County Budgeting

December 9, 2010Budget2 Finance a. The science of the management of money and other assets. b. The disposition of public revenues by a government. From the Latin word finis, meaning “end,” as in “to end” or “settle.” 1 1 American Heritage Dictionary

December 9, 2010Budget3 Finance “The proper role of government provides a starting point for the analysis of public finance.” 2 What is the role of government? Mission: “Why does this organization exist?” Means: “How does this organization performs its mission?” 2 Wikipedia

December 9, 2010Budget4 Financial Management Treasury: Tax and revenue collection Debt issuance & mgmt Investing and banking Accounting: Financial Record keeping Financial Reporting Financial Auditing Performance Auditing Budgeting: Appropriation plan Expense & Revenue Forecasts Performance measures Line item budget

December 9, 2010Budget5 Treasury Functions a. The executive department of a government in charge of the collection, management and expenditure of the public revenue. From the Old French word for “treasure.” 1 1 American Heritage Dictionary

December 9, 2010Budget6 County Treasurers 1 Receive, disburse, invest, account for revenue Steward of funds for state and local gov’ts: County, cities, schools, special purpose districts. Collect property & other taxes, past due amounts. Bond sales and sales of surplus county property. Account for and report on the fund they manage but are not counties’ accountant (the Auditor is). Can be an appointed county financial officer in charter counties. 1 Adoped from the Municipal Research and Services Center of Washington

December 9, 2010Budget7 Accounting Functions a. the discipline of measuring, recording, com- municating and interpreting financial activity. From the Latin word “to count” 1. Primarily retrospective; looks at the past. Generally includes: –financial record keeping, –financial reporting, –financial auditing, –performance auditing. 1 American Heritage Dictionary

December 9, 2010Budget8 County Auditors Perform most of the accounting for ‘code’ 1 counties, mainly tracking expenses: Auditors have many other statutory duties : By statue, auditors prepare the preliminary budget, but the BOCC or county council also may do this. 1 Counties constituted under Title 36 of the Revised Code of Washington (RCW) 2 Board of County Commissioners ElectionsRecording LicensingDoR agent SAO supervisorReport to SAO Clerk of the BOCC 2 Preliminary budget

December 9, 2010Budget9 Budget Functions a. An itemized summary of probable revenues and expenditures... embodying a systematic plan for meeting expenses 1. b. An organization plan stated in monetary terms 2. c. A forecast of expected resources and the purposeful distribution of those scarce resources 3. From the French word bougette, meaning “purse.” 1 American Heritage Dictionary 2 Wikipedia 3 Washington State Budget and Accounting Reporting System (BARS) manual

December 9, 2010Budget10 Budget Officer Auditor’s office or BOCC appointee (statute allows either). Responsible for the recommended budget and the budget process, which include: These tasks all must be completed, but often they are done implicitly and without deliberation. Policy developmentStrategic planning Expenditure forecastsRevenue forecasts Financial planningCapital planning Performance measures  Line item detail

December 9, 2010Budget11 Summary: Finance vs. Budget Treasury and accounting are the bulk of finance, but most financial management occurs via the budget. Treasurers track revenues and Auditors track expenses -- budget is what they track against. Budget is an appropriation -- not cash. Budget is spending plan, a forecast. You pay for what you budget You do what you pay for Policy is what you do

December 9, 2010Budget12 Revenues by Source About a third of revenue is from direct taxes. About 80% of all revenue is restricted Unrestricted Revenue 20% Restricted Revenue 80% Taxes Grants Charges for Service Transfers Taxes

December 9, 2010Budget13 Restricted $: GF and Other Virtually all unrestricted revenue is in the GF, and a third of that is also restricted. Total Revenue Un- restricted GF Revenue 20% Restricted GF Rev. 10% Other Restricted Revenue 70% Unrestricted GF Revenue 2/3 Restricted GF Revenue 1/3 General Fund: 30% of Revenue

December 9, 2010Budget14 Typical General Fund Expenses The majority of GF expenses are for L&J. While they are funded with discretionary dollars, most GF programs are not discretionary. Parks 2-3% Law & Justice 2/3 to 3/4 Internal Support 6-9% Fiscal Entities 7-10% General Government 9-12%

December 9, 2010Budget15 Declining Revenues Overall, counties are at or below 2006 revenues GF growth was 4% per year GF growth was -2% per year. Due mainly to new construction, which drives: All property tax growth over 1% Up to a third of sales tax revenues Real Estate Excise Tax Development fees The mean grossly understates the extremes.

December 9, 2010Budget16 Same Costs Example: Structural Revenue Deficit

December 9, 2010Budget17 Structural? The structure of County revenues changed in 2002 with Initiative % limit on levy increases Counties are designed to be property tax-based Typically 40 – 50% of GF revenues Masked by new construction, which drives: All property tax growth over 1% Up to a third of sales tax revenues Real Estate Excise Tax Development fees

December 9, 2010Budget18 New Construction

December 9, 2010Budget19 The Context County revenues grow with inflation and population, at best. But gov’t costs grow faster than inflation.

December 9, 2010Budget20 The Context Yet, our citizens are becoming poorer. A national, decline in personal income growth.

December 9, 2010Budget21 Solutions Not cutting…

December 9, 2010Budget22 Solutions Not raising taxes…

December 9, 2010Budget23 Solutions Not even cutting AND raising taxes…

December 9, 2010Budget24 The New Normal Structural revenue change Worst economy in eighty years Long-term personal income decline Accelerating costs: Gov’t inflation + benefits Cuts and tax increases not sustainable High percentage represented So what works?

December 9, 2010Budget25 Efficiencies Not one-time improvements, but an ongoing pursuit of efficiency - a culture change for many organizations. Examples are: Compensation structureIncreased productivity Limit hiringPerformance requirements RegionalizationAutomation Triaging most costly svcsFee for service revenue PreventionEducation / training  Regulatory reliefCost shifting True IncentivesNegotiations