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Tools of sound budgeting Discipline, creative solutions & gumption for tough decisions
– especially in the area of general operations which covers so many areas of required services. A variety of pressures affect county govern- ment finances, including declining or static tax bases, stagnant levels of state aid, escalating health care and employee benefit costs, the lack of mandate relief, the need to ensure costly public safety, and one that many probably don’t think of – too many rigidly restricted revenues [an obstacle to spending money where it’s needed]. County government – more than any other branch of government – is expected to provide more for less. County government serves and provides for every citizen of the county…..even those within municipalities. County government serves the entire populace of Arkansas just like the State of Arkansas. In an attempt to close budget gaps for the 2014 budget year, many
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Arkansas counties will have to consider job cuts, service reductions, property or other tax increases, fee and/or fine increases allowed by law – or a combination of these measures. Setting a successful financial course for any county in these financially challenging times requires discipline, tough decisions and creative solutions if we are to “weather the storm.” While every budget has a number of “at risk” items, any budget adopted in a time of economic insecurity, should not include optimistic revenue projections. A flush revenue forecast may make it easier to make a budget – but, will probably prove to be impossible to maintain. Per- haps the mantra of these times should be: “Hope for the best - plan for the worst.” When you have one or two sources of revenue that provide a large percentage of any budget, such as a sales tax, be extremely cautious – you cannot afford to be overly optimistic. A budget is only as good as the revenue forecast on which it is built! Here’s what I really want to talk about – the use of one-time money for on-going expenses. It may buy a little time, but it is not the solution. Using one-time money to fund initiatives that result in recurring costs is a slippery financial slope that will lead to a structurally unbalanced bud- get. At a glance unrestricted, unappropriated fund balances appear to be the answer to a county’s prayers. Using the fund balance is generally seen as a win-win situation that temporarily appeases taxpayers and political leaders alike. Tese “retained funds” just seem to be waiting to be used to fill in gaps and plug deficits – or so it seems. Te problem with using a fund balance to finance recurring expenses
is that it’s a temporary fix to a permanent problem. Te deficit being plugged will continue to exist long after the once available funds have been depleted. Appropriating a fund balance for operating expenses should be looked at as the deferment of a tax increase. No matter how large a county’s fund balance – in any fund, con- tinuously drawing down these funds without replenishing them will create a structurally unbalanced budget. A $1,000,000 fund balance can only sustain a $500,000 deficit for two years. Immediately after the funds run dry an unprepared county will be left with two op- tions that should have been explored all along: (1) Cut services and/ or (2) Raise taxes. Doing both in one year is devastating to taxpay- ers, service recipients, the local economy and of course, a campaign. Tat’s where budget planning comes into play.
20 COUNTY LINES, FALL 2013
oday, running a county government with dwindling resources is no easy task. It takes brains and brawn. While a few county governments in Arkansas have held fairly steady through these tough years – most are struggling
Seems To Me...
It is imperative for a county to have a multiple year plan – possibly a four year plan. Tis plan should mitigate the impact of an expected or exist- ing deficit in any one year. A county that does not consider its multi-year options for the worst case scenario is setting itself up for failure. A county that year after year develops a budget calling for the use of carry- over fund balances and other one-shot revenues is a county that has repeatedly failed to address the recurring struc- tural imbalance in its annual budget. At the end-of-the-rope, the result is a county that has depleted its reserves and now has to replace these revenue sources or cut services to balance the budget. Dependence on surplus dollars to cover operating costs will be short-lived at best – it will cripple a county financially. During tough economic times, like we’ve been in for several years, it’s difficult to imagine not relying partially on the assistance of surplus dol- lars. But it needs to be a managed use – a part of a county’s multi-year budget plan. A multi-year plan will help a county improve their fiscal management. Te 2014 budgets of most Arkansas counties will include available carry-over fund balances to balance the budget and many times to keep from increasing the county property tax – although Arkansas has 36 counties that have maxed their general property tax, 32 counties have maxed their road property tax and several others are close to max.
Eddie A. Jones Guest Writer
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