Opening Up the County Budget

Walking into the county administration office last week, The Chronicle spotted several hefty unopened boxes stacked on a table. It turns out those boxes contained some of the information we were there to discuss with county administrator Bob Guenzel – proposals for cuts in the 2010 and 2011 budget, which will be formally presented to the county Board of Commissioners at its June 3 meeting.

At that meeting, Guenzel will be recommending an array of cuts – plus more limited ways to increase revenues – aimed at balancing the county’s $102 million annual general fund budget, which faces a $26 million deficit over the two-year period from Jan. 1, 2010 through Dec. 31, 2011. That includes eliminating at least 26 positions (about half of which are already vacant), a proposed price increase in the controversial police services contract, 20% funding cuts to nearly 20 local nonprofits, and the elimination of funding for the proposed north/south commuter rail, among other things.

If approved, some of the cuts could be implemented this year, rather than waiting until 2010. Revenues for 2009 have come in lower than expected and the county also faces a $3.3 million deficit in the current fiscal year, which ends Dec. 31.

The deficit is linked to dramatically falling revenues caused by plummeting property values. The county gets the majority of its general fund revenue from property taxes – the rate of taxation is restricted by state law, and can’t be increased without voter approval.

This is the first phase of an ongoing process to tackle the deficit. The administration plans to propose long-term structural changes as well, which are being developed and will be presented for approval by commissioners later this year. The current recommendations come in four broad categories: employee compensation, organizational changes, departmental reductions and revenue growth.

Employee Compensation

As The Chronicle previously reported, Guenzel is recommending pay cuts and changes in medical benefits for non-union employees in 2010 and 2011. Those changes – which include a 3% salary cut in 2010 and a 2% cut in 2011 – will save an estimated $2.3 million over the two-year period and affect nearly 300 of the county’s 1,350 employees.

However, the administration has targeted total savings of up to $14 million in employee compensation, the bulk of which would need to come from the county’s unionized employees, which make up 81% of the total workforce. They are represented by 17 different collective bargaining units. Contracts for union employees are already set for 2010 and in some cases through 2012, so the administration has asked union leadership to meet and renegotiate those contracts. Those negotiations are ongoing and will continue through the summer. Possible areas of concessions include staff reductions, salaries and work hours, time-off banks, medical benefits, retirement benefits and retiree health care.

A complicating factor is a recent change of leadership in AFSCME Local 2733, which represents about 700 county workers and is the largest union of county employees. The local’s president, Caryette Fenner, was suspended from that job last month and replaced by interim president Tonya Harwood, while the union resolves internal leadership issues, Harwood said. Fenner could not be reached for comment. Harwood said she expects the leadership issue to be resolved in the next 90 days or so.

Meanwhile, Guenzel said Local 2733 has asked the county administration to submit a written proposal identifying the categories – such as salaries or medical benefits – that the county wants to negotiate. Then, the membership will vote on whether or not they want union leaders to negotiate on those issues, Harwood said. While the outcome depends on how the membership votes, Harwood – referring to the cuts recommended for non-union employees – said, “I do not see that as being what the union accepts or negotiates.”

Organizational Changes

The county hopes to see budget reductions from several organizational changes.

Sheriff’s office

Sheriff Jerry Clayton has identified $1.25 million in budget cuts, plus about $260,000 in additional revenues (see below). He has also agreed that his department will take responsibility for community corrections, which administers the jail and prison diversion programs and which has previously been a division of the Trial Court. That shift will eliminate one management position. The sheriff’s department is also taking control of the county’s emergency management division, and hopes to see cost savings from that move.

An issue likely to cause some controversy relates to the price that townships and other municipalities pay for sheriff deputy patrols. Last year, the board of commissioners approved a 2% increase in the price charged through 2010. The administration is recommending an increase of 4% in 2011. That move would increase revenue by $231,685 more than is currently budgeted, according to the budget recommendations report. The issue has been hotly disputed for years – a lawsuit filed by the townships of Ypsilanti, Salem and Augusta over the issue is still in court.

Nonprofit funding

The county plans to save roughly $700,000 annually by cutting funding to about 20 local nonprofits. Agencies receiving 20% cuts (listed here at their reduced funding levels) are:

• Blueprint for Aging: $20,000
• Supportive Housing Initiative: $200,000
• Dispute Resolution Center: $24,000
• Domestic Violence/Project SafeHouse: $96,000
• Eviction Prevention: $40,000
• Family Learning Institute: $12,000
• Food Systems Economic Partners: $12,000
• Legal Resource Center: $4,000
• National African American Parent Involvement Day: $8,000
• Nonprofit Enterprise at Work/NEW Center: $28,000
• Project Grow: $3,600
• R.S.V.P (program of Catholic Social Services): $9,600
• Legal Services of Southeast Michigan: $60,000
• Shelter Association: $160,000
• Small Business Development Center: $8,000
• Success by Six: $40,000

In addition, the budget recommendation calls for a 50% reduction to the United Way 211 program (from $40,000 to $20,000), and a 67% decrease to the Eastern County Economic Development initiative (from $300,000 to $100,000). Funding is proposed to be cut in its entirety for 1) the north/south commuter rail, known as WALLY (previously funded  for $150,000) and the Dept. of Human Services Child Abuse Prevention program (previously funded at $38,000).

A few programs will not only see allocations for their programs cut by 20%, but they’ll also be required to bid competitively for those dollars through the Office of Community Development, a joint county/city of Ann Arbor department. The money will become part of a pool of funds from which OCD will award competitive two-year grants. Agencies affected by this change include Child Well Being funding (cut from $1 million to $800,000), Michigan Tenant Counseling (cut from $17,250 to $13,800), and the Fair Housing program (cut from $50,000 to $40,000).

