County Budgeting. December 9, 2010Budget2 Finance a. The science of the management of money and other assets. b. The disposition of public revenues by

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


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


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


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



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


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.



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


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


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


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


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


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


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%


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.


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

t o

f B

ase

Yea

r

Revenue @ 4% Expenses @ 6%


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


New Construction

County NC

Statewide NC

-

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


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%

19

61

:1

19

65

:3

19

70

:1

19

74

:3

19

79

:1

19

83

:3

19

88

:1

19

92

:3

19

97

:1

20

01

:3

20

06

:1

20

10

:3

20

15

:1

20

19

:3


The ContextYet, our citizens are becoming poorer.• A national, decline in personal income growth.

-3%

0%

3%

6%

19

61

19

63

19

65

19

67

19

69

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09


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

r



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



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



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?


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

Documents

County Budgeting. December 9, 2010Budget2 Finance a. The science of the management of money and other assets. b. The disposition of public revenues by