By John Estridge
It was the proverbial good news/bad news scenario for Franklin County Council members when their financial consultant talked about the 2021 budget at their September meeting recently.
The good news is based on new information: the General Fund budget will actually come through with a $27,000 surplus when it was thought to contain a $400,000 deficit.
This is based on a number of good-news factors. One is the income tax revenue is projected to come in $300,000 more than the previously projected numbers used during the budget workshops in August, leaving – using that factor alone — the 2021 county budget with a $100,000 deficit instead of the $400,000 planned during the workshops.
Another subject that was good is the county has to pay less for the Purdue Extension budget than planned. That savings was about $18,000.
And the third good item is the county has a history of annually not spending all of its allocated money. At the workshops, financial consultant Gabe Gerth of Reedy Financial Group had plugged in a figure of 2 percent of the budget not being spent, but he said 5 percent could be used.
The bad news was the election equipment has to be paid in full during 2021, and not drawn out over a three-year lease as council had planned. That will mean a payment of $154,000 in 2021, instead of the planned $63,000 payment in each of the next three years.
During the workshops, council members were told previous councils had robbed the county’s Insurance Fund to bulk up the General Fund money. That time is now over, and this council has to pay more money from the General Fund into the Insurance Fund to keep it solvent. FC has a self-funding insurance policy with the county paying for most medical costs, but when the costs per patient gets too high, then another insurance policy clicks in.
This reallocation of funds caused the deficit. Gerth said then and is saying now, council can use cash reserves to bridge the previously projected gap in the General Fund; however, the cash reserves has a finite balance and cannot be used in perpetuity. He said, currently, the county has a six-month amount in the cash reserves, meaning six months of paying all the bills, including payroll, out of the General Fund.
“Council’s goal is to maintain that cash,” Gerth said as he gave the recent briefing outlining the good and bad to the council members.
He said, in subsequent years, the budget will grow and what is a six-month reserve in cash will be less due to inflation, which causes the increase in budget spending.
Later, in the recent budget hearing, first deputy in the auditor’s office, Derrike Kolb, gave an impassioned plea for some pay increase for county employees. It was to no avail. Council froze county employee wages at the 2020 levels.
How the 2021 General Fund became balanced
With COVID-19 and the subsequent shutdown, government entities are flying in the dark about how tax revenues will be affected in 2021 and 2022. It is new territory for everyone.
“When we left the budget workshop on the 19th (August), if you recall, there was a $400,000 deficit,” Gerth said. “We left that knowing there was a potential that the General Fund could spend down cash based on revenue projections that we had. The state sent out income tax revenue projections (for the August workshops) that were 10 percent under 2020. When we did a little presentation during the budget workshop, we discussed that Reedy Financial Group didn’t think that would entirely come true given two circumstances with income tax and how it’s calculated. Well, the state has come through and come up with updated estimates now that the pool is in place that income tax revenue is $300,000 more than what we even projected. So that means the $400,000 deficit we projected in the General Fund is now $100,000.”
He said, in 2019, the county did not spend 8 percent of the county’s budget.
“When we left the budget workshop, we left it at a conservative 2 percent,” Gerth said.
Gerth said he upped that to the 5 percent figure for 2021.
“That’s the goal, and it’s very attainable,” Gerth said. “You’ve done it in years past.”
Based on those figures, the 2021 General Fund will have a $27,000 surplus.
“So on a $7.3 million budget, that’s balanced,” Gerth said.
Impassioned plea
Kolb asked to speak to council members during the public hearing on the budget and after Gerth gave his presentation.
“I think the motion that was first made (in the budget workshops) is kind of cruel for you to put a (wage) freeze on without looking at the budget, based on a problem that you created yourself, and you pinning that on the back of your employees,” Kolb said to council members. “Where you are trying to make up a deficit of $400,000, but you’re OK with it, but you’re not OK with helping out your employees through this difficult time by giving them just a little bit of a raise?”
Kolb asked for a 1.5 percent increase. He had already done the math and told council members a 1.5 percent increase would cost the county $90,000 from the entire 2021 budget and $60,000 from the General Fund. That is because not all county employees are paid out of the General Fund.
However, council member Rebecca Oglesby reminded Kolb the revenue figures are speculative in nature. Due to the pandemic, council is walking through unknown areas. However, what is known is the revenue is going down.
