Bartholomew County government faces a $3.9 million deficit in 2016, but local officials believe an additional $800,000 will have to be cut from the preliminary budget in order to keep the county on solid fiscal ground for years to come.
When the Bartholomew County Council resumes its annual budget process today, members will continue work toward a goal of eliminating a total of $4.7 million from requests and expenses.
If successful, such steps could reduce next year’s general fund to $16.35 million, which is $850,000 less than the approved budget for this year, chief deputy auditor Sandy Beatty said.
Budget reviews resume at 5:30 p.m. in the fourth-floor council chambers at the county’s governmental office building, near Third and Franklin streets.
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After a week of line-item budget reviews with each department manager, the county council was able to reduce the preliminary budget for next year by slightly more than $1 million by Friday afternoon, Beatty said.
That still leaves the county looking for $3.7 million in additional cuts this week.
In more than 30 years on the council, president Evelyn Pence said, she has never been asked to cut anything close to that amount from the county’s annual spending plan.
But if the governing fiscal body simply focuses on deficit reduction, instead of addressing causes, the county will continue to face significant financial challenges, council member Chris Ogle said.
“If we continue down the same path, come January of 2017, we’ll find ourselves $5 million in the hole,” Ogle said. “We either tax people or get rid of people.”
That’s not the way Dan Eggermann sees it, however. In fact, the county’s financial adviser told council members they likely will have to bite at least two bullets rather than one.
Unwelcome news
As the first step, Eggermann is recommending the council flat-line annual budgets for an unspecified number of years. That means keeping all spending at or below the $17.2 million budget approved for this year.“But that’s not going to cover it,” Eggermann said. “In my opinion, you are also going to have to come up with more revenue.”That means enacting one of three new taxes:
A county wheel tax.
A cumulative capital development fund.
A new local option income tax.
For many on the council, that recommendation does more than rub them the wrong way. It conflicts with a conservative ideology that some members hold dear.
“I know of no country or entity that has ever taxed itself into prosperity,” council member Bill Lentz said. “On top of that, the benefits of a tax increase only lasts a short time.”
Such matters should be considered as only a last resort, said Pence, who admits feeling a political backlash in 2009. That’s when the county enacted a 0.25 percent tax on paychecks, with proceeds earmarked for building infrastructure, encouraging investment and job creation.
During last week’s budget discussions, the council heard from an elected officeholder who adamantly voiced his objections to yet another tax, Pence said.
When she arrived home Thursday night, Pence said, she received two telephone calls from constituents urging the council not to further burden taxpayers.
On Friday morning, she found a letter without an envelope that a third person had left in her mailbox with essentially the same message — no new taxes, she said.
“Many of our taxpayers are on very tight budgets, and there are a lot of people who are not getting the benefits that others are getting,” Pence said. “It’s only fair that we look at every other alternative before we raise taxes.”
But while discussing those alternatives with Eggermann on Friday, council members discovered that — as member Mark Gorbett put it — they have “very limited options.”
Layoff possibility
With the possible exception of raising taxes, a workforce reduction appears to be the most controversial step the council might have to take to reduce their expenses.Last week, Bartholomew Circuit Judge Stephen Heimann took the county council to task for openly discussing such measures during public hearings, describing layoffs as a further erosion of the community’s middle class.“I would rather raise taxes than fire people,” Ogle said. “I’d rather put the burden on everyone out there, myself included, than start taking jobs away from people.”
While the county has hired an additional 60 employees over the past 15 years, Eggermann said most of Indiana’s 92 counties have experienced similar increases in their payroll due to several factors beyond local control that include unfunded state and federal mandates.
Since almost 80 percent of county business involves an employee providing services, most county government jobs are essential, Eggermann said.
Furthermore, whatever savings the county might receive by laying off workers would be eaten up by payments to unemployment insurance, the financial adviser said.
Eggermann described to the council what happened when another south-central Indiana county facing similar problems immediately laid off 25 employees. In just three months, that county had hired all but two of them back, he said.
“They said they couldn’t get the work done without them,” Eggermann said.
The paychecks and benefits for 305 county workers come out of the general fund, county auditor Barb Hackman said.
Most of the remaining 135 employees are paid through other means, such as separate funds or grants, she said.
Health insurance
A high amount of money paid out in 2014 by the self-insured county for health care claims is one reason for the county’s financial pinch, but not the only one.Earlier this year, the council also approved using $2.6 million in existing funds to help pay for a $3.25 million county annex building. To fund that project, $2 million would come from county reserves, with the remaining $600,000 would come from the telecommunications and leftover EDIT funds.But the third financial drain was unexpected, when the county lost more than $1 million in property tax revenue from taxpayer appeals.
Gorbett used a metaphor to describe the combination of all three as “the perfect storm.”
On Friday, Lentz referenced another metaphor used earlier by Judge Heimann, who referred to the drain on the county’s health care trust as the “800-pound gorilla in the room.”