Funding for two initiatives related to economic development – Ann Arbor SPARK ($200,000) and the Eastern County Incubator, or SPARK East ($50,000) – did not get cut. However, Guenzel is recommending that commissioners authorize a millage of 0.017 to be levied in December for economic development purposes. The millage would raise $256,000 and would be used to fund Ann Arbor SPARK and SPARK East, which would free up general fund dollars that are currently being used to fund those initiatives.

One nonprofit – the Humane Society of Huron Valley – actually will see an increase in  county dollars from $400,000 in 2009 to $500,000 in 2010 through its contract to provide shelter for animals picked up through the county’s animal control activity. The county is contractually bound to that increase, according to the budget report.

Other groups that aren’t getting cut: Neutral Zone ($20,000), Soil Conservation ($30,000) and the Ann Arbor-Ypsilanti Urban Area Transportation Study Committee reserve ($20,000).

Infrastructure

Proposed departmental budget reductions in facilities and information technology (outlined below) mean that the county is shifting its focus from upgrading those areas of infrastructure or doing discretionary projects, to a focus on maintaining existing infrastructure. Details about specific infrastructure budgets – and the effect on specific projects – will be completed later this summer.

In addition, expansion of a new courthouse in Saline – a joint project of the county, the 14-A District Court and Saline – is recommended to be put on hold. The new courthouse, which is set to open later this year, was originally slated for expansion in 2010.

Departmental Reductions

Roughly $6.76 million is expected from cuts identified by the heads of county departments, including a reduction of 26 jobs – about half of them vacant. More job cuts are expected through retirement or attrition.

Departments have been working on budget-cutting scenarios since March of this year, when department heads were asked to identify what areas they would cut if their budgets were reduced by 5%, 10% 15% or 20%. They were asked to identify savings from structural changes only, not one-time cuts, and to include possible ways to increase revenues as well (see below).

In general, the budget recommendations to be presented to the board of commissioners suggest reducing departmental budgets between 10% and 20% compared to 2009 levels. These are not across-the-board cuts – funding for some departments isn’t being touched at all, while others are taking a greater hit.

Some of the larger cuts include:

• In the sheriff’s department: Renegotiating food and medical contracts with vendors for the jail; cutting one manager in the community corrections office and one office specialist in LAWNET (the Livingston and Washtenaw Narcotics Enforcement Team); carrying over $500,000 in structural reductions made in 2009. Outcome: loss of 2 positions and budget reductions of $1.25 million.
• In the information technology department: Reducing operating costs in maintenance contracts and technology purchases. Outcome: $1.18 million in budget reductions.
• In the facilities department: Reducing costs in the county’s vehicle fleet and its operations & maintenance budget; reducing the funding for building maintenance. Outcome: $1 million in budget reductions.
• In the children’s services department: eliminating Day Break, a residential and intensive outpatient addition-treatment program for youth who are in the juvenile court system; reducing funding for the Washtenaw Area Teens for Tomorrow (WATT) program; shifting the management of certain nonprofit contracts to the Office of Community Development. Outcome: loss of 6 positions and budget reductions of $667,827.

In addition, the county is negotiating lump-sum payments to both the Trial Court and the 14-A District Court – though they are separate branches of government, these courts are funded by the county. Guenzel is recommending a cut of $375,000 to the 14-A District Court’s budget, with staff reductions to be determined. The district court’s 2009 budget was $5.2 million. No recommendations have been made yet for cuts to the $20 million Trial Court budget.

Revenue Growth

The county hopes to gain $4.38 million in revenue growth annually. Much of that would come from various departments finding outside sources of funding, such as money from federal grants. For example, the Community Support and Treatment Services department (CSTS) hopes to see an additional $2.17 million in federal funding. In general, the report on budget recommendations states that the county will go after new grants, federal and state support, and federal earmarks.

Some smaller revenue increases are expected to be gained through contracts for shared services with other municipalities. A contract for information technology services with the city of Ann Arbor is expected to increase revenues by $120,000, for example. Another revenue source is the 0.017 mill levy that the administration is asking commissioners to approve for economic development (see above).

The administration also hopes to get increased revenue from collections and programs at the 14-A District Court. Since the amount given to the court is still being negotiated, a specific revenue increase was not listed in the current budget recommendations. The court handles traffic tickets, misdemeanor cases, small claims and a range of other proceedings for all of Washtenaw County, with the exception of the city of Ann Arbor and Ypsilanti Township.

More cuts to come?

The budget recommendations also lay out a raft of additional organizational changes that might be considered later this year, depending on what kind of concessions, if any, are given by the unions. Those categories of possible cuts, nearly 20 of them, include:

• further reducing department service levels, or cutting funding in departments that weren’t affected in this round of cuts;
• reducing Head Start funding, or transferring responsibility for that program to another entity;
• closing the juvenile detention program;
• cutting funding to nonprofits by more than the currently recommended 20%;
• reducing funding for or eliminating the MSU Extension program and/or the strategic planning program;
• continued evaluation of how much townships and other municipalities pay for sheriff deputy patrols.

Finally, some strategies have been taken off the table for now, but could come into play if the budget crisis worsens. They include selling county-owned properties; integrating programs dealing with public health, physical health and mental health; and outsourcing public defense services.

More information about the proposed 2010 and 2011 budget is online. The county is also having two additional budget forums: On Wednesday, June 3 from 3-5 p.m. in the Learning Resource Center, 4135 Washtenaw Ave., and on Thursday, June 11 from 4-6 p.m. at the Washtenaw Intermediate School District, 1819 S. Wagner Road.