Priorities Set for Washtenaw County Budget

Washtenaw County board of commissioners special meeting (July 24, 2013): As the staff works on developing a budget to present on Oct. 2, county commissioners have set four broad priorities to guide that process.

Those priorities, listed in order of importance, are: (1) ensure a community safety net through health and human services; (2) increase economic opportunity and workforce development; (3) ensure mobility and civic infrastructure for Washtenaw County residents; and (4) reduce environmental impact. [.pdf of budget priorities resolution] [.pdf of budget priorities memo and supporting materials]

The vote on the budget priorities resolution was 6-1, with dissent from Dan Smith (R-District 2), who indicated that his No. 1 priority is long-term fiscal stability, followed by public safety and justice. Rolland Sizemore Jr. (D-District 5) had left the meeting before the vote, and Alicia Ping (R-District 3) was absent. Although it was not part of the four priorities, a resolved clause was added during the meeting, stating that “the long-term fiscal stability of the county [will] continue to be of import throughout the budget development process.”

The resolution was brought forward by Felicia Brabec (D-District 4), who’s leading the budget process for the board. It also laid out a framework for developing strategies to measure the effectiveness of county investments in these priorities.

Brabec described this approach as “both a policy and a paradigm shift” that can’t happen overnight, but one that’s critical for the county’s future. The board is forming work groups focused on each of the four priorities, as well as on the topic of human resources. These work groups will be meeting to develop as many as five “community impact” goals in each category, in work that’s expected to continue into next year and beyond.

The July 24 meeting also included an update from county administrator Verna McDaniel about the county’s current financial condition and preliminary projections for 2014. At her last presentation, on May 15, 2013, McDaniel told commissioners that the county needed to identify $6.99 million in structural reductions for the 2014 budget. The approach to addressing this $6.99 million target depended on whether the county moved ahead with a major bond proposal to cover obligations to retirees, she said at the time. That bond proposal was put on hold earlier this month.

Now, the projected general fund shortfall is $3.93 million on a roughly $101 million budget. McDaniel indicated that the shortfall will be addressed primarily with operating cost reductions ($3.83 million) as well as $100,000 in cuts to funding of outside agencies, including support for nonprofits. The lower shortfall resulted from revised actuarial data that significantly lowered the contribution that the county is required to make toward its unfunded retiree obligations. Other factors include: (1) a decision not to make a $1 million contribution to the general fund’s fund balance; and (2) $2.4 million in higher-than-previously-anticipated revenue.

McDaniel noted that if the county had chosen to bond, then operational cuts would not be needed, and the fund balance contribution could be made. She also reported that the general fund budget doesn’t factor in serious state and federal cuts to non-general fund programs. “Revenue is needed,” she said. “We need to figure that out.”

Commissioners Yousef Rabhi (D-District 8) and Conan Smith (D-District 9) both voiced interest in exploring possible new taxes. “I think it’s important that we strongly consider asking the voters of Washtenaw County if they’re willing to support some of the ongoing operations that we have,” said Rabhi, the board’s chair. “We need to pose that question at least to the voters in the form of a millage of some kind.”

Smith cited human services and public safety as areas that might gain voter support for a millage. During public commentary, representatives from SafeHouse Center urged commissioners to continue funding of that nonprofit, as well as for human service organizations in general.

The upcoming budget will be prepared without the major bonding initiative that until earlier this month was anticipated to occur later this year. The bonding was intended to cover unfunded pension and retiree healthcare obligations – for the Washtenaw County Employees’ Retirement System (WCERS) and Voluntary Employees Beneficiary Association (VEBA). The original maximum amount for the bonds had been estimated at up to $345 million, but updated actuarial data resulted in a lower estimate of about $295 million. During the July 24 meeting, commissioner Conan Smith said it’s unlikely that bonding could occur this year, although he’s still supportive in general of taking that approach.

McDaniel plans to present the 2014 budget to the board at its Oct. 2 meeting. Commissioners are required to adopt a balanced budget for 2014 by the end of 2013. At its May 1, 2013 meeting, the board had approved development of a four-year budget. However, commissioners have not yet decided whether to follow through by adopting a budget with that four-year horizon. And some commissioners – notably Ronnie Peterson (D-District 6) – have expressed skepticism about this longer-term approach. For the past few years, budget plans have been developed for a two-year period, though the board must confirm the budget annually.

Budget Priorities

One of the main agenda items at the July 24 meeting was a discussion of priorities that the administration would be asked to use as the staff develops the budget for 2014-2017. [.pdf of budget priorities resolution] [.pdf of budget priorities memo and supporting materials] Commissioner Felicia Brabec (D-District 4), who’s leading the budget process for the board, began by saying that this year, the board would focus on community impacts and creating a vision.

In 2014, that work would shift to developing strategies and metrics related to the community impacts, she said. The board would ask the administration to report back on a more regular basis to talk about how the budget reflects community impacts and investments in the board’s priority areas. It allows for a fuller and more rigorous look at what’s typically been called the budget reaffirmation, Brabec said. [In the two-year budget cycle that the county currently uses, the board votes to "reaffirm" the second year of the budget, usually with only minor changes.]

Brabec noted that the board had held two budget retreats – on March 7, 2013 and May 16, 2013 – and a July 11, 2013 working session focused on the budget. She said she’s had follow-up conversations with commissioners, and these four budget priorities were her best attempt to synthesize that feedback.

“This is both a policy and a paradigm shift for our county,” Brabec said. It can’t happen overnight, she added, and there will be bumps along the way. But this model is an attempt to create a solid process that will help reach the county’s goals, she said. It also sets forth a model for transparency, responsibility and accountability to the community, Brabec noted. Her hope is that, by working with the administration, the board can achieve the community impacts that will be set as part of this process. The framework will allow the board and administration continuously to assess and adjust its investments, she said, assuring that they’re making choices that align with their priorities and vision. She described it as a strategic, longitudinal and dynamic process.

