FINANCIAL STABILIZATION SUMMIT I
August 17, 2010
Lane Community College Center for Meeting & Learning
Commissioner Bill Fleenor presided with Commissioners Bill Dwyer, Rob Handy, Pete Sorenson and Faye Stewart present. Recording Secretary Melissa Zimmer was also present.
Present: Madilyn Zike, Liane Richardson, Chuck Forester, Tony Black, Alicia Hays, Rob Rockstroh, Marsha Miller, Alex Gardner, Anette Spickard, Russ Burger, Denis Hijmans, Jim Steiner, Lori Green, Pat Dotson, Linda Hamilton, Alex Guyler, Rick Daughtery, Ed Daniels, Sid Leilken., Gordon Zimmerman, Lisa Smith, Les Sieczkowski and Steve Sieczkowski.
I. Call to Order.
Chair Bill Fleenor called the meeting to order.
II. Introductory Comments by Commissioners
Fleenor stated the purpose of todayís meeting is to fulfill a promise made to the Budget Committee following a last minute revelation that the County was going to experience a $10 million revenue shortfall between Fiscal Years 10/11 and 11/12. He indicated the announcement was made after the County Administrator prepared and submitted his FY 10/11 budget and it was too late in the budget process to make the necessary changes. He said when the administrator was asked if his submitted budget would have been different had he known about the $10 million revenue shortfall, his response was absolutely yes. Fleenor indicated they are here today to commence the challenge of reconciling the $10 million shortfall.
Sorenson said this was an idea he originally proposed during the budget process. He indicated that it was a way to satisfy some of the concerns of the Budget Committee members that approved the budget. He added they are in the midst of the simultaneous decision of the governor to order severe reductions to funds that are administered under Oregonís income tax and the collapse of money being paid to the state by Oregon income tax payers. He thought it was best to have an early reassessment of where they are with the budget process. He believed it is important that they do not make broad decisions about all of the funds they administer. He said they need to be open and creative with ideas on how to do things more efficiently, to motivate the work force and to keep the best people they have in the organization to do the very best job they can for the taxpayers.
Handy noted the people in his district make an average income of $28,000 a year. He said when he thinks about children and families, public health and safety he said they are on both sides of the same coin. He said they need to have balance and proportionality and fairness around how they look after the needs of the community during tough times.
III. Introductory Comments by Invited RSVP Legislators or their Representatives.
There were none present.
IV. Approval of December 8, 2009 Leadership Team Meeting Minutes
MOTION: to approve the minutes of the December 8, 2009 Leadership Team Meeting.
Handy MOVED, Sorenson SECONDED.
VOTE: 4-0. (Dwyer out of room).
V. O&C Lands and Federal Forest Payments Ė Past, Current and Future
Jeff Spartz and Alex Cuyler gave a presentation on O & C Lands and Federal Forest Payments. (Copy in file).
Cuyler commented that the Countyís challenge is when they get a reauthorization, they need to work on what happens after that. He didnít think they would go past another reauthorization.
Sorenson was optimistic because President Obama promised to work on this issue and the congressmen and senators are reminding the President at every opportunity. He noted that NACo and AOC have been instrumental in gaining a partnership for the Campaign for Rural America and administration officials have been open to meeting with them and other organizations. He stated that he is more optimistic now than he has been in several months. He noted that Congress has asked the President to include this in the next budget.
Fleenor asked if $15 million from SRS was sufficient for next year to use for the budget.
Cuyler said Christine Moody has been in touch with the Forest Service and the BLM regarding the expectation under the new formula. He said over the next several months the 2012 budget will be developed by several federal agencies. He said they need to ensure this program is in the budget and the agencies forward it to the President.
Sorenson said if it is included in the Presidentís budget, they will have an idea of what will be presented and adopted by Congress. He commented that the County has had success in last ditch efforts.
Cuyler indicated that he feels some optimism, but the ramp down is drastic for them. He said to ramp down to $15 million or less is the reason they are at the point they are. He commented FY 2011 will be a difficult year.
VI. Property Tax Revenue - Past, Current and Future.
Anette Spickard, Assessor, gave a presentation on property tax revenue. (Copy in file).
Spickard explained the biggest issue for the three percent growth in her opinion is all of the value of the appeals at the Department of Revenue because any huge reductions will come off the tax role and affect everyone. She said it could dip below three percent but it is too early to tell and that was why she recommended budgeting conservatively.
VII. Cost Drivers and Revenue Enhancements and Cost Control Opportunities?
Madilyn Zike gave a presentation on the Lane County workforce. (Copy in file)
Jeff Spartz discussed revenue enhancements. (Copy in file).
