Deep Deficits Projected for Washtenaw County

Washtenaw County Board of Commissioners (Feb. 4, 2009): Faced with sharply lower revenues in the coming years, Washtenaw County government will be dealing with staggering budget deficits and must start making some tough decisions about where to cut costs. At their Wednesday night board meeting, county commissioners heard that grim report from county administrator Bob Guenzel, who estimates the budget deficit in 2010-11 could reach $28 million under a worst-case scenario. And it likely won’t end there. “We don’t know when we’re going to hit bottom,” he said. “It’s just too hard to predict that.”

Guenzel called the financial situation the worst he’s seen in his 36 years with the county, but noted that this was a nationwide crisis. Falling property values and a sluggish housing market have eroded tax revenues – property taxes and fees related to building inspections, real estate transfers and other housing-related services account for roughly 75% of the county’s general fund, he said.

His report to commissioners was an initial step in working through the upcoming budget cycle, laying groundwork for decisions that the board will ultimately need to make. The county’s finance staff has laid out best- and worst-case projections for property tax revenue: Assuming that expenditures remain unchanged, the worst-case projections for 2010-11 would result in a $28 million deficit, equating to 318 full-time jobs. Under the best-case scenario for property tax revenues, the county would still face an $18 million deficit in 2010-11, or 211 full-time positions. Guenzel said that this didn’t mean those jobs would be eliminated – it was simply an indication of how dire the situation has become.

At the board’s next meeting in two weeks, Guenzel said he hoped they could reach some consensus about revenue projections for the next two to three years. That will then give staff a target for identifying cuts to expenditures.

For planning purposes, the county works on a two-year budget cycle, with the current cycle ending this year. It has already been forced to adjust the current budget when faced with revenues that fell short of projections: Last April, the county had estimated a $13 million shortfall for 2009, and identified $10 million in cuts. By the fall, that shortfall was estimated to be closer to $15 million, and the county worked to find additional cuts. On Wednesday, Guenzel said they won’t get the final revenue figures for 2009 until this April, and that might force the county to make even further cuts this year.

Guenzel and his staff – as well as some commissioners – will be meeting with employees, other elected officials in the county and community groups to talk about the financial situation. ”We need all the help we can get on this budget,” he said.

Commissioners gave Guenzel some initial feedback after his report. Barbara Levin Bergman said the county should take a look at its mandated services – she sensed the levels of service were higher here than in other counties, and that might be a place to cut costs.

Leah Gunn said the public doesn’t really understand the depth of the county’s financial crisis, and that they need to be better informed. Other elected officials also need to be engaged in these discussions, she said. Guenzel agreed, saying he had already started reaching out to the 28 jurisdictions in the county.

Maintaining cash balances would be crucial, Mark Ouimet said, both for cash flow and bonding. He also said the county needed to be aware of the impact its decisions will have on local nonprofits, a sentiment later echoed by other commissioners.

Some commissioners asked for additional details to be provided as they go through this planning cycle. ”The more information we have, the better decisions we can make,” said Kristin Judge.

Judge also said she disliked using jobs to characterize the deficit, saying it came across as though cutting jobs would be the top priority. She said it caused employees to panic, and that she’d already heard from one of her constituents, who also works for the county.

Jeff Irwin noted that Washtenaw County was still relatively affluent and hadn’t been hit as hard as other places in Michigan. There might be something to learn from communities that have already gone through this, he said. Irwin said he reacted negatively to the idea that Guenzel had floated about across-the-board cuts, and hoped that they could be more strategic, especially when considering departments that had already endured cuts in previous budget cycles.

He said he thought the county should seriously look at slowing its jail expansion in light of the budget situation, and that perhaps the new sheriff, Jerry Clayton, had some ideas for revenue growth in his department. Irwin also cited the importance of being aware how dollars in the budget were sometimes used to leverage state and federal funding. Nonprofits funded by the county might have the same issue – sometimes they’re able to use money from the county to leverage other funding sources. “If we lose sight of that, we’re going to be penny wise and pound foolish,” Irwin said.

Rolland Sizemore Jr. urged the staff to market the county’s services to townships and cities, and to look at building space that might not be needed.

Wes Prater, referring to a chart from Guenzel’s presentation, wondered why general fund expenditures in 2007 had increased at a higher rate than previous years. Jennifer Watson, the county’s budget manager, said she’d find out and report back. Bergman later quipped that she “seemed to remember” $800,000 they’d spent on a lawsuit – referring somewhat obliquely to a dispute between the county and three townships over the cost of sheriff deputy patrols, which led to a lawsuit against the county and substantial legal fees on all sides.

Ken Schwartz, injecting a bit of humor into the otherwise somber discussion, said he wished he could lead off his comments with a joke: “Did you hear about the budget from Nantucket?”

[Editor's note: The Chronicle will report on other items from Wednesday night's board meeting in an upcoming article.]