LEADERSHIP TEAM MEETING
Tuesday, January 21, 2003
9:00 a.m. - 12:00 noon
Goodson Room, Public Works
Commissioner Peter Sorenson presided with Alicia Hayes, Lisa Smith, Doug Harcleroad, Jim Gangle, Terry Wilson, Tony Black, Rob Rockstroh, Ollie Snowden, Jan Clements, Bill Dwyer, Bobby Green, Sr., Tom Lininger, Anna Morrison, Bill Van Vactor and Recording Secretary, Melissa Zimmer.
1. CALL TO ORDER
2. APPROVAL OF MINUTES:
December 3, 2003, Leadership Team Meeting, 9:00 a.m.
MOTION: to approve the minutes of December 3, 2003.
Lininger MOVED, Harcleroad, SECONDED.
3. MANAGEMENT TOOLS UPDATE
Alicia Hayes, Children and Families, reported her group came together to develop parts of the Strategic Plan for the purpose of moving ideas forward. She discussed their ideas. (Page 2 handout, copy in file.)
Rich Fay, Parks, stated his committee was in charge of reviewing revenue generation. He said they reviewed the current fee structure including full cost recovery. He passed out a report. (Copy in file.) He said they discussed the recommendation to set up a fee waiver based on income and the ability to pay. He added they examined automatic indexing of fees for inflation. He said it was important that they look at that in more detail in the future. He said they discussed options for credit card payments and use of a collection action or a prepayment of services.
Van Vactor noted in terms of benefits, they will find the base of operation (without anyone getting a cost of living increase) would go up eight or nine percent. He asked if the Finance and Audit Committee should consider some direction from departments to come forward with fee increases that are within the range of automatic indexing. He said they are concerned on the revenue side that a lot of the revenues in the discretionary general fund will not increase as rapidly as their base cost of operation.
Clements stated as it relates to a non-general fund, there is a principle of gain sharing of giving back to a department. He said with gain sharing from the general fund departments, if there are fee increases or other efficiencies, they would in part or whole accrue back to the department.
Sorenson noted that gain sharing was going to Finance and Audit on January 28 and then to the Board.
4. UPDATE ON STATE REVENUES
Tony Bieda, Intergovernmental Relations, reported the new governor had proposed a budget for the next biennium that is based on the assumption that Ballot Measure 28 does not pass. He said there would be a larger deficit going into the next session in terms of rolling back to the legislative approved budget in July 01. He said the most significant area they examined was a combination of decreases. He added that they won’t fund the inflation of a cost of living increase. He said there is a decrement in the Department of Corrections’ budget for SB 1145 of about $45 million. He added it is statewide as part of the governor’s way to make up the deficit. He said details for Health and Human Services hadn’t been provided yet.
Bieda said if Measure 28 fails, there is every expectation that some of the cuts that were put in by the legislature last fall as a contingency will be revisited and money will be moved around. He noted that some one-time money would be brought to the table for the rest of the biennium. He thought K-12 would be the first place where they would look for some type of restoration.
Bieda explained for the next biennium they would consider new revenue enhancements to go back to local governments. He said the key indicator will be the degree to which K-12 could be stabilized going into the next biennium and to be able to identify a stable funding source and still accommodate some of the down turn in revenue. He added a key component of what they would be doing for resources for the next biennium will be the revenue forecast. He said there will be one more revenue forecast between now and May and until they know that, any finalization of the next budget is an exercise because they won’t know how close they will be to having revenue that will sustain the level of spending that is already proposed or make other contingencies.
5. DISCRETIONARY FUND FORECAST
David Garnick, Senior Budget Analyst, passed out a copy of the Fin-Plan Forecast. (Copy in file.) He noted this budget was similar to what they had seen before. He updated it based upon health benefits. He said (based upon their consultant’s best projections) health benefit costs will only go up 12% percent next year instead of the 15% that was projected. He said it resulted in a 9% increase over the combined rate. He said the original forecast was $159,980, but as the costs had come in (including the health benefit increases, the new PERS rates and the retiree medical costs), the budget deficit for next year is $1,062,000. He noted this was the discretionary general fund part. He added the other half of the general fund is non-discretionary. He reported that discretionary revenue is only going up 1.4% over the forecast period. He added at the same time, the statutory personal services are going up 7.7% and health benefits are up 9%. He said they were talking about almost 9% overall for total personal services growth. He commented that left no room for COLA’s and there are none built into the forecast. He stated the forecast assumed 2.4% inflation for next year. He said they were going to also assume the two percent lapse assumption and the five-person prudent person reserve. He said they were looking at over $1 million for a deficit.
6. SPECIAL REVENUE PROCESS REVIEW
With regard to video lottery, Garnick explained Peter Thurston, Economic Development, had already sent out instructions for the video lottery process. He added that departments who received money needed to reapply.
John Arnold, Analyst, stated that revenue for Title III funds is projected to rise less than one percent, based on a formula of rural CPI. He said the other part is Title II revenue. He said that was dependent on how they bill for services on federal lands. He said it applies to the Sheriff’s Office, Forest Work Camp and the Department of Youth Services.
