County Budgeting
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Transcript of County Budgeting
CountyBudgeting
December 9, 2010 Budget 2
Finance
a. The science of the management of money and other assets. b. The disposition of public revenues by a government. From the Latin word finis, meaning “end,” as in “to end” or “settle.”1
1American Heritage Dictionary
December 9, 2010 Budget 3
Finance“The proper role of government provides a starting point for the analysis of public finance.”
2 What is the role of government?
Mission: “Why does this organization exist?”
Means: “How does this organization performs its mission?”
2Wikipedia
December 9, 2010 Budget 4
Financial ManagementTreasury: •Tax and revenue collection
• Debt issuance & mgmt• Investing and banking
Accounting: • Financial Record keeping• Financial Reporting• Financial Auditing• Performance Auditing
Budgeting: • Appropriation plan• Expense & Revenue Forecasts• Performance measures• Line item budget
December 9, 2010 Budget 5
Treasury Functions
a. The executive department of a government in charge of the collection, management and expenditure of the public revenue.
From the Old French word for “treasure.”1
1American Heritage Dictionary
December 9, 2010 Budget 6
County Treasurers1
Receive, disburse, invest, account for revenue• Steward of funds for state and local gov’ts:
County, cities, schools, special purpose districts.
• Collect property & other taxes, past due amounts.
• Bond sales and sales of surplus county property.
• Account for and report on the fund they manage but are not counties’ accountant (the Auditor is).
• Can be an appointed county financial officer in charter counties.
1Adoped from the Municipal Research and Services Center of Washington
December 9, 2010 Budget 7
Accounting Functionsa. the discipline of measuring, recording, com-municating and interpreting financial activity.
From the Latin word “to count”1.
• Primarily retrospective; looks at the past.• Generally includes:
–financial record keeping, –financial reporting, –financial auditing, –performance auditing.
1American Heritage Dictionary
December 9, 2010 Budget 8
County AuditorsPerform most of the accounting for ‘code’1 counties, mainly tracking expenses:
Auditors have many other statutory duties:
By statue, auditors prepare the preliminary budget, but the BOCC or county council also may do this.1Counties constituted under Title 36 of the Revised Code of Washington (RCW)2Board of County Commissioners
•Elections •Recording
•Licensing •DoR agent
•SAO supervisor •Report to SAO
•Clerk of the BOCC2 •Preliminary budget
December 9, 2010 Budget 9
Budget Functions
a. An itemized summary of probable revenues and expenditures... embodying a systematic plan for meeting expenses1.
b. An organization plan stated in monetary terms2.
c. A forecast of expected resources and the purposeful distribution of those scarce resources3.
From the French word bougette, meaning “purse.”
1American Heritage Dictionary 2Wikipedia 3Washington State Budget and Accounting Reporting System (BARS) manual
December 9, 2010 Budget 10
Budget Officer
Auditor’s office or BOCC appointee (statute allows either). Responsible for the recommended budget and the budget process, which include:
These tasks all must be completed, but often they are done implicitly and without deliberation.
•Policy development •Strategic planning
•Expenditure forecasts •Revenue forecasts
•Financial planning •Capital planning
•Performance measures Line item detail
December 9, 2010 Budget 11
Summary: Finance vs. BudgetTreasury and accounting are the bulk of finance, but most financial management occurs via the budget.
Treasurers track revenues and Auditors track expenses -- budget is what they track against.
• Budget is an appropriation -- not cash. • Budget is spending plan, a forecast.
You pay for what you budgetYou do what you pay for
Policy is what you do
December 9, 2010 Budget 12
Revenues by Source
About a third of revenue is from direct taxes.
About 80% of all revenue is restricted
Unrestricted Revenue 20% Restricted
Revenue 80%
Taxes
Grants
Charges for Service
Transfers
Taxes
December 9, 2010 Budget 13
Restricted $: GF and OtherVirtually all unrestricted revenue is in the GF,
and a third of that is also restricted.
Total Revenue
Un-restricted
GF Revenue 20%
Restricted GF Rev.
