Living within our means — the rest of the story

Published 8:26 am Wednesday, August 2, 2017

Last weekend the Mayor gave his side of the passed 2017-18 County budget in an opinion article published in the Elizabethton Star (Living Within Our Means; Sunday, July 23, 2017). Unfortunately, he didn’t tell you the reader and citizen of Carter County all of the facts surrounding the budget deliberations and budget needs. Hopefully, this will shed some light on the budget that was presented by the Budget Committee to the County Commission on July 17, 2017.
This was a tough budget process. As the committee began reviewing the proposed budget and hearing from all county department directors, it became clear that full requests could not be met. These requests included a 4-5% increase in salary for employees, coupled by non-salary requests ranging from no request for an increase to $232,630.59.
Before we even started working on the budget, we were already almost $700,000 in the hole. During this year’s budget cycle several items were paid for out of Fund Balance (the monies held in reserve for emergencies). The two largest expenditures were the renovation and expansion of the Health Department building ($500,000), and the Animal Shelter increase (which was proposed by the Mayor in this year’s budget to include almost double the cost from the 2016-17 original budget allocation) in operational cost ($119,000 in the 2016-17 budget cycle).
To make matters worse, the State of Tennessee mandated a 5% salary increase for all elected officials (not Commissioners) equaling $42,019.60. That was another hit to the County budget, because even though the state required us to give the salary increase, all of that hit our budget as the state provides no financial assistance for it.
During the process, budgets were reduced (approximately 6%) where dollars remained unspent or there was a historical unspent line item. Because the Commission does not have line item veto authority by state law, the department directors retain full authority to use at his/her discretion the budget that has been allocated to them. We also held the line on outside agency requests. They were reduced to a fraction (1%) above the requests they made for 2016-17 budget year.
As to the County investments, the picture painted in the July 23rd article isn’t entirely correct. Fund balances are important. They sustain the County in times of neutral or negative revenue income. In fact the Comptroller’s Office for the State of Tennessee issued the following caution to Carter County in a letter dated May 6, 2015: “The County (Carter) is required to maintain a cash-basis budget for all funds throughout the life of any debt issues pursuant to Title 9 Chapter 21 of the Tennessee Code Annotated. An adequate level of working capital (cash) is necessary to meet the requirements of T.C.A. § 9-21-403. Spending cannot be performed unless cash is available at the time of the transaction.” In other words, our investments make a significant contribution to both a healthy fund balance and emergency expenditures without defaulting on our obligations or borrowing money from lenders at high interest rates, to cover any shortfall in County expenditures.
Another misleading statement was that the investment revenue would bring $700,000 in new revenue to offset the needed revenue in the 2017-18 budget. Our County investments range from 3 months to 2 years at variable interest rates ranging from 0.45% to .95% until they mature. These investments won’t bring $700,000 in this coming budget year so to state this as a reason not to raise taxes is incorrect; a falsehood. In fact, it would require investing the entire $17.8 million currently invested in a single CD with a 4.186 percent interest rate for one year to yield $700,000. If we could invest all $17,816,792.82 in a .6% yielding account (average percent return of the current investments) for one year, it yields only $106,900.70. To portray this falsehood to citizens as fact is troubling. Further, this falsehood could raise a red flag in the Tennessee Comptroller’s office resulting in an audit, which could cost the county in excess of $20,000.
The need to finance County government on a month-by-month basis is why an investment of one or two years will not work to finance County expenses. These investments must be arranged in a ladder like way (some invested in short-term, some in medium-terms, up to two years in length). This allows ready and needed cash between revenue income in the County. Currently the highest interest rates in Tennessee are averaging around .68%, not anywhere close to 4.0 percent. In fact, no bank in the U.S. is offering a rate that high and it wouldn’t make any difference if they were because by state law, the County Trustee (Randal Lewis) is required to invest in a bank that has its headquarters in Tennessee. To his credit, Mr. Lewis has been able to secure a rate of just over 1.00 percent from a local bank, Carter County bank for some of the funds going forward for the 2017-18 budget year.
In reviewing County investment, some investments have matured and are part of the fund balances and interest bearing accounts to pay County bills. The investments coming due in 2017 and 2018 based at current rates are projected to yield approximately $285,000 in new money (could be more, but could be less). Combining this amount with current account yields ($154,730 in 2016-17) brings the total to around $489,730. Less than the $700,000 figure.
If we have a deficit of $1 million as stated in the July 23rd article, the projected revenue increase from property tax assessments of $250,000 and investment income still falls short of the prediction of revenue ($250,000 + $489,730 = $739,730). If we are $1 million in the red, using the revenue projections still leaves the County in a deficit of $260,270. That’s 3.143 pennies on the tax rate where every penny currently equals $82,800. We only raised the property tax by 2 pennies, so we are still in the red financially, which must be met from reserves (Fund Balance) and barring no emergency spending in 2017-18, we will for another year fall short of a balanced budget.
This article is intended to help constituents and the citizens of this County to better understand the complex dilemma surrounding issues within our county government. No one likes tax increases, but ignoring our financial situation and the challenges we are facing won’t make them go away. It is deeply troubling that as we face an upcoming election, our mayor slanted the facts pertaining to our budget when he presented his opinion article, “Living Within Our Means.” You have the right to demand the truth and full disclosure you’re your elected officials settling for nothing less. It is for this reason you are reading ‘the rest of the story’.
(Both Robert Acuff and Sonja Culler are county commissioners and serve on the budget committee, Culler as chair and Acuff as vice chair.)