County Considers $12 Million More in Cuts

Nearly $12 million in potential cuts over the next two years – affecting up to 181 employees and services to hundreds of residents – are being considered as Washtenaw County leaders struggle to deal with a two-year budget deficit that’s grown to $30 million for 2010 and 2011. Details of the cost-cutting options were released Thursday. County administrator Bob Guenzel will formally present the options at an Aug. 5 board of commissioners meeting – a meeting that’s expected to draw a crowd of county staff and union members.

Hardest hit in this latest round could be mental health services – one option is to cut that part of the general fund budget by $2.4 million and eliminate 91 jobs.

At a July 29 briefing for commissioners, Guenzel stressed that the options he’ll present next week aren’t his final recommendations. No decisions have been made, he said. The extent of the cuts, which commissioners will vote on as part of the overall budget, ultimately will depend on the outcome of ongoing negotiations with union leaders.

The county is talking with most of the 17 bargaining units that represent about 1,000 of the county’s 1,350 workers, asking for concessions – even though union contracts are set through at least 2010. Guenzel plans to update commissioners on the progress of union talks at a closed executive session during their Aug. 5 board meeting. The closed session for union contract negotiations is an exception allowed under the Open Meetings Act.

This is the second phase of budget cuts. Phase 1, approved by the board in July, included $13.69 million in cuts and a reduction of 26 jobs, about half of them already vacant. Guenzel’s final 2010-2011 budget recommendations are expected to go before the board at its Sept. 16 meeting.

After the jump, we’ll provide details for the budget options being considered next week.

But First, Some Budget Background

County officials have been talking about the budget crisis for months. In September 2008, when The Chronicle launched and first began covering the board of commissioners, a dire budget projection was already on the horizon. At the board’s Sept. 17, 2008 meeting, Guenzel told commissioners, “I’ve been through a lot of these cycles and I’ve never seen one this bad.”

In February, Guenzel and his staff laid out revenue projections and described how different revenue sources – including sharply declining property taxes – could affect the budget. In April, commissioners held a retreat dedicated to identifying budget priorities. Later that month, the county’s tax equalization report gave officials a clearer sense of how tax revenues would be affected by the economic downturn. Officials have also held a series of public forums, trying to engage residents on the topic of the budget crisis.

The projected deficit has grown another $4 million from original estimates made early this year, which showed a $26 million shortfall. There are several reasons for the higher projected deficit, Guenzel said. Revenue  from the register of deeds office is now anticipated to be $1 million less than originally forecast, due to a significant decrease in the volume of real estate transactions. The revised deficit also accounts for a higher number of successful property tax appeals – $1 million, compared to $500,000 originally forecast. Increases in projected pension and health care costs account for the remaining amount.

Guenzel said that even if commissioners approved the maximum number of Phase 2 cuts, they’ll still need to find another $4 million to balance the budget for 2010 and 2011. (The county handles its budget in two-year cycles.) The rest might come from union concessions, departmental reductions in personnel and other expenses, and budget cuts expected from the Trial Court, which haven’t been determined yet, Guenzel said.

Jobs on the Line

Of the potential 181 positions affected by the budget cuts being considered, the bulk of those come in three areas: Mental health services, Head Start and juvenile detention. In his report, Guenzel gives the maximum number of jobs that could be cut and the maximum amount of savings, but notes that cuts could be lower than the maximum indicated. The options he presents are categorized as either high or medium priority – a designation that factors in the feasibility of the cuts, dollar amounts, public policy issues and whether the services are mandated or discretionary.

Mental Health: Cuts to mental health services – including up to 91 jobs – have been given a high priority. If fully enacted, those cuts would eliminate funding for the Community Support and Treatment Services department (CSTS) and the county’s Project Outreach Team, which serves the homeless, mentally ill and people with mental illness who are in the justice system.

This is an area where the county currently goes beyond its state-mandated service level. Guenzel said that those mandated levels could be met by services offered through the Washtenaw Community Health Organization (WCHO), a collaboration between the county and the University of Michigan. Of the 91 jobs at risk, 66.5 work under a contract that the WCHO has with CSTS to provide vocational and skill-building services. If the county eliminates funding for CSTS, the WCHO could provide those services through another agency.

The outreach team that deals with the justice system – called JPORT – has strong support from local judges and law enforcement officials, Guenzel said. Some of these advocates will likely come to speak to commissioners on Wednesday.

Head Start: The county manages this federal program for children of low-income families – running the Ypsilanti site and delegating responsibility for four other sites to other local entities. Eliminating support completely would affect 35 county employees for a maximum savings of $765,880. If the county relinquishes local management of the program, another local entity could bid for that federal contract and continue the program, Guenzel said.