VIII. Financial Considerations Ė Past, Current and Future Budgets
Christine Moody, Budget and Finance Manager, gave a presentation on financial considerations. (Copy in file).
Dwyer asked what was paid out in claims last year. He also wanted the average benefit cost of payroll He asked for a history on who is spending the lapse. He asked if there are continued increases in PERS if the state is weaning of PERS and going on the IAP.
Fleenor asked if the County has a fundamental problem with respect to the Lane County budget. He asked if that was something to everyone to be a reality. He said he heard from people it is not.
Jim Steiner, AFSCME, asked if there are 140 positions in the general fund that are not filled but are still budgeted. He believed it could be as much as $10 million. He added if it is really a $10 million reduction, then he asked if they had a problem. He said this union has asked for transparency in the budgeting process. He asked how much money is in reserves and their actual costs. He commented that the budget is a forecast. He asked with regard to the vacant positions, if there is a difference from the budgeted amount to the actual amount and if it is a significant number to look to see if they really have a problem.
Spartz said that Steiner referred to a large number of budgeted vacant positions. He said a number of those positions donít affect the general fund one way or another. He noted the Sheriff has a number of vacancies that he has been trying to fill.
Fleenor indicated there was a rumor they have approximately 140 budgeted positions that have not been filled. He said the average personnel cost with the position is about $102,000. He indicated that represented $14 million. He recalled Steiner stating the County doesnít have a problem because they havenít spent the money.
Moody stated the 140 number is a moment in time. She said that is how many vacant positions they have today. She added they are constantly having people leave and coming into the County. She noted one third is in the general fund. She said they wonít save the whole annual rate because a position is vacant for a little while. She indicated that the lapse is their vacancy rate. She said Lane County assumes a two percent vacancy rate will occur and the two percent has to go back into the general fund. She added smaller departments have to leave vacancies open because they budget so closely and they canít save the money twice by eliminating vacancies and trying to get a lapse.
Steiner said they requested information before. He wanted a detailed flow chart of the current positions and the people who fill them He said they can then determine if they have a vacancy rate. He thought the County has a vacancy rate that was closer to ten percent. He didnít have the facts but he said they do need the information.
Sorenson asked about the state budget reductions in the current fiscal year. He asked if they will have to make any decisions about the budget in the current fiscal year or will the vacancies and the filling of the vacancies be enough.
Moody hadnít heard from any departments in the general fund that they have to make a reduction right away.
Rockstroh indicated that he has vacancies in the Community Health Center because they havenít done all the hiring. He added that they pay indirect into the general fund and it enhances it. He said they will employ more people with the expansion of the Community Health Center. He said if they have big cuts in Public Health, there is the risk of giving it back to the state and then they would be billed for it. He thought for this year they will be intact with their money.
Fleenor asked what the action plan is to initiate a flow chart for Jim Steiner.
Zike responded that they will have it available in the next couple of weeks. She added that the County doesnít have one at this point.
Cindy Land, Budget Committee Member, wanted to know about the vacated positions. She indicated that over the last month she has been trying to get numbers. She ran her own spreadsheet using the budget FTEís versus the current active FTEís and there was 143 people who have a vacant position. She said if that is factored by the general fund percentages for each department, they end up with a potential of $14.8 million overall but if it is through the general fund, it is $5.8 million. She said they could save jobs and keep the services for the community and keep the structural deficit under control. She thought they should pursue that as soon as possible so it is more money they will be able to glean for this budget. She indicated that if they donít hire anyone this year to fill a position that is not needed right away, then next year they donít have to pay expenses when they have to lay that person off. She added if they lay the person off the following year, then they have to lay off 1.6 positions to get the same amount of savings. She said it was more of deactivating a position to save today so they can exponentially save more money next year if they need it. She thought SRS could come through and things could be fine. She said if that is the case, they could reactivate those positions and build on that success. She said in order to preserve jobs, it is important to look at it today so they are cutting expenses, not services when the community needs them the most.
Zike indicated the department directors are evaluating what it would look like if vacant positions are not filled and the service reductions that could result in not filling positions. She indicated there needs to be a dialog about not filling the positions.
Les Sieczkowski commented that with the Sheriffís Office it taxes the work force when they have open positions they canít backfill. He added they work 50 to 70 hours as a work week when they are short staffed and it causes problem with fatigue. He asked to keep the open positions in mind.