7. SERVICE INFORMATION SHEET
Tanya Heaton, Senior Budget Analyst, described the Service Information Sheets for funding priorities. (Copy in file.)
Van Vactor commented when they went through the Strategic Planning process, there was general consensus to make decisions based upon the actual services.
8. INTERNAL COST REVENUE
Tony Black, Information Services, reported they changed how the IS budget is put together. He noted the 03/04 budget for IS based on actuals. He said they went through their time card system to determine which of the programmers were in what department and for how long. He said they found that a time card system and how they were billing was inconsistent. He noted there is some margin of error on how time was allocated. He said that all of the personal cost for IS were allocated based on how much time in each department. He commented that all countywide time has accumulated and was distributed based on FTE. He added the FTE counts were based on the 02 / 03 adopted budget. He noted the direction they were headed was that if there is a dedicating programming effort with personal costs that would be allocated to the department. With regard to M & S, it is allocated out countywide, other than support costs for applications specific to a department.
Snowden asked if Land Management had a large application program effort this fiscal year and when IS would bill for that.
Black responded it would show up on the 04/05 budget. He said in some cases they have departments requesting work where there is no association of money. He said over the course of the year they will have discussions about how best to deal with that.
Van Vactor recalled the reason they have the two-year cycle is because of the requirement in the indirect plan to use audited numbers. He said it would take the indirect plan to be changed in order to change the two-year cycle.
Clements asked if there had been any discussion for either the interim or long term that their three-year replacement cycle is where they want to be. He asked if that was a department-by-department decision or a countywide decision.
Black stated they had that discussion at Management Team and the consensus was it was insignificant for the amount of work that it would cause in additional support to keep the system running. He added if the 03/04 budget was built based on something that happened two years ago, that unless they do another adjustment, there is no consideration for planning projects this year or a reduction of projects. He wanted to bill for people on the personnel side and on the M & S with licensing and maintenance agreements to the appropriate departments. He commented there wouldn’t be a lot of change but it would be easier and would make more sense. He wanted to continue this discussion in the future.
Garnick noted he did a summary sheet cost comparison for 01 /02 and it showed what the actual costs were for the support service departments and programs. He stated the differences in percentage changes were for those two years and that is what the indirect is based upon. He reviewed the general fund and the cost increases for all departments combined and that total expenditures were up 11.6% over all. He said they show a small increase in deprecation, but there is a larger decrease of $641,000 because Suchart had done a revised formula for how the costs are to be allocated.
Karen Artiaco, reported that medical costs didn’t go up as much as they thought they would. She said their benefit consultant reviewed the utilization of services for the first quarter of this year as well as all of last year and thought it should translate into a lower premium next year. She noted that overall the health care increases and the negotiated benefit increase will be about nine percent this year. She said it calculates to $806 per year, per person, whereas a year ago they were looking at a $1,100 per year increase per employee. She added it still translated out to a $1.2 million increase in negotiated benefits for the upcoming year. She explained under statutory benefits, they expect to see small increases in unemployment because people are being laid off. She added that workers comp and long term disability were going up. She commented the reasons were PERS and retiree medical. She noted the PERS rate was 18.8% or $2.3 million.
Artiaco noted the retiree medical was a new line item on the form. She said they received the final actuarial report from the person reviewing their retiree medical program. She said over 20 years if Lane County paid 5%, they could fund it. She said if they accrued 5% per year over the next 20 years they would meet their requirements for retirement benefits plus have enough to pay it out over the remaining life of the people covered by the benefit. She said they were assuming three percent for this year. She suggested using three percent this year, gradually moving it to five percent, and doing it in three years to phase it in.
Artiaco noted the benefits cost is up 9.3% for a total of $3.8 million for the general fund.
With regard to the charges to workers compensation, Artiaco said there is a similar calculation. She said that every department is charged based on a rolling five-year average of what their claims had been. She said workers comp was hit this time because the year that dropped off last year was a low year, with only $100,000 in workers comp claims. She noted that this year there was about $340,000 in workers comp claims. She explained the departments who actually have the charges bear a larger portion of that cost. She noted the total this year is $500,000 compared to $395,000 last year.
Artiaco noted that property and casualty was the most expensive policy. She said for general liability claims, they had a big year come off the five-year average and this year there was about $130,000 total in claims.
Van Vactor explained if they went back to the rate increases for the statutory and negotiated benefits, there is a 9.3% increase. He noted that even in a status quo budget where they don’t have a COLA, employees continue to get step increases and it is built into the system. He added that revenue grows three percent for property taxes and on the Federal County Payments Legislation; the rural cost of living increase is at about one percent. He said the organization is absorbing a 9.3% increase in base costs with less than a three percent gain in revenue. He said they are using what underexpenditures they have to maintain the organization and it still leads to a deficit of about $1 million with more deficits projected into the future.