One factor in weighing cuts to this program: The county owes money on a Head Start building paid for in part by federal funds. If county support is eliminated for Head Start, they might have to repay the $1.95 million that the feds kicked in. Head Start cuts are designated a medium priority.

Juvenile Detention: Also a medium priority is eliminating the juvenile detention program, with a maximum 24 jobs at risk and $919,464 in savings. This is not a mandated program, so the county could choose to send the youth in juvenile detention to facilities outside the county. That’s a solution that would cost the county money, but it would be less than the cost of operating their own facility.

Other Potential Cuts

There are several other areas considered a high priority among the options being considered:

Building Inspection: This is a non-mandated program, and given current economic conditions – with little construction activity taking place – the demand for these services has decreased. About five jobs would be affected, at most, for a savings of up to $239,547. Other options include raising fees and working to find a more regional approach to handling these services.

MSU Extension: Another non-mandated program, the extension is jointly funded by the county, Michigan State University and the U.S. Department of Agriculture. It provides a range of support to local farmers, several educational programs related to food, nutrition, youth and families, and some mortgage foreclosure prevention services. According to the county, every $1 in general fund support brings in $1.89 in funding from outside sources, such as the state or federal government – totaling $1.6 million in 2009. The cuts would affect a total of three county jobs. The county also pays a portion of the salary and benefits for 12.4 MSU employees. In total, the cuts would save up to $424,220. It’s not clear whether MSU would continue the program locally without county support, Guenzel said.

Public/Environmental Health: The state requires a minimum level for county public health and environmental health services – it’s referred to as a “maintenance of effort.” County funding goes beyond that level, Guenzel said, and one option is to cut back to the minimum, for savings of up to $586,000 and a maximum of 12 jobs.

Office of Strategic Planning: Among the options being considered is eliminating this department completely. Led by Tony VanDerworp, the department has already taken budget hits in previous years, Guenzel said. Closing it would save roughly $1.1 million and eliminate seven jobs (two of which are currently vacant). The strategic planning staff supports the Ann Arbor Region Success initiative, the Eastern Leaders Group and the Detroit Aerotropolis, which Washtenaw County recently joined. A less radical option would be to downsize the department, focusing resources on economic development.

Support Services: A maximum of six job cuts and $750,000 in savings could result from major restructuring of the county’s support services. Those areas include information technology, finance, budget, human resources and facilities.

VEBA Debt: Additional savings might be sought from restructuring the county’s Voluntary Employees’ Beneficiary Association (VEBA) debt, which funds the medical plan for 700 county retirees. One option could be to issue bonds for up to 75% of the county’s projected unfunded liability, assuming that changes in state law would allow the county to take such action. An advantage to this would be cost savings – a yet-to-be-determined amount – with no impact on jobs.

In addition to the high-priority options described above, the following areas have been given a “medium” priority when considered as potential budget cuts:

Funding for local nonprofits: Eliminating all county funding for non-county human services agencies, except for funding that is mandated, would save $1.69 million from the general fund budget. No county jobs would be affected. However, considerations include whether the nonprofits that rely on this funding would survive if all their county support is cut. A less drastic option would be to cut funding 20%, saving $338,542.

Other medium-priority potential cuts include eliminating the professional development program, which would save $205,586 and cut one job. A raft of changes to retiree health benefits – such as increasing drug co-pays to $10 for generics and $40 for brand-name drugs – could save up to $1.9 million and would not affect county jobs.

Special initiatives that might be cut include funds for the Eastern County initiative (up to $100,000), a housing contingency program (up to $160,000), and supportive housing (up to $200,000).

Also on the table – but with no numbers attached yet for savings or jobs – is related to a new jail expansion that’s under construction. Options include not opening the new space, or opening it while closing part of the old jail.

Potential New Revenue

On the revenue side, the county board is considering a new tax to raise $256,000 for economic development. That amount currently is earmarked from the general fund for Ann Arbor SPARK and its Ypsilanti office, SPARK East. By levying .017 mills – or $1.70 per year for every $100,000 in a property’s taxable value – the county would free up those general fund dollars for other purposes. The tax wouldn’t require voter approval because its enabling legislation (Act 88) predates the state’s Headlee Amendment.

A public hearing on the proposed tax will be held during the board’s Aug. 5 meeting. The board meeting immediately follows the board’s Ways & Means Committee meeting, which begins at 6:30 p.m. at the County Administration Building, 220 N. Main St.

Four public comment periods are available during the evening, before and after both the Ways & Means Committee and the regular board meeting. Three minutes are alloted for each speaker.