At the beginning of the year, annual deductibles for single employees rose to $1,250, up from $750; and to $2,500 for family coverage, up from $1,000.
But in order to effectively deal with the health insurance problem, it will be necessary to raise deductibles even more and increase employee contributions by 4 percent at a time when annual raises aren’t even being considered, council member Jorge Morales said.
It was an option that Morales described as distasteful, adding that his mind was incapable of reconciling all of those issues.
“That’s the only thing you can do, unless you adopt another tax,” Eggermann said.
But such unpopular steps may not prove to be as effective in cutting the deficit as others on the council might think, Ogle said.
“(Proposed changes to) the health fund is only a million dollars maximum in savings,” Ogle said. “That is not going to take care of the problem.”
On Monday, the Bartholomew County Commissioners agreed to bring in Doug Cassman of Governmental Consulting Services, a Carmel-based firm that helped the Bartholomew Consolidated School Corp. resolve its health insurance problems in October 2006.
Year-end leftovers
It was just a short time after the council had approved spending $2.6 million on the annex that members received a surprising analysis. The county’s general fund is projected to have $20,000 left in the general fund at the beginning of next year.Since new money won’t flow into the county’s coffers until May or June, the news created a stir among council members.“It’s my understanding we won’t be able to pay our employees (the first half of 2016) if we don’t do something drastic,” Gorbett said to the county’s financial adviser.
While Eggermann didn’t disagree, he did point out most county funds other than the general fund — which include cumulative bridge, elections, reassessment and health department — will end this year with a surplus of unspent funds.
If it doesn’t create encumbrances, the council could move some of that excess cash into the county’s rainy day fund, which shrank from more than $5 million at the beginning of this year to about $2 million now, Eggermann said.
Although such action falls far short of solving the county’s entire financial problem, it could provide a significant step toward bridging financial gaps, Eggermann said.
Projected excess amounts in the health department fund are most likely to be used if the council chooses to go that route, several council members said.
While the council is not allowed to touch the separate tax levy for the cumulative bridge fund, members do have the power to decrease next year’s allocation by the amount of the excess or to borrow against the excess, Eggermann said.
Reduced hours
Most of Indiana’s 92 counties close their offices at 4 p.m. daily — including neighboring Jennings — rather than 5 p.m., the schedule Bartholomew County offices follow, County Clerk Jay Phelps said.If the county offices in Columbus follows that path, it could provide an effective way of reducing payroll costs if employee hours are reduced by the same amount, Phelps said.But when the idea was brought up Friday, Morales expressed frustration.
“If you cut employee hours, the judges tell us we would create a backlog of work that we just can’t have right at this time.”
Most of Bartholomew County’s 440 employees are scheduled to work 40 hours a week, Hackman said.
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A majority of Bartholomew County Council members stressed they will consider all cost-cutting options first before looking at a new tax. Of the three possible new taxes discussed Friday, members of the Bartholomew County Council stated they felt the local option income tax was the most likely one they would consider.
Local option income tax
Type: Income tax already levied by 19 of Indiana’s 92 counties.
Stated purpose: Public safety
Amount raised if enacted (based on 2015 data): Columbus, $2.84 million; Bartholomew County, $2.06 million; Edinburgh, $118,000; Hope, $29,000; Hartsville, $2,184; Clifford, $1,203; Elizabethtown, $471. Jonesville would also receive an amount appropriate for its population.
Wheel tax
Type: User tax
Amount raised if enacted: $1.5 million. Like the local option income tax, funds from the wheel tax would be distributed to all incorporated communities.
Disadvantage: Money is earmarked for highways only.
Cumulative capital development tax
Type: Property tax currently levied by a vast majority of Indiana counties.
Amount raised: $1.4 million annually, beginning in the second year.
Disadvantages: 25 percent of money raised through the cumulative capital development tax must be applied toward property-tax relief. In addition, the county would be required to move $694,000 from its general fund into the cumulative capital development fund the first year.
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Members of both the Bartholomew County Council and County Commissioners expressed a willingness last week to put construction of a new county annex building on hold. On July 16, the county placed $2.6 million in existing funds for the building project. No official action has yet been taken to delay construction.
Besides new taxes, workforce reductions and cutting both benefits and hours, other cost-cutting efforts discussed last week by the Bartholomew County Council include:
- Reverting some monies from the economic development income tax controlled by the commissioners back into the general fund.
- Create an incentive program to entice older workers into early retirement.
- Search for duplication of services.
- Hiring a limited number of retirees as contractors to perform limited services.
- Asking Cummins Inc. to have each department undergo a Six Sigma evaluation with the aim of reducing costs and improving quality.
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The Bartholomew County Council will meet three times this week with further discussions on the 2016 budget. The county council meets in the fourth-floor chambers at the county’s governmental office building, near Third and Franklin streets. All meetings are open to the public.
Today
5:30 p.m. — Budget review
Wednesday
8:30 a.m. — Roundtable meeting with appointed and elected officials.
5:30 p.m. — Budget review
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