The bad news? The economic outlook is dire and county leaders have been informed the county’s income shortfall could be $6.5 million for Fiscal Year 2019-20, which runs through the end of September. The good news? Office of Management & Budget Director Megan Diehl has digested the data and has a plan for it; actually, many plans, and they should serve the county well even after the coronavirus pandemic is over.
On Thursday, May 21, Diehl provided an informational tour through the economic updates she has received from the financial firms working for the county as well as sage advice obtained from the International City/County Management Association for successfully budgeting during an economic downturn.
Diehl began with Key Economic Indicators. She said the federal Bureau of Labor Statistics puts the current national unemployment rate at 14.7%, the highest since the Great Depression. Unemployment is expected to peak at 16.2% in the second quarter of 2020, then gradually decline, but it might not return to “normal range” until 2022. She pointed out there is a high variation between estimates. One she used was from Bloomberg financial services, which forecasts the median Gross Domestic Product – GDP – for the second quarter of 2020, April through June, will be down 32.6%, “easily the worst quarterly decline in history.” A rebound median forecast of more than 15% is forecast for the third quarter.
Turning to the KEI of the Consumer Price Index, Diehl showed commissioners a graph with it going down – 0.8% in April 2020, mainly due to a 20.6% decline in the gasoline index.
Next, municipal bond ratings. Moody’s Investor Services reported on May 4 that it was lowering its outlook on the “State Government” sector from “stable” to “negative” due to a weakening economy, and “significant budget adjustments will be necessary for local governments with high fixed costs and healthcare facilities.” Diehl pointed out that “declines in property tax revenues will take longer to materialize compared with drops in other revenue sources.”
The steps suggested by the ICMA are to understand the next 6 to 18 months, reduce spending, find new resources, reduce materials or contractor costs, communicate and engage, and support decision-making.
Diehl made sure the commissioners understood that there is a formula for certain revenues first accumulated by the state and then distributed back to the 67 counties, then broke the bad news: In one scenario, Diehl’s number crunching and forecasting estimates a 40% reduction in certain non-ad valorem tax revenue for the county through the end of Fiscal Year 2019-20, resulting in a potential budget shortfall of $6.5 million, or $6.7 million in an annualized projection.
But Diehl is already scouring the county’s budget to find savings, looking to both get
more for less and do more with less.
In the category of reducing capital asset investments, she believes $3.5 million could come from deferring and reallocating certain projects. She has also asked for 12
currently vacant positions to be frozen for now, and for new vacancies to be reviewed for whether they are urgently required or not.
She pointed out that a project management initiative is underway, a policy review is taking place, and new accountability measures will be instituted. She has also called for an “emergency only” replacement of vehicles, bringing the county’s fleet management program in-house and consolidating it, consolidating and streamlining general repair and maintenance budgets as well as IT equipment replacement, and analyzing the cost-benefit of in-house work versus contracts. Diehl said the repair and maintenance budgets in the county’s various departments were decentralized and “all over the place.” She said all department budgets would be looked at very, very closely.
As far as finding new resources, new or revised fees could be coming along with new departmental budget review requirements, interfund charges are being analyzed, General Fund reserves could be redesignated, and expanded use of a service called “Gov Deals” – a sort of eBay for government property – is being considered.
Diehl will also review contractor costs and renegotiate contracts where possible while also seeing to it that the county implements stricter contract renewal standards. The
professional level of staffing at the county now makes it less necessary to contract out some work.
As for short-term borrowing, Diehl said it could mean, “borrowing from ourselves, absolutely,” if one county department has “reserves” that are not committed.
Any decision to use capital reserves to offset operating expenses would have to be carefully considered. “I would want that to be extremely transparent, done here in this boardroom, and done by a vote of all of the commissioners,” she added. “That’s not something I would take lightly, nor would I think any of you would, because we would have to make sure we could pay back that commitment.”
Diehl knows that her initiative to go over departmental budgets line by line to “right-size” them is not a popular process, but she is committed to it. “Some of our friends here already know that if they get an email from Megan Diehl, and it says something about reviewing your budget, they don’t want that email.”
Previewing the 2020-21 fiscal year process, Diehl said she wants “public participation and transparency in the budget development process. She said budget forums will be streamed online due to the reluctance of some to attend public meetings at the present time. A budget meeting for area non-profits is scheduled for tomorrow, May 28, and public forums are scheduled for June 1 and 9.
The tentative budget will be presented to the BOCC July 15, and proposed dates for public hearings are July 27 and Sept. 14 and 28.
The board also unanimously approved 14 roads for double chip sealing. The roads are Pine Drive, Donnie Lane, Chem Cell Road, Gregg Street, Palm Drive, Crews Creek Avenue, Lang Road, Mobley Heights Road, Merlin Road, Live Oak Drive, Palm Circle, Mill Creek Road, Maria Avenue, and Shirley Avenue. The project will use money already budgeted in the current fiscal year.