by CHRIS ROGERS
The Winona County Board is facing a big deficit as it prepares to set next year’s tax levy. Last week, county administrator Ken Fritz presented a draft 2019 budget with a $2.3-million shortfall and laid out options for balancing the budget by raising the property tax levy by 6-10 percent and/or spending down county reserve funds. The County Board will have to make a preliminary decision by the end of the month.
Fritz’s proposed budget is relatively lean. It does not include new programs, the county’s total staffing levels would decrease by two full-time equivalents, and it includes $500,000 to repair to county buildings and replace plow trucks and squad cars — a middle-of-the-road figure compared to the county’s recent history. The county’s total projected spending for 2019 — $54.5 million — is actually a slight decrease from 2018, but the county’s revenues are projected to fall by nearly $1.6 million.
The county’s deficit is increasing largely because of rising personnel costs across government and a combination of increasing needs and decreasing funding in the community services department, which handles everything from welfare programs to foster care. State and federal laws mandate that the county provide community services programs, but the state and federal funding for those programs have not kept pace with the cost of running them. In the draft 2019 budget, the community services department’s expenses are projected to rise by $1.4 million while its revenues are only expected to increase by less than $160,000.
“Our labor expenses and cost of doing business is going up and this is not,” Fritz told the board, pointing to a chart of federal and state funding for community services programs. Unfunded mandates have been a perennial frustration for County Board members, who have in recent years gotten more aggressive in their attempts to get lawmakers to fund the programs or cut back the mandates. At last week’s meeting, County Board member Marcia Ward suggested sending state legislators a bill for the county’s unfunded mandates. “We have to get their attention somehow. We talk about this all the time, but we haven’t gotten their attention,” she said.
County leaders also say that state labor law effectively requires them to offer county unions similar raises as other unions across the state. Although the total number of staff will decrease from 294 employees this year to 292 next year, the county is budgeting for a $718,000 increase in salaries.
Another factor in the deficit is that last year, the County Board balanced part of the 2018 budget with one-time reserve spending. In effect, that $771,000 deficit carries over to the 2019 budget.
There is one area where the 2019 budget deficit might improve without any hard decisions by the County Board. In Fritz’s proposed budget, the county is bracing for a 20-percent hike in employee health insurance costs at a cost to the county of $560,000. Health insurance increases have not been that drastic in the recent past, and Fritz said he is relatively confident the actual increase will be closer to five percent. That could save the county a few hundred thousand dollars, but it would not be enough to eliminate the deficit.
With limited options for cutting expenses, the County Board will likely need to raise taxes or spend more reserves to balance the budget. In recent years, it has done a mix of both: the County Board approved a 3.5-percent increase in the property tax levy in 2016, a six-percent hike in 2017, and a 5.5-percent increase in this year’s levy. The county drained its reserves by $877,00 in 2016 and $519,000 in 2017, in addition to this year’s projected $771,000 in reserve spending.
Because the county only collects property taxes twice a year, it keeps a significant amount of reserves on hand to cover its cashflow. County Board policy officially requires five months’ worth of reserves, but Fritz and several County Board members have said that amount is excessive and the county can meet cashflow needs with much less.
County Board members did not discuss how they want to balance the budget during last week’s meeting, but under one scenario thrown out by Fritz — which assumes a five-percent increase in health insurance costs — the County Board could balance the budget with a six-percent tax hike and $766,000 in reserve spending. Alternatively, a 10-percent tax increase could balance the budget while using up only $29,000 in reserves.
The County Board is expected to deliberate next week and vote on a preliminary tax levy by September 25. The final levy will be set in December.