Dealing with budget reductions :

1. Dealing with budget reductions: A presentation on how some County Officials have balanced public service with decreasing resources

2. Dealing with budget reductions Presenters Kristina Swanson, Auditor, Cowlitz County (360) 577-3002 swansonk@co.cowlitz.wa.us Mark S. Nelson, Sheriff, Cowlitz County (360) 577-3092 nelsonm@co.cowlitz.wa.us Terry McLaughlin, Assessor, Cowlitz County (360) 577-3010 mclaughlint@co.cowlitz.wa.us Claire J. Hauge, OFM Director, Cowlitz County (360)577-3065 haugec@co.cowlitz.wa.us

3. Dealing with budget reductions • What Happened to Our Prosperity? • Challenges in Cowlitz County • Strategies / Impacts • Strategic Planning Efforts • Outcomes / Unintended Consequences • Lessons Learned • Tools & Transition Strategies • Resources • Share Your Experiences & Questions

4. Dealing with budget reductions What Happened to Our Prosperity? • Revenue Reductions / Losses • Initiative 695 (MVET reductions) • Initiative 747& Referendum 47 (Property Tax Limitations) • Sales Tax Receipts • Timber Receipts • Interest Earnings • State Shared Revenues • Federal Grants

5. Dealing with budget reductions Challenges • Increasing costs • Cowlitz County – mostly labor • Increasing Service Demands (e.g.) • Homeless Programs Medicaid Program • Mandatory Mediation Registered Sex Offender • Unfunded or Under-funded Mandates (e.g.) • Sentencing guidelines Incarceration length • DOC Probation DOC Collections • DUI Mandatory Tow Child Abuse/Assault Investigations • Bridge inspections Environmental regulations • Economic Crisis: world-wide, regional & local • Construction & Building Activity Slowed • Housing Market • Credit Crisis

6. Dealing with budget reductions What Happened to Our Prosperity? • Cyclical Deficit? • Short-term drop in revenues • Reactive response – maintain status quo - OR- • Structural Deficit? • Growth too large to sustain • Loss of a large employer • Economic change in community (low business activity) • Recession • Natural Disaster • Proactive response – looking longer term • (effectiveness, efficiency, stability)

7. Dealing with budget reductions Cowlitz County had a structural deficit: expenses were significantly higher than revenues creating cash flow problems.

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11. Dealing with budget reductions Strategies / Impacts • Acknowledge the Realities • Establish Goals and Principles • early in the process • articulate clearly • Resolve to have a comprehensive, coordinated team approach • Leadership: speak with a single voice • avoid confusion • enhance credibility

12. Dealing with budget reductions Strategies / Impacts • Dealing with Cowlitz County’s Budget Crisis • Acknowledge the Realities • Short-term response (works for cyclical deficits) • Move money around • Defer maintenance • Long-term perspective (acknowledges structural deficit) • Prioritize programs • Reduce expenses • Increase revenues

13. Dealing with budget reductions Strategies / Impacts • Dealing with Cowlitz County’s Budget Crisis • Goals and Principles • Achieve a balanced budget for the current period • Secure financial integrity • sustainable beyond the crisis period • encourage long-term perspective • don’t fund the present at the expense of the future

14. Dealing with budget reductions Strategies / Impacts • Cowlitz County’s Budget Crisis • Goals and Principles • Position county to react well to (current & future) state and federal legislation • Maintain a long-term perspective • Secure appropriate fund balances for cash flow • Ensure ability to meet bond obligations • Ensure ability to meet payroll • Ensure ability to pay vendors on time • Avoid frequent or dramatic fluctuations in service levels • Anticipate changing expenditure and revenue levels

15. Dealing with budget reductions Strategies / Impacts • Cowlitz County’s Budget Crisis • The Early Debate: • Targeted expenditure reductions & prioritizing programs vs • Across-the-board cuts • In the end – this strategy was implemented

16. Dealing with budget reductions Strategies / Impacts • Across-the-board cuts – why? • Simple • Need to act quickly to avoid deeper cuts • “The longer we wait, the more we’ll have to cut. It’s been a rough go and it’s going to get rougher.” George Raiter TDN 3/18/2009 • Consistent • but not necessarily equitable • probably can’t be both

17. Dealing with budget reductions Strategies / Impacts • Across-the-board cuts – impacts • Does not distinguish essential from non-essential services • ignores importance and priorities of mandated programs • “We have cut everything we can think of and unfortunately the commissioners chose this 10 percent across the board thing. So the (county historical) museum is open and Drug Court is closed.” Judge Stephen Warning TDN 4/20/2009 • Impacts are not proportional • smaller programs are hit harder than larger programs