”Our revenue is going down,” Oglesby said. “Our problem is the unforeseen. We know revenue is going to be down because of all the unemployment with low income taxes. The other thing is the whole impact of the country with business and services being suspended. We don’t know what the affects are going to be. This is something nobody has foreseen or been through.”
Oglesby emphasized she was speaking for herself and not for the other council members; however, she said other counties have frozen wages.
“I don’t know of anyone who has gotten a raise,” she said.
Kolb suggested other counties are paying their employees hazard pay due to working with the public during the pandemic.
After questioned by council, Gerth said none of the counties his company works with is paying hazard pay. Kolb said many companies in the private sector are offering the hazard pay.
Oglesby, who served as the clerk and treasurer for the county before being elected to council, said there are many perks that go along with working for the county. There are many holidays and the work week is 32.5 hours for those employees not on the highway department or engaged in public safety. Also, county employees get a check near the end of the year for longevity. Thus, if employees are disgruntled about pay, they should seek employment elsewhere, she said.
“If somebody doesn’t like their job or want to find other, better-paying jobs I always said ‘you can go for it,’” Oglesby said.
Former council member Daryl Kramer spoke after Kolb.
Lay off county employees
Kramer started by saying he understood how hard it is as a councilman to get through the budgetary process. He said being a council member is sometimes the most unappreciated elected office next to being a school board member. Kramer said council should keep enough money in the Insurance Fund to cover the most expensive year in the most-recent three-year period. And if the amount in there is more than the target amount, council should be able to take that number, divide by three and then use that amount of cash in other ways such as the General Fund.
However, since there is a pandemic and this is undiscovered territory, council members may want to have extra funds stocked away in the Insurance Fund, Kramer said.
Kramer said he did not like the fact council floated the $1.1 million bond, as that amount of tax rate could have come off the county residents’ taxes. Council decided to keep that part of the tax rate in the bond as the bond for the renovation of the Brookville Middle School/old Brookville High School was paid off. Instead of letting that part of the tax rate leave the rolls, council decided to keep that amount on the tax rate and fund the $1.1 million bond.
He said council’s financial problems come from hiring an additional nine county employees for the 2020 budget year.
“… with no idea how to pay for (the increase in the number of employees) this year,” Kramer said. “Every job costs you $50,000 a year at least. You have a responsibility when you hire people in, to make sure you have a plan – not just for the immediate next month – but for the next 10 years.”
He said they should do a hiring freeze on all but public safety employees. He also said some county employees need to be laid off.
“But other jobs in the county (not counting public safety jobs), you need to cut some jobs,” Kramer said.
Eight employees at $50,000 per year adds up the $400,000 deficit council had going into the recent budget hearing, Kramer said.
All but three of the council members: Glen Bischoff, Scott McDonough and Joe Gillespie served with Kramer on council, and they did not let him go quietly into the night.
Oglesby said eight of the nine hires last year were public safety.
“We added on deputies and jailers,” Oglesby said. “Also, an EMA person (in a) fulltime (capacity). And then we had the pandemic.”
“That’s public safety as far as I know,” Bischoff said.
Kramer said he is for public safety and believes the county needs a good police force, but instead of adding deputies and jailers, council should have increased the pay of those already in the sheriff’s department to keep people from leaving to other counties and towns, which have higher pay.
“We are training them, and when they get trained, they are moving on,” Kramer said. “What you needed to do last year was up the pay at the same rate as what Brookville and other surrounding cities are doing and keep good, experienced people in those jobs. (That) would actually save you money in the long run.”
Oglesby said the employees are staying at the sheriff’s department, and the workforce is stable at this time.
Council member Joe Sizemore, who was attending the meeting via Zoom, added more to what Oglesby already had discussed.
“The previous comment on adding jailers to the jail, I want to correct that,” Sizemore said. “The reason the jailers didn’t stay is because no one could take any time off. There weren’t enough people to go around. Now, since we added a few more (jailers) there, people are able to breathe a little bit, and we’re able to better retain people.”
Sizemore said he has discussed the situation extensively with Franklin County Sheriff Peter Cates.
Voting machines
Gerth said his understanding of why $154,000 has to be paid in a lump sum in 2021 was a three-year lease did not go through.
In an interview after the meeting, Franklin County Clerk Neysa Raible said that is not the case. She said Microvote does not sell election equipment on a lease agreement but wants the money in a lump sum. Raible said at an earlier time she told council members and commissioners they could borrow from the Indiana Bond Bank since Microvote does not sell equipment on lease agreements.