State Shared Revenues and Future Budget Projections

March 3, 2009

Why are we talking about this?

• Major economic events have occurred– Pension investment losses– Flat inflation with contractually obligated

increases

• These economic events have a large negative impact on revenues and expenditures

• Budget shortfalls compound

The impact on the 2010 General Fund

-$140

-$120

-$100

-$80

-$60

-$40

-$20

$0

$20

State SharedRevenues

Property Tax Cap

Police PensionContribution

Forestry Lift

Telephone Savings

Bottom line impact for 2010

Revenues Expenditure Net Change in Fund Balance

November Estimate

$8,538,416 $8,646,110 ($107,694)

Changes ($197,460) $29,723 ($227,183)

February Estimate

$8,340,956 $8,675,833 ($334,877)

The next shoe to drop… IMRF

• IMRF will release the 2010 rates in April• 2008 investment returns of -24.8%• Actuarial (rate setting) techniques modified

to mitigate rate increases• Our 2010 rate will be at least 8.33%, which

would be a $12,500 increase to the General Fund over projections

• If the rate is 10%, General Fund impact would be $38,000

It may not be over…

• Future investment losses– IMRF– Police Pension

• State legislation– Reducing or eliminating shared revenues– Possible relief for governments: proposed

legislation removing Police Pension and IMRF levies from Tax Cap. Passage is unlikely.

We are fiscally conservative, but realistic• Revenues

– use verified sources and actual data whenever possible

• Expenditures– wages are budgeted as actual estimate – no

rounding up.

5 Year projections

• Necessary to gauge the near and long term outlook of Village services

• Estimates use current (2009) levels of service

• Revenues and expenditures escalate at known amounts if possible, or historical trends

• Near years are more reliable than out years

Notable assumptions: 2010-2013

• Property tax: increase by 0.1% in 2010, 3% thereafter

• Police Pension contribution increases by 32.3% in 2010, 13% thereafter with positive investment income

• State shared revenues growing at moderate 3%• Recreation is at current expenditure levels with

increased revenues from additional fees• Museum funding exists at current level• Sales and other taxes growing at modest levels,

2% to 3%

Fund balance – our savings account

12-31-2009 Projected Reserves (in thousands)

$2,027

$440

$195

$1,138

Cashflow Debt ServiceMisc. Undesignated

Current Village Policy• 25% of expenditures are set aside

for cash flow purposes (Cash Flow Reserve)

• Some dollars are for restricted purposes (Fire insurance, Police forfeitures, etc.)

• Undesignated reserves are available for any purpose

• Reviewed every 2 years• Projections are based on 2008

unaudited projections and will be adjusted upon completion of the financial statements in June, 2009.

5 Year Revenues, Expenditures and Changes in Fund Balance

-$2.00

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

2009 2010 2011 2012 2013

Revenues Expenditures Net ChangeIn millions

Available Reserves (as a % of expenditures)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

2009 2010 2011 2012 2013

Cashflow + Undesignated Policy

Cost control measures

• Continue to review all purchases

• Contractor/ vendor reselection (per review schedule presented to the board last year)

• Competitive bids / requests for proposals to secure low cost providers

• Joint purchasing through WCMC, State and others to achieve economies of scale

• Strict enforcement of purchasing policies