18. Dealing with budget reductions Strategies / Impacts • Across-the-board cuts – impacts • Community perception & community priorities • purpose of government activities • Should all be treated equally? • “It’s a good day to be a drug dealer or a crook, that’s for sure, Mahoney said after a Monday meeting with commissioners, elected officials and departments heads. “They’ve got to be loving this.” Sheriff Bill Mahoney TDN 4/13/2009 • “I’m hearing ‘shutter the museum’ or ‘lock the gate on the county fair’ or ‘cut back on childhood immunization;’ but maybe the public doesn’t agree,” Swanson said. “Bottom line is there are a lot of services provided to people who don’t break the law…And everything is incredibly important to that person when they need it.” Commissioner Axle Swanson TDN 3/18/2009

19. Dealing with budget reductions Strategies / Impacts • Across-the-board cuts – impacts • Fails to deal with the source of inefficiencies • missed opportunity? • “All of those people that say there’s fluff in government, now’s a great time to step up and show us where it is.” Sheriff Bill Mahoney TDN 4/13/2009 • Denies fiscal sustainability problems • retreat to “weathering the storm” mentality rather than dealing with fundamental change

20. Dealing with budget reductions Strategies / Impacts • Across-the-board cuts – impacts • Encourages competition • among departments & among constituencies • May ultimately only delay layoffs or program elimination

21. Dealing with budget reductions Strategies / Impacts • Traditional Cost Cutting Options • Sweep Unused Accounts • Delay/Eliminate Interfund Transfers • Re-prioritize Capital Expenditures • Reduce Personnel Costs • Contra line item (as a last resort)

22. Dealing with budget reductions Strategies / Impacts • Strategy: Sweep Unused/Overstated Accounts (a/k/a reduce “contingency” budgeting, fluff, padding) • Supplies / Travel / Training / Contracted Services • Align budgets with actual spending levels • historically over-allocating? • opportunity to reduce the budget without actual reductions in service or staffing levels • But…distinguish between cyclical needs & normal operating needs • Focus on mandatory certifications & licensing requirements • Encourage sponsored training • Focus on what is necessary to maintain funding sources (e.g. grants)

23. Dealing with budget reductions Strategies / Impacts • Impact: Sweep Unused/Overstated Accounts • Supplies / Travel / Training / Contracted Services • Approved Budget (January 2009) $8,101,434 • Actual Reductions (May 2009) $ 612,385 • Budget “Return” (December 2009) $ 893,830 • Result: there was still a “surplus” budget in these categories.

24. Dealing with budget reductions Strategies / Impacts • Strategy: Delay/Eliminate/Reduce Interfund Transfers • Technology • Fleet Services • Equipment • Small Purchases >$5,000

25. Dealing with budget reductions Strategies / Impacts • Impacts: Delay/Eliminate/Reduce Interfund Transfers • Technology • manage workload by dividing service • technical support, programming & mapping • delayed implementation of upgrades • delayed hiring staff • work orders & routine upgrades are lagging • under funded for future replacements & upgrades • both hardware & software

26. Dealing with budget reductions Strategies / Impacts • Impacts: Delay/Eliminate/Reduce Interfund Transfers • Fleet Services • reduced county-wide admin fleet by nine vehicles (~6%) • considering extending life of vehicles • financial needs vs. efficiency vs. service impacts • increasing safety concerns, especially for the Sheriff’s Office • replacement reserves have declined • future cash flow problems?

27. Dealing with budget reductions Strategies / Impacts • Strategy: Re-prioritize Capital Expenditures • Focus on preservation and response to emergencies before improvements, expansions, additions, new acquisitions • Start no new projects unless there is revenue to pay for it (grants)

28. Dealing with budget reductions Strategies / Impacts • Impact: Re-prioritize Capital Expenditures • Facilities have deteriorated • More crisis/emergency maintenance – higher cost • 2009 project to remodel courts was eliminated • 2011 – borrowing $2.5 million for HVAC upgrades

29. Dealing with budget reductions Strategies / Impacts • Strategy: Reduce Personnel Costs • Wage Concessions / Benefit Reductions • Mandatory (non-represented) • Voluntary (re-open negotiations with unions) • Furloughs • Early Retirement Incentives • (Situational) Hiring Freeze • Extended Recruiting Period • Eliminated Discretionary Overtime • Minimized the Use of Extra Help • Layoffs

30. Dealing with budget reductions Strategies / Impacts • Impact: Wage Concessions, Benefit Reductions & Furloughs

31. Dealing with budget reductions Strategies / Impacts • Impact: Early Retirements • The Offer: • Lump sum payment up to 2 months salary depending on length of employment -or- • $500/mo into a Health Reimbursement Account for 8-16 months depending on length of employment • Not to exceed $8,000 • Employee agreed not to seek re-employment with Cowlitz County for a period of 3 years from date of retirement • The Results: Eight employees exercised the option

32. Dealing with budget reductions Strategies / Impacts • Impact: Layoffs Internal & external service reductions Building Closures

