At their regularly scheduled meeting tomorrow, Washoe County Commissioners will receive the County Manager’s recommendation of a nearly $311 million general fund budget for FY 2011-12. The recommended budget includes a reduced deficit of $31.3 million from the original $33.5 thanks to employee health care costs stabilization and higher than expected departmental budget reductions. Neither the new budget deficit nor the recommended final budget includes impacts of the Governor’s proposed state budget upon the County, such as the possible diversion of the 9 cents of local property tax re-directed by the 2009 Legislature to the State and set to expire on June 30, 2011 nor the push-down of some state-provided services to the county without funding sources. These two proposals would add approximately $24 million to the county’s $31.3 million deficit for next fiscal year.
Deficit Reduced. While a $31.3 million deficit is still daunting, especially after four years of $123 million worth of budget reductions and the permanent loss of 725 county jobs (16% of the workforce), it is about $2.2 million less than the original budget deficit of $33.5 million projected earlier this year thanks to two recent actions taken by the County. First, county labor groups voluntarily negotiated with management to shoulder more of their health care costs, originally estimated to rise 12% in 2011-12. This action basically held 2011-12 employee health care costs constant with 2010-11. Also, all county departments were tasked with collectively reducing their 2011-12 operating budgets by $5 million; departments recommended budgets for next year actually result in $5.7 million of reductions. The newly-calculated $31.3 million deficit is the second largest the county has identified in the last four years as a result of declining property tax and sales tax revenues. If the Governor’s state budget is approved as proposed, however, the deficit would rise to $55.3 million and would make it the largest deficit the county has ever grappled with.
Labor Costs Savings Target Reduced. Of the original $33.5 million budget deficit identified, $13.8 million was to be achieved by labor costs savings through negotiations with the county’s nine employee union groups (the county must participate in collective bargaining per Legislatively-enacted state law; however, the State is exempt from such negotiations). Thanks to employees’ willingness to absorb more of their health care costs, that target has been reduced to about $11.6 million ($11,588,607). In response to the budget reductions necessitated by the recession, employees have voluntarily given up their cost-of-living increases for the past three years (anticipated to also be eliminated in the coming year), had their real wages reduced and have contributed more to their health care premiums.
Redefining “what and how” for Sustainable Savings. The County Commission had also identified a target of $5 million in first-year savings (2011-12) and a total of $15 over two years by redefining the “what and how” of services provided through a Fundamental Services Review which is currently being conducted through the County’s Organizational Effectiveness Committee (comprised of local CEOs) as directed by the County Commission.
Current Status. Washoe County’s spending in this fiscal year is equivalent to its 2005 spending levels, and staffing is at 2004 levels overall. The 2011-12 general fund budget that the County Manager will present to the County Commission tomorrow is reflective of departmental operating budget reductions ranging from 1.7% to 3.7% and, unfortunately, includes the permanent elimination of an additional 44 vacant positions and the elimination of three occupied positions in the Public Works Department. Three additional occupied positions would have hours reduced or their funding source changed to lower costs. A final budget must be approved by Commissioners by June 1st. An official public hearing on the budget is scheduled for May 16th at 10:00 a.m., however the public is encouraged to provide their input at any time via the county’s website or at any County Commission meeting where the budget is agendized.
Contingency Plans. During a Legislative year, state statute provides that a local government may amend their budget after filing (i.e., June 1st) to reflect any impact legislative measures may have on it. In March, the Board directed departments to begin preparing two contingency budget plans based on worse-case scenarios; 1) a 90% funding level and 2) a 75% funding level. These plans will provide the Board a range of budget reduction options from $29 million up to $72 million. The Board will make decisions about the actual amount reduced in each department’s budget based on the deficit driven by the Legislature and the impact to services. These plans are due in July.