The Challenging Realities of the County Budget

Every year I am invited to present to the Westmoreland Chamber of Commerce a topic pertinent to the state of the county. I used this year’s invitation to explain to the Chamber’s 350 members and guests in attendance the challenging realities of the county budget. I wanted to share my remarks with you here.

Thank you to the board, staff and membership of the Chamber of Commerce for having me here again. There is no better way to communicate the challenges and opportunities facing county government than by talking face-to-face.

I’ve had the pleasure throughout my time as Commissioner of speaking to you about transportation, economic and community development and the opiod epidemic. This year, I’d like to discuss the means that tie it all together – and that’s the county budget – to help everyone better understand the state of the county’s financial situation and the peculiarities of our annual budgets.

To begin, a few assumptions I think are important to note as we start this conversation, particularly since the vast majority of you in the room are business people. First, while we always incorporate sound business practices in our decisions, county government cannot be totally run “like a business”, mostly because it’s not. We provide services – often life-sustaining services – that do not, and cannot, make a profit.

Second, my standard has always been to pass a budget that is responsible, defensible and that honors basic arithmetic. We cannot fudge numbers to make us look better. And politics has no place during budget negotiations.

So, given that, here’s where we are…

Westmoreland County’s budget for 2017 is almost $311 million dollars. That money funds public safety programs, like 911, human services, like programs for people with disabilities, seniors struggling to stay in their homes and our public nursing home, Westmoreland Manor. It provides funding for parks, cultural amenities and economic development. We fund the criminal justice system, including court staff, probation and the prison. In many ways it’s remarkable how much is accomplished with that money.

The basis of that $311 million budget is the county’s General Fund. The General Fund is our main operating fund, the fund where property tax revenue is received, and really the fund where Commissioners have any real control. For our $311 million overall budget in 2017, the General Fund portion is about $128 million. So in short, Commissioners have direct control over only 41 percent of our total budget. The rest is made up of state and federal monies to fund services that are almost entirely mandated.

So, what business owner here operates with say over only 41 percent of their budget?

So let’s focus on that General Fund.

That $128 million is funded through taxes, licenses and permits, fines, and fees for services. It also includes more than $15 million in intergovernmental revenues, which are essentially state and federal funds specifically targeted for restricted reimbursable expenses, like large grants for a trails project or pass-through state money to run the Transit Authority But the real backbone is, of course, property taxes, which is about $82 million, and has been since 2005.

Based on the average assed property value, for the past 12 years the average taxpayer pays about $435 a year in county real property taxes, or $1.19 a day.

So it’s been 12 years since Westmoreland County has had a true increase in the revenue needed to run the essential services of government. Thus, the $7 million operating deficit in the budget we passed this year. It’s a number that’s been fairly consistent for the better part of a decade, since milage was increased from 17 mills to 21 mills in 2005.

The budget is balanced using a once-robust “fund balance” that was in excess of $60 million more than a decade ago. As of today, that fund balance is about $16 million. Truth is, since 2005 Commissioners of both parties – and there’s been nine of us – have unanimously used this fund balance to balance the yearly budget. That’s really the only way to pass what is a legal requirement to have a balanced budget, without routinely raising taxes – something that everyone wants to avoid.

One thing is certain, despite having flat revenue the cost of doing business – as most of you can certainly relate – has continued to go up. Simple inflation accounts for a lot of that. But let me offer a few significant examples to underscore the challenge…

  • The county’s General Fund contribution to the Children’s Bureau has increased by $1.1 million in the past year, to $3.6 million, due in large part to new regulations resulting from the Sandusky abuse scandal a few years back.
  • Due to the (hopefully temporary) decline in natural gas production, revenue to the county from unconventional drilling has dropped $600,000.
  • Just like your business, health insurance coverage increases every year. This year we are anticipating an increase of $1.6 million from the General Fund. This is despite raising premium contributions, deductibles and co-pays for all of our employees (including Commissioners) and having competition among our insurance providers.
  • The General Fund contribution to the county’s pension is up $1 million this year, to $5.5 million.

Now, we have taken steps to offset these challenges. We have cut staff where possible. We have taken advantage of favorable market conditions and a strong bond rating to better fund capital projects. We have introduced competition and used the bid process to get taxpayers the best value. We’ve held funding flat for our partner agencies who, too, are struggling.

We’ve held vendors accountable, used technology to save money, subcontracted where feasible and brought work in-house to free us from expensive outsourcing. We’re right now evaluating assets that may be valuable, and looking to merge programs and departments where appropriate.

We’ve even made the difficult decisions to raise additional revenue when we could to alleviate the reliance on property tax dollars, like a $5 license registration fee, adding a couple bucks to the price of recording a deed and other user fees. None of this, of course, comes close to property tax revenue. It simply augments it.

But perhaps most importantly, no Commissioner thankfully has ever abandoned the responsibilities we have to you and to those who most rely on us.

None of this information is to rationalize or criticize any decisions any Commissioner has made since 2005, including us. Budgeting is our most basic responsibility, and I’ve had the privilege of working with many Commissions over the years. I respect them, and I respect the budget process, which is unique very year.

I am hopeful these numbers help you to better understand the realities of the county’s budget, our obligations and the challenges we face.

Thank you again for the opportunity to be with you today.