33. Dealing with budget reductions Strategies / Impacts • Impact: Wage Concessions, Benefit Reductions & Furloughs • Cost savings • Retains employees • but • Makes recruitment & retention difficult • 24/7 operations can’t easily participate • Adversely affects morale

34. Dealing with budget reductions Strategies / Impacts • Impact: Hiring freeze • Costs savings • Reduces FTE’s without layoffs • But -- • Leaves critical positions vacant • Creates additional work for existing employees • Adversely affects morale

35. Dealing with budget reductions Strategies / Impacts • Impacts: Layoffs • Vacancies are easy targets • Unemployment benefits • Union bumping rights – necessary to bargain? • Notice requirements • Unintended consequences • “Doing the right thing, may not turn out to be the right thing.” • Sheriff Mark Nelson • Impacts agencies with high turnover rate • Departments who have unfilled positions at the time reductions are made – “luck of the draw”

36. Dealing with budget reductions Strategies / Impacts • Impacts: Layoffs • Leaves some agencies severely understaffed • Gradual erosion in the quality of programs • Decline in public satisfaction • Masks the true cost of programs and services • (doing more with less)

37. Dealing with budget reductions Strategies / Impacts • Impacts: Furloughs • Short-term cost savings • Complex schedule coordination • Takes time to implement but savings come faster • Softens the blow – spreads the pain • Lost income to employees • Disrupts services • Avoids layoffs (perhaps temporarily)

38. Dealing with budget reductions Strategies / Impacts • Strategy: Contra Line item (as a last resort) • Technical Definition: An account whose balance is on the opposite side of the account to which it is related. • A negative appropriation. • Example: a budget reduction that is captured in a contra balance to lower the overall budget and that will later be allocated to specific budget reduction account(s). • Departments would be expected to manage appropriations to achieve the under-expenditure. • Different than a Provisio • A requirement in the adopted budget that places a restriction on a portion of the budget. A specified dollar amount is restricted from being spent until the terms of the proviso are met.

39. Dealing with budget reductions Strategies / Impacts • Other Options • Use Reserves or Conserve Cash • Consolidate Programs & Functions • Eliminate Programs & Services • Consider Revenue Enhancements • Building Closures

40. Dealing with budget reductions Strategies / Impacts • Other Options • Use Reserves or Conserve Cash • Planned to use some reserve to balance the budget (annual budget “return”) • Scheduled payments to vendors for the last working day of the month – unless otherwise contractually required • Invoiced promptly for goods and services provided to other jurisdictions

41. Dealing with budget reductions Strategies / Impacts • Other Options • Use Reserves or Conserve Cash • Deposited revenues received promptly • 24-hour rule • Delayed Interfund transfers, if feasible • Intrafund Loan Resolution – Capital Funds • a backup plan to address potential cash flow issues

42. Dealing with budget reductions Strategies / Impacts • Other Options • Consolidate Programs & Functions • Review budgets from a programmatic viewpoint rather than line-item approach • Politically difficult • Time consuming

43. Dealing with budget reductions Strategies / Impacts • Other Options • Eliminate Programs & Services • mandated vs discretionary • core vs ancillary functions a) Mandated: • must be prescribed by federal or state Constitutions, USC, RCW, WAC, etc. b) Mission Critical: • not prescribed by law but required to efficiently and effectively carry out mandates c) Discretionary: • all other programs and services

44. Dealing with budget reductions Strategies / Impacts • Other Options • Unfunded & under-funded mandates • Legislative remedies • Lengthy process • Would not have yielded savings in a timely manner

45. Dealing with budget reductions Strategies / Impacts • Other Options • Consider Revenue Enhancements • Reviewed fee schedules – update-to-date? • Reviewed taxes authorized but not imposed • Discussed Levy (shift & diversion options) • Considered asset disposal • Sands sales on LT1 (dredge spoils) • Tax Title Properties • Other

46. Dealing with budget reductions Strategies / Impacts • Other Options • Building Closures • Service reduction vs. cost savings • Initially instituted to accommodate furlough program • Staff worked anyway just to keep up • Public confusion about hours of operation • Lack of consistency among County buildings & among agencies within buildings

47. Dealing with budget reductions Strategic Planning Efforts • Government Summit Initiative • Cowlitz County Strategic Plan

48. Dealing with budget reductions Strategic Planning Efforts • Government Summit Initiative • Concept & Objectives • Formation & Structure • Goals • Achievements • Barriers to Success

49. Dealing with budget reductions Strategic Planning Efforts • Government Summit Initiative • Concept & Objectives • January 2009 “State of the County Address”: “Explore ways that additional collaboration and combining services can benefit the citizens of Cowlitz County” George Raiter, Commission Chair

50. Dealing with budget reductions Strategic Planning Efforts • Government Summit Initiative • Formation & Structure • Elected Leadership from • Board of County Commissioners • City Councils • Longview • Kelso • Castle Rock • Kalama • Woodland