10%
Other Restricted Revenue
70%Unrestricted GF Revenue
2/3
Restricted GF Revenue
1/3
General Fund: 30% of Revenue
December 9, 2010 Budget 14
Typical General Fund ExpensesThe majority of GF expenses are for L&J.
While they are funded with discretionary dollars, most GF programs are not discretionary.
Parks 2-3%Parks 2-3%
Law & Law & JusticeJustice
2/3 to 3/42/3 to 3/4
Internal Support 6-9%Internal Support 6-9%
Fiscal Entities 7-10%Fiscal Entities 7-10% General Government 9-12%General Government 9-12%
December 9, 2010 Budget 15
Declining Revenues
Overall, counties are at or below 2006 revenues•2000-2007 GF growth was 4% per year.•2007-2010 GF growth was -2% per year.
Due mainly to new construction, which drives:•All property tax growth over 1%•Up to a third of sales tax revenues•Real Estate Excise Tax•Development fees
The mean grossly understates the extremes.
December 9, 2010 Budget 16
Same Costs
Example: Structural Revenue Deficit
10% beginning surplus
32% overspent
Lines cross, year 7
0
100
200
300
0 2 4 6 8 10 12 14 16 18 20Year
Per
cen
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f B
ase
Yea
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Revenue @ 4% Expenses @ 6%
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Structural?
The structure of County revenues changed in 2002 with Initiative 747.•1% limit on levy increases
•Counties are designed to be property tax-based
•Typically 40 – 50% of GF revenues
Masked by new construction, which drives:•All property tax growth over 1%
•Up to a third of sales tax revenues
•Real Estate Excise Tax
•Development fees
December 9, 2010 Budget 18
New Construction
County NC
Statewide NC
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400
800
1,200
1,600
2,000
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Cla
rk C
o. i
n M
illio
ns
-
5,000
10,000
15,000
20,000
25,000
Sta
tew
ide
in M
illio
ns
December 9, 2010 Budget 19
The Context
County revenues grow with inflation and population, at best. But gov’t costs grow faster than inflation.
Gov't IPD higher than
CPI
Gov't IPD lower than
CPI-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
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61
:1
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65
:3
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70
:1
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74
:3
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79
:1
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83
:3
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88
:1
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92
:3
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97
:1
20
01
:3
20
06
:1
20
10
:3
20
15
:1
20
19
:3
December 9, 2010 Budget 20
The ContextYet, our citizens are becoming poorer.• A national, decline in personal income growth.
-3%
0%
3%
6%
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01
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03
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07
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09
December 9, 2010 Budget 21
Solutions
Not cutting…20%
overspent
10% cut, year 9
Lines cross 2 years later
0
100
200
300
0 2 4 6 8 10 12 14 16 18 20Year
Per
cen
t o
f B
ase
Yea
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Revenue @ 4% Expenses @ 6%
December 9, 2010 Budget 22
Solutions
Not raising taxes…
Lines cross 2 years later
10% revenue increase in
year 9
20% overspent
0
100
200
300
0 2 4 6 8 10 12 14 16 18 20Year
Per
cen
t o
f B
ase
Yea
r
Revenue @ 4% Expenses @ 6%
December 9, 2010 Budget 23
Solutions
Not even cutting AND raising taxes…
10% cut year 9
10% revenue increase in
year 9
10% overspent
0
100
200
300
0 2 4 6 8 10 12 14 16 18 20Year
Per
cen
t o
f B
ase
Yea
r
Revenue @ 4% Expenses @ 6%
December 9, 2010 Budget 24
The New Normal
•Structural revenue change
•Worst economy in eighty years
•Long-term personal income decline
•Accelerating costs: Gov’t inflation + benefits
•Cuts and tax increases not sustainable
•High percentage represented
So what works?
December 9, 2010 Budget 25
Efficiencies
Not one-time improvements, but an ongoing pursuit of efficiency - a culture change for many organizations. Examples are:
•Compensation structure •Increased productivity
•Limit hiring •Performance requirements
•Regionalization •Automation
•Triaging most costly svcs •Fee for service revenue
•Prevention •Education / trainingRegulatory relief •Cost shifting
•True Incentives •Negotiations