As county manager Ed Causey wrapped up his presentation of the 2014-15 proposed budget Monday night, a room full of department heads, school officials and citizens sat silently and at least a couple commissioners looked shell-shocked.
“It’s about what I expected,” Commissioner Billy Lockamy said flatly.
“I feel like I’ve been hit in the head with a baseball bat,” Commissioner Albert Kirby remarked. “Wow.”
At its core, the recommended budget includes a 9 cent property tax increase, which would raise the rate from 78.5 to 87.5 cent per $100 valuation, a needed hike to pay for some $4.4 million in additional countywide expenditures detailed in the budget package, according to Causey.
Just some of the added expenditures include $1.4 million to make up for existing budget shortfalls and lost state lottery proceeds, $500,000 for implementation of an employee pay study, more than $670,000 in capital repairs for Sampson Community College (SCC) and a student ADM (Average Daily Membership) hike to $900 per student for Clinton City Schools and Sampson County schools, meaning $484,000 in extra county dollars.
“We recognize that this proposed budget will likely receive substantive and possibly intense discussion,” Causey said. “The proposed tax increase … is more a result of circumstances than increased discretionary spending on the part of the county.”
Two budget work sessions have already been set for 1 p.m. on both Thursday, June 5, and Tuesday, June 10, to further tinker with the proposed plan leading up to the June 16 budget public hearing.
Causey alluded to his budget message one year ago, in which he told the board it would have to spend extensive time examining big issues and making big decisions. “Without this process, a significant increase in the property tax rate can be expected in subsequent years,” he stated at the time.
And a significant tax hike is exactly what is on the table.
While the board held monthly budget work sessions for the better part of the past year, listening to presentations from every department about the gamut of services, staffing and needs, the goal was to make gradual cuts to ease the stress of last-minute budget slashing.
That did not happen.
Now early June, commissioners are facing an uphill battle and an almost certain tax increase. Causey applauded the board for its monthly meetings extending from September 2013 to April 2014 and said, due to those extensive talks, the board gained knowledge of county operations and nothing in the budget should come as a surprise.
“It is unfortunate, however, that this extensive process did not yield significant budget reductions which could be made without significantly reducing the level and quality of our services,” he conceded. “The (board) has spent a year in budget reviews. We can conclude from these reviews that we are limited in how to significantly reduce expenditures without altering and reducing services.”
The county and its funding partners find themselves forced to absorb federal spending reductions and fund state mandates, while the county experiences the “consequences of inadequate cash reserves” to cover maintenance and repairs for its infrastructure, as well as for the two school systems and SCC.
A massive cloud hanging over its head, Causey attested, was the tax structure that was never put in place to cover all the county’s acquired debt — which spiked from $24 million in 1999 to $139 million by 2005.
“These issues have wreaked havoc on our budgets in the past years and left both our physical infrastructure and the human infrastructure in great need,” Causey asserted.
When you are in a hole, he said, you have to stop digging. That is where Sampson now finds itself.
“We find ourselves in a fiscal pit dug for us by federal and state government as they reduce our funding and pass down mandated programs or services. And, unfortunately, we do not have the same luxury to transfer the responsibility for those mandated services to other entities,” Causey stated, reading from his message. “Nevertheless, we must put our shovels down, stop digging and find a way out of our fiscal chasm.
“Therefore, this budget does include a proposed tax increase of 9 cents.”
He emphasized that the proposed tax increase, which he conceded was “a little bit alarming,” was not the result of substantive increases in discretionary spending.
“County administration sincerely regrets the need to recommend a significant tax increase. However, we hope that everyone will take time to review what has occurred in recent years as well as what is currently recommended and note that we spend the vast majority of our time in the fix and repair mode as opposed to the old adage of ‘tax and spend.’
“At the end of the day, we have two choices,” Causey continued. “We have to either increase our revenues or decrease our expenditures.”
Additional expenditures in the 2014-15 proposed budget total $4,426,198, or 11 cents on the tax rate. Of that, the county would absorb 2 cents in the form of the shortfalls with which it has to deal, notably lost lottery proceeds, bringing the proposed tax rate hike to 9 cents.
Simply put, revenues are not coming in and the county has to think about its growing and often deferred human and physical infrastructure needs, as well as those of its funding partners, Causey said.
Encompassed in the $4.4 million in additional expenditures are:
• $600,000 shortfall in last year’s budget that needs to be made up. The amount becomes $1.3 million if excess revenues from the state, based on additional collections of four months, are factored in.
• $800,000 less in lottery proceeds than was original authorized.
• $670,000 in capital expenditures for SCC, $540,000 of which is for the auditorium that cannot be used until work is done, as well as $80,000 for improved lighting to address student safety.
• $150,000 for new voting machines for the Board of Elections. The estimated total cost is $450,000 and is expected to be fully funded in three years. These new machines are an unfunded state mandate.
• An increase in the local per pupil contribution to $900, based upon an estimated student population of 11,556, translating to an additional $484,000 in operational funding for the two school systems ($354,000 for county schools, $130,000 for city schools). The schools have already appropriated $2.8 million in fund balance to fund 2014-15 needs.
• $142,296 increase for SCC to cover increased insurance costs, utilities and other maintenance items.
• $425,000 in recurring operating expenses for the courthouse because of mandated security measures.
• $661,000 in increased county contribution for operating the Department of Social Services due to mandated services that could not be offset as hoped by efficiencies through N.C. FAST, an automation system that is still a work in progress.
• $43,902 in increased county contribution for operating the Health Department.
• $500,000 be set aside for the initial implementation of the pay, classifications and benefits study when completed and approved by the Board of Commissioners. The 2014-15 proposed budget does not include a raise, but the projected initial implementation date for the study is Jan. 1, 2015.
“It is well documented that our current system is broken and deteriorating to the point that we are beginning to see a negative effect on services delivered,” Causey stated. “The study should provide for the long-term stability of our personnel system. It is likely that we will see recommendations that will provide for better sustainability of future benefits that have to be paid by the county.”
In his budget, Causey also recommended a minimum annual deposit of $900,000 be made into capital reserve accounts for maintenance needs for the county, school systems and SCC.
Approximately $1.8 million in fund balance is proposed to be appropriated to balance the budget, but it is anticipated that lapsed salaries and benefits will negate the need to spend all of that, Causey said.
“No budget is above being critiqued, improved and challenged,” Causey stated. “However, the one thing we would like everyone to do is recognize that, in fact, we do have a challenge and at least enter into a positive dialogue of what we need to do.”
The full budget is expected to be available for view at sampsonnc.com this week.
Chris Berendt can be reached at 910-592-8137 ext. 121. Follow us on twitter @SampsonInd.