Even with strong tax revenues in a stable economy, Spokane County commissioners could be headed for a tough choice in 2007: cutting the budget or tapping into the county’s reserve fund.
The news has brightened since spring, when the county forecast that maintaining current services and staffing levels in 2007 would cost $6.7 million more than what the county would collect.
That gap has narrowed significantly in the last few months because of higher-than-expected tax revenues and smaller-than-expected increases in health-care costs, said county Chief Executive Officer Marshall Farnell.
There’s some disagreement about whether the gap will close completely.
“We’re clearly going to have to dip into that reserve,” said Commissioner Mark Richard. “My hope is: not very much.”
Commissioner Phil Harris, however, said a large rise in new construction likely will generate enough new taxes to prevent the need for deficit spending.
For five of the last six years, including this year, commissioners have balanced the county budget using a massive reserve fund built in the late 1990s when a bullish economy drove healthy tax revenues. This year, commissioners are expected to spend about $5 million more than they will collect.
Using the reserves is expected to drain that fund, once as high as $29 million, down to $15.3 million at the end of the year. That’s about 11 percent of the overall county budget. County commissioners have said they don’t want to dip below 10 percent.
Richard, however, said he wouldn’t be surprised to hit 8 percent or 9 percent before turning around deficit spending. He said he expects “belt-tightening” in the coming budget but no drastic measures such as layoffs.
The reserve fund worked as it was supposed to a few years ago when the economy tanked, saving the county from massive cuts when other governments were forced into layoffs.
Harris said the county used much of the money for necessary one-time expenses, such as refurbishing the courthouse, a new roof for the juvenile court building and software upgrades.
Still, the budget has grown in other ways. Health-care costs have been a significant drain, and there’s been a steady rise in the number of county workers.
When the reserve fund peaked in 2000, the county employed 1,219 people. That jumped by almost 100 workers at the end of last year and is expected to reach 1,340 by the end of 2006.
Harris said the increase in the employees reflects the growing population and a need to beef up criminal justice services.
Other increases in expenses include a 2 percent pay raise for many county employees each year for three years, resulting from an employee contract approved in 2005.
He and Richard said they felt the contract was fair.
“Hopefully, your boss gave you 2 percent because bread and milk went up at least that much,” Harris said.
Commissioners are in the midst of holding budget meetings for each department, a practice that has made a return after it was abandoned in 2005.
“I really wanted to look under every nook and cranny this year,” Richard said.
In early forecasts for 2007, Farnell predicted a double-digit rise in health-care premiums. That number turned out to be 5 percent for one plan and no rise for another.
“We’ve had some good news,” Farnell said.
New construction will bring an extra $1 million in property taxes to the county, and sales taxes receipts also appear strong, he said.
Bonnie Mager, who is running for county commissioner against Phil Harris, said she agrees that 10 percent is a solid goal for a reserve fund and that it might be reasonable to dip further to cover critical needs. However, she criticized commissioners for accepting recent pay raises.
A citizens salary commission increased their salaries from $75,000 to $82,000 in 2005 and then to $93,000 this year in an attempt to bring their pay closer to counties with similar population.
“I just thought it was sending a bad message to the employees,” Mager said.
Harris notes that the decision was made by the citizens commission, not the county commissioners.
“It’s a political statement,” Harris said of Mager’s criticism. “That’s all that is.”