Ghosts of Budgets Past: ‘We have talked about this day coming’

By Patrick Adrian EAGLE TIMES STAFF
NEWPORT — Sullivan County officials will face difficult budget decisions in preparation for the coming fiscal year, as inflation, wages and repercussions of past budgeting practices are expected to significantly impact the county’s operating cost.

Heading into budget discussions with the finance committee next week, Sullivan County is potentially facing up to $36,458,700 in total operating expenses for fiscal 2023, an increase of $4.1 million from the current year and an estimated tax increase of 29 percent.

While this projection is more a worst-case scenario, based on several tentative figures, there will inevitably be hard choices for the county commissioners and delegates, according to Sullivan County Manager Derek Ferland.

“We have talked about this day coming,” Ferland told the county commissioners last week. “And I think this year is probably the year.”

About 75 percent of the $4.1 million increase stems from three areas: an initiative to make lower-tier wages more competitive, approximately $1.6 million; a decline in one-time federal revenues, approximately $1.2 million; and less anticipated surplus from the current year budget to offset next year’s tax impact.

The county also anticipates higher operating expenses next year due to inflation, including increases in electricity, food and medical supplies.

And the county’s past budgeting practices also factor heavily into the size of this budget increase, county officials said.

For much of the last decade, the county delegates have fought to keep the county tax rate level, despite rising costs from inflation and other sources. Often this was achieved by using funds from county reserves or the fund balance to offset operating costs.

This approach spares taxpayers in the short term but it only defers the tax hit to the subsequent year, the county commissioners said. When practiced over multiple years, that tax impact compiles, while the county’s reserves and fund balance deplete.

“We used to hold up with a lot of pride that our taxes have only gone up two percent over 10 years,” Ferland said. “But inflation during that time has gone up 12 percent.”

Last year the county initially proposed a budget with a tax increase of 9.7 percent. But the Executive Finance Committee, a panel composed of county delegates, eventually reduced the proposal’s tax impact to 3.9 percent. This reduction was achieved by withdrawing an additional $200,000 from the county’s one-time federal revenues and canceling $660,000 in fund transfers to replenish the county’s reserves.

Ferland said the county originally expected to face these budget repercussions a couple of years earlier, but the county was spared by the slate of federal relief packages to counter the pandemic, including the American Recovery Protection Act (ARPA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

That one-time money bought the county additional time, similar to “a stay of execution,” Ferland said.

According to Ferland, county officials will have many potential ways to reduce some of next year’s budget expenses, though every solution will carry drawbacks.

In a phone interview with The Eagle Times, Ferland stated that he has a list of potential cuts totalling approximately $1 million, which he will bring to the Executive Finance Committee and commissioners for discussion.

Some proposed reductions may include level funding community grants; suspending new initiatives, such as a county-wide grant writer position or funding for the regional economic development project; increasing private pay rates at the county nursing home; and reviewing the county’s wage policy for cost of living adjustments.

Ferland expects there to be further discussion regarding the county’s proposal for improving the county’s payscale for non-supervisory level positions, such as food service workers.

Sullivan County aims to increase its minimum starting wages from $12.06 per hour to $15 per hour, to better compete for employees in the marketplace.

Adjusting starting salaries will also require adjusting the compensation of the higher pay levels to avoid creating wage compression.

The county currently has 15 vacancies in its dietary services team alone, or about 55% of the staff, according to Ferland.

Though county commissioners have expressed wariness towards the idea, the county could also consider drawing further from the county’s reserves or federal money.

The county has approximately $7 million in ARPA money, $5.3 million in capital reserves, $2.3 million in the county nursing home reserves and $3.5 million in the unassigned fund balance.

However, many of these reserves are significantly below their recommended levels, or contain funds that the county hopes to use to offset costs of the county nursing home renovation, currently estimated between $80-85 million.

Tapping these reserves is also repeating the county’s past practices that contributed to this situation, the county commissioners said last week. .

County officials also noted that the actual monetary impact of a 20 or 29 percent tax hike is much less at the county level than, say, a municipal or local school budget.

Using the averaged tax rate from all Sullivan communities a county tax increase of 29 percent would, in monetary terms, equate to an additional $195 on a $250,000 home. A 20% tax increase on a $250,000 home would average to an additional $134.

“I do not want to act like some of these tax increases aren’t significant,” Ferland said. “But the [percentages and rates] look scarier before converting them to actual dollars.”