Land said her math was based on the proposed budget because that was the only hard numbers she had access to. She added that everything is an estimate. She hoped as they look at the vacant positions that they can be sensitive to the Sheriffís Department, and Health and Human Services positions that are essential to the community.
With regard to the budget being finalized, Stewart asked what the lapse was and what was rolled forward versus the budgeted amount. He said there might be vacancies in the Sheriffís Office and the money allocated for the positions are being spent in overtime so they can provide their service. He didnít think there could be savings until they close the books because they donít know what they actually spent.
Rockstroh indicated that he has some vacancies but they canít fill them because they are not at market. He added that they are under market in a lot of their classifications both non-represented and in AFSCME. He said it is getting harder to attract people. He added a lot of the positions add money into the indirect.
Smith said they make certain promises to the state or federal government through grants that in order to get a certain amount of money there needs to be a match. She said they make the match with staff. She added that by not filling some of the positions, they could lose a sizable amount of grant funding. She added at DYS they are capped at 33 youth at any time that can be committed to the Oregon Youth Authority and sometimes the judges send more kids than that. She asked what they would do with those kids. She commented that it affects their secure custody programs.
Land asked what happens to the money if it takes six months to eight months to fill a position. She didnít want to see the process lose the opportunities with analysis paralysis. She stated that they need to get on this quickly to take advantage this year that will magnify next yearís ability to keep the County employees in their jobs and their families and community secure.
Sorenson asked how much money they had to stop spending between now and June 30, 2011 to have a balanced budget in the current budget year. He asked if they had to make any changes in their current budget.
Moody said if they donít want to make any reductions in the 11/12 budget they will have to decide how to get rid of the $10 million deficit beginning now. She indicated that the current budget is balanced. She added that if they want to completely get rid of the deficit in 11/12, it would depend on one time reductions or continuing reductions. She said if they could get to the structural problem ongoing, then they can get to the amount they need to reduce. She said if they can reduce $5 million in the current year that would continue, they would have a $10 million reduction over two years.
Steiner said when they looked at changing the Lane Justice Courts, it is their understanding there are four deputy positions that could be added back in and they would bring in revenue to support them. He stated that it is not the unionís intention to take positions that would make money and eliminate them or lessen services in the community. He asked if they can get a number of the actual dollars that Lane County has in reserves.
Moody indicated the reserves are budgeted in their own line. She said they are easily determined. She said for the reserve in the general fund for 10/11, they estimate the ending fund balance at $20 million but by the end of the year, they believe they will only have $11 million left in reserves. She added that each fund has its own reserve and it stays within its fund, it is not general fund sitting in reserves. She indicated that the lapse only applies to the general fund and that amount is $1.5 million for the year.
Fleenor asked how they can prove to the unions and citizens that they have identified all of the different reserves when they have an ever changing document. He thought they could have a work group to identify to each otherís satisfaction that they have been able to identify all of the reserves.
Spartz indicated that AFSCME has people who are experts on local government budgeting. He asked if they could have a one day session on the budget and have it with other unions so the numbers they are representing are the same.
Steiner said they have experts in Washington, D.C. that could do that. He said it is important for the entire community and organized labor to know what it is so they all understand it at the same time.
Hijmans wanted to know where the commissioners stand on the last three bullet points of the agenda.
Fleenor said his feeling is they are having difficulty transitioning the first bullet point. He thought they need to have a Financial Stabilization Summit II once they get the flow chart and other information and schedule it in late September or early October. He said that would allow them to get beyond the second bullet point. He said they have issue with the numbers and accounting techniques they need to agree upon. He hoped in the future they will have an agreement they have a problem and to what extent the problem is.
Sorenson said they need to have departments slow down the hiring. He asked if they make a $10 million cut in April or if they want to do it slower over time. He wanted to see the ratio between the people doing the work and the people managing the work. He noted the population of Lane County has gone up but the number of employees working for Lane County has gone down. He said they shouldnít fill the positions in the general fund.
Dwyer commented the structural deficit is an immortal and it will never go away. He said the question is how much revenue are they going to get determines how much of a deficit they are going to have. He stated that they are not going to cut a position that provides critical services that leverages other peopleís money. He indicated that they have a problem every year. He noted the biggest problem is the things that they canít control like medical costs. He thought they could work together with the unions to develop a model. He said the question is do they save now so they can extend the anemia further. He asked if they should provide an anemic service or not do it at all. He thought they could consolidate departments. He said they have to develop models to keep the level of service as high as they can and keep the cost per employee down.