Dale Wendt, Public Works, reported that for the past 20 years, Fleet had billed on a four-week cycle (13 billings per year) and beginning July 1, 2003, they will be doing it on a monthly basis. He said the Fleet rate has a base rate that includes the fixed costs that are the replacement of the vehicle and the overhead of running the fleet operation. He added the other factor is the mileage rate. He stated this year they also combined the compact and intermediate sedans in one category because they have noticed they are operating intermediate vehicles for less cost than the compact and they have few compacts left in their fleet. He commented it was the first time in seven years they have had an increase in the cost of the sedans. He noted this year they were going up two percent. He explained the main reason was for labor and fuel. He said overall the vehicle fleet went up 1.85% for the coming budget year. He added that compared to 1.48% in the current year and 2.78% in 01/ 02. He noted their target was to keep under the CPI.
9. BUDGET PARAMETERS
Garnick explained they need to be given budget direction. He listed things to be discussed so they all use the right assumptions in the budget instructions to departments. With the initial base budget, he suggested they carry over whatever the current budget is, as that is the starting point for materials and services. He added for personal services, that they cost out what the employee will cost next year, based upon merit and cost of health insurance. He asked if everyone was starting with the current budget to move forward.
There was consensus to move forward with the current budget.
Garnick noted with personal services they did not have a COLA included. He asked if everyone was in agreement to move forward without a COLA.
There was consensus to move forward without a COLA.
Van Vactor explained they had different options. He said they could ask employees to pick up some of the expense of the insurance benefits. He said they were recommending no COLA’s but keeping step increases.
Dwyer said the unions need to be involved.
Van Vactor noted with the delivery of services, that the citizens hold the Leadership Team accountable, not the unions.
Morrison asked if they were to take the no COLA’s off and put in some other type of mechanism for funding, if there were any scenarios that showed the employees could pick up more of a co-pay.
Garnick stated that scenarios could be developed.
Lininger stated they had to set parameters and to provide guidance about how much money is available. He supported building no COLA’s in the budget. He added once they put that amount of money on the table, if the union wants to play with that money that frees up some for the COLA and reduces the cost of health benefits, he would be in support.
Green supported Garnick’s direction.
Harcleroad wanted to see the past five years for the cost of health insurance benefits to the general fund overall. He also wanted to see what it cost per employee. He said then they could discuss the alternatives of sharing the increases, or capping an amount and if the employee wanted to decide upon a plan they could. He said there was more control over health care costs than for PERS.
Dwyer recommended building in the indirect, reducing materials and services one to two percent, and follow up on the reduction target based on the other revenues. He said they need to separate the internal add requests and review them during the budget process. He wanted a list of things that would fall off the cliff if they had to make the reductions and based on the Strategic Plan, what would they be.
10. MOTION - ADOPT BUDGET PARAMETERS
MOTION: to move to begin with the current budget, having no COLA’s, build an indirect and purchased insurance cost, reduce materials and services from one to two percent, have a follow up meeting on the target reductions, separate the internal add requests and review them with the Budget Committee and define a list of what might fall off the cliff and what those unmet needs might be should they have to make tough decisions.
Dwyer MOVED, Morrison SECONDED.
Clements asked for an amendment to the motion that provides for flexibility for departments that don’t have control over their materials and services. He noted the Sheriff’s Office has medical costs and services that are above appropriation and they don’t have control of those costs.
Dwyer accepted that suggestion as an amendment.
Dwyer said when discussing uncontrolled costs of materials and services they need to realize there are some things not within their control.
Garnick noted they had another option regarding retiree medical. He said the plan was built around the three percent rate for next year. He said they could bump it up right away.
Dwyer suggested letting it go up a little at a time. He thought things would get better.
Van Vactor stated the implication of that is that the little surplus they have in the benefits fund will be used over the next two years to cover that. He said they have the funds to stair step it, but it means in two years they will be at five percent and there won’t be any surplus to help with the impact on the departments.
Harcleroad wanted to see different scenarios where they stair stepped it with three, four, or five percent that would show the least painful way to cover the liability.
With regard to the process for external add requests, Garnick said they would have a published date by which groups should submit their requests. He said they would go through the external advisory committee review so they would be put onto the same priority criteria that everyone else had gone through. He added they would have one night to come in to discuss what the requests are.
11. REVIEW BUDGET SCHEDULE
Garnick stated they would need to have a follow-up Leadership Team on March 10.
Heaton explained the final budget list would be put together on February 25. She said it was important the departments didn’t miss the budget due date. She stated they needed all department numbers completed by 5:00 p.m. on February 21. She noted March 3, is the date community requests are due. She added April 29 is the Budget Message and Public Hearing. She suggesting the first meeting on the budget message and the second meeting would be a budget committee meeting with the public speaking with the list of unmet needs for the department. She added that any community requests would be heard on one night so they hear them all at the same time. She added the next four meetings would be budget work sessions instead of committee meetings and there would be no public comment those nights. That is when the departments would present their budget. She noted the last two meetings are budget committee meetings for discussion and deliberations. She said they need to be finished by May 22 so they can get the appropriate advertisements and legal notices in The Register Guard and back to the Board on June 18 for budget adoption.
There being no further business, Commissioner Sorenson adjourned the meeting at 11:40 a.m.