected operating deficit will grow to $5 million and eat
up more of the reserves.
On paper we can end that year okay, but in
2001 when our debt service payments grow to roughly $8.25 million (including new debt for
911 improvements and juvenile detention renovations), we have a serious problem. We should
always maintain a fund balance of anywhere from 5% to 10% of the General Fund, and
projections for 2001 show NO fund balance. If current trends continue in 2001, General
Fund expenses will exceed General Fund revenues by about $13 million. 2002 is more of the
same with debt service at $8.25 million, and a General Fund deficit of nearly $16 million.
I don’t mean to spread doom and gloom
at the holidays but I don’t want people to be lulled into a false sense of security
either. What can we do? We must stop mortgaging our future with debt restructuring to
receive short term benefits. It is just not fair to saddle future generations with our
debts and that has been done long enough in county government. We must continue to look at
ways of trimming spending and increasing revenues without everything being dumped on the
taxpayers.
We must better utilize technology so that
we are more efficient, and to purchase goods and services in a more cost-effective manner.
Next year when you get to elect Commissioners, participate in the process, find out which
candidates grasp the challenges ahead, and who is capable of finding solutions that
minimize the burden of tax increases. Running a $200 million business is an enormous
challenge that takes dedication, hard work, and a commitment to finding the right way to
do things. The right way just isn’t always the easy way. |