Fleenor asked whatever savings they can derive will help them in the future. He said for them to move on, they should try to find as much savings as possible. He thought the sooner they start, the greater the savings over time. He asked how they can address issues and start making cost cuts today while they are waiting for the supplement.
Spartz responded that on September 14 they will present a series of recommendations from the Management Team and alternatives that will reduce their expenditure outflow during the current budget year.
Fleenor asked if they can institute a hiring freeze for those jobs that are associated with the general fund that they are in the process of reviewing.
Spartz explained that the Board can pass a board order tomorrow directing a hiring freeze, but in a week or two they will have issues. He asked the Board to direct the administrator to put the tightest possible controls on and do reviews of vacant positions and hiring requests.
Dwyer said it wasnít practical to have a hiring free. He said they need to ask each department director what is optimum in terms of their needs and then they can determine the service level.
Sorenson believed it would not be a good idea to have a hiring freeze. He agreed that the hiring has to be done carefully and they need to determine if it is the type of job that is on the chopping block. He said they are facing large cuts so they need to be careful how they fill the positions.
Les Sieczkowski said it would be their position as the Lane County Peace Officers that this yearís budget stays intact. He said the Board has adopted a budget they are working within in and they are looking for solutions if the SRS funding doesnít come through. He commented to make the cuts now would cause the departments to be in a state of disarray and there isnít any benefit. He thought they could do away with add backs and work on solutions for next year.
Fleenor asked if they receive full SRS funding in 2012, how it would impact the $10 million shortage today and in the next year.
Moody indicated the shortage they are looking at now is in the fourth year of the SRS funding. She said the renewals wonít occur until the end of the fourth year. She said the deficit is in 11/12. She indicated that unless they change the fourth year formula, it will not be in time to deal with the deficit.
Fleenor said by keeping the budget as is until 2011 that they are laying down a bet that at some point in the future SRS is going to come through. He said they are stuck trying to balance a budget based on a possibility that they will have a federal increase in revenue at the last moment.
Moody said the $10 million deficit is not the end, there are deficits after that. She added they donít address the structural deficit until 2014/2015.
With regard to a four day work week, Bartlett asked if any other counties in Oregon instituted something like that. He said given the complexity of bargaining contracts, he asked if it was feasible for the long term and what kind of savings could be generated. He said if they take the long view, SRS has always at the last minute been rescued. He said with the political climate and economy that might not happen this year. He thought making budget cuts might be premature and counterproductive. He said if they donít get SRS back, they lose about $47 million total. He thought if they had a slow glide path down, the public will have psychologically absorbed that and it will cushion the loss. He is afraid they wonít understand the severity of the Countyís situation.
IX. Comments by Union Leadership
Les Sieczkowski said they have to look to find new funding solutions. He said if they have the money now to hold things together, until they get to the point where they donít have the money, then they can figure out what needs to get cut and moved on from there. He anticipates that there will be a lot of layoffs like there were in 2007.
Steiner read a letter into the record. (Copy in file). He was against a hiring freeze.
X. Concluding Remarks by Commissioners
Dwyer commented that in the 12 years since he has been a county commissioner, they have come very far with tools for doing the budget for Lane County. He said people really donít have an understanding on how the services are provided. He said there is not much that motivates people except when they call for police because their house is being burglarized. He commented that most people are trying to get through life without government. He said the people of Lane County at some point in the future will have to step up because Lane County wonít be able to provide a certain level of services when income gross is at three percent and the costs are at six percent. He didnít think the structural deficit could ever be solved. He thought it will take a collective group of citizens to solve the problems.
Sorenson said what hasnít been discussed is the timing of their budget. He wanted a 15 month budget. He said they should get their budget done in March. He asked how they get the attention of the legislature.
Handy thought it was a good start but they have more to do.
Stewart said they have a problem whether they have SRS or not. He said they have had to make cuts of an average of $1.5 million over the last 15 years. He said they are at a point where they have done everything they can to minimize the impacts. He doesnít know how to do it any further. He heard great ideas that they need to be working on. He commented that they need to work together as a team of the whole organization to look at how they are going to move into the future. He said he doesnít see how they can continue to do the same thing over and over and continue to make these cuts. He was optimistic that they will see some relief from SRS. He indicated they are involved in national efforts and he is going to remain optimistic that they will have something in the end. He said even if they receive money, they still have to make cuts. He indicated that they are going to have to do things differently to continue to move forward. He said they can make the commitment to work together.
Fleenor thought this was the beginning of building trust. He hoped that they can have another Economic Summit sometime in the future to share the information they have requested from staff.
Commissioner Fleenor adjourned the meeting at 11:30 a.m.