The four priorities stated in the resolution are:

1. Ensure a community safety net through health and human services;
2. Increase economic opportunity and workforce development;
3. Ensure mobility and civic infrastructure for Washtenaw County residents;
4. Reduce environmental impact.

The resolution on budget priorities also “directs the Administrator to lead a structured and transparent process by which the Board, representatives from throughout the organization, and community partners engage collaboratively to develop a balanced budget proposal that (1) aligns the organization’s programs and services with the Board’s four priorities, and (2) includes a summary set of ‘community outcomes’ that declares benchmarks related to the Board’s priority areas.”

The board has named the framework for this budget decision-making process: “Community Impact Investing.” Part of the framework includes six “decision-making principles” that commissioners are asking staff to use in developing the budget. Those principles are:

1. impacts and outcomes drive investment priorities;
2. services are delivered optimally by the right provider, social and financial returns are calculated and articulated;
3. programs are evidence- and performance-based;
4. mandates that support outcomes and impacts are better funded;
5. the excellence of the County’s internal workforce is foundational;
6. programs and services should be encouraged to achieve the triple bottom line of financial returns on investment, contribution to social equity, and reduction of environmental impact.

Ronnie Peterson (D-District 6) wondered when the board would actually discuss dollar amounts for this upcoming budget, especially for funding of organizations like SafeHouse and other human service programs.

Brabec described the priorities as the “big picture,” which will in turn determine allocations in the budget. It’s a huge shift in process, she said. Noting that the priorities are listed in order of importance, Brabec said the board will be able to look at the budget that the administration brings forward and see how the allocations are aligned with the budget priorities.

Rolland Sizemore Jr. (D-District 5) said it looked like the board was duplicating things they’ve already discussed. Why is the board spending time on this, he asked, when they already have a list of guiding principles that they’ve used for years? Is there anything different here?

By way of background, the “guiding principles” of the county are listed on the county administrator’s website:

1. Ensure long term fiscal stability for the County.
2. Reduce the cost of conducting the County’s business.
3. Enhance customer service.
4. Provide the necessary knowledge, skills and resources to County employees to carry out these principles.
5. Ensure adequate provision of mandated services.
6. Focus on the root causes of problems that affect the quality of life of County citizens by aggressively pursuing prevention strategies.
7. Provide leadership on intragovernmental, intergovernmental and intersectoral cooperation and collaboration aimed at improving services to County citizens.

Saying he didn’t understand the purpose of the proposed budget priorities, Sizemore asked Brabec to explain the difference between the current proposal and the existing principles.

Brabec said that in the past, the board would present its budget priorities, then the administration would develop a budget based on those priorities. The current proposal is an attempt to keep the board involved – not just during the budget development, but continuously as the county makes investments.

Sizemore said that as someone who is elected by residents, he already keeps the budget priorities in mind throughout the year. Although he felt it was duplicating a mechanism the board already had, Sizemore said he had no problem with it if the board is going to follow through on it. But if these priorities are just going to be put on the “back shelf,” he said, there are already plenty of reports like that. Brabec said her hope is that it will be a dynamic process.

Yousef Rabhi (D-District 8) noted that Sizemore had spoken about the classic issue between the board and the administrator, who’s been hired by the board to present a balanced budget. Brabec is trying a different approach, Rabhi said – to involve the board in evaluating and benchmarking the priorities that it’s setting. Some of the priorities are carried over from the previous budget cycle, he noted, but a lot of it is new. The hope is that this process will be more dynamic than in the past, he said.

Andy LaBarre (D-District 7) highlighted the working groups that will focus on the budget priorities. This approach hasn’t been taken before, he noted. The working groups will be developing a list of “community impacts” for each priority. LaBarre asked for clarification about the timeline for that work.

Brabec replied that the work groups will be meeting in August and develop up to five community impacts for each budget priority. Those impacts will be delivered to the administrator as the budget is developed.

Peterson brought up the issue of long-term legacy obligations to retirees, and stated that it should be one of the priorities. “It’s not going to go away, and it should be something we should be talking about,” he said. The county made a commitment to employees, and has an obligation to meet it, he said. The board has discussed it for the past few months in terms of a potential bonding to cover those obligations, he noted, and the public should continue to be part of that discussion. He pointed out that the state legislation allowing the county to bond for this purpose doesn’t sunset until the end of 2014. The public should know that the board isn’t hiding this issue, he said.

Peterson added that he wasn’t trying to make it a controversial issue, but “money’s always controversial when you lack it.” He said if the topic became part of the budget document, “I will be quiet for the rest of the night.”

Conan Smith (D-District 9) thanked Brabec and Rabhi for their leadership on this budget framework. It’s important to know what your goals are when you’re developing a budget, he said. For a legislative body, the messiest part of doing that is creating the framework. Giving clear, good direction to the administration is the board’s job, he said. It’s essential to know what the board wants to achieve over the long-term with its investments. The document that the board is voting on that night doesn’t make any allocation of funds, Smith noted. However, he said, it builds on the “experiment” that the board has been undertaking to identify goals for the community, and then pursues those goals “very deliberately.”

Smith called Brabec’s proposal a “significant step forward.” The process calls for defining metrics and clearly articulating those metrics for each priority. In the past, the board simply talked about its priorities, he said, and that wasn’t sufficient. He also said he appreciated the “consistent accountability method” that’s being proposed. The board will be checking outcomes, not just funding amounts. Commissioners will be asking if the investments are delivering the change in the community that they really want, Smith observed.

Rabhi in turn thanked Conan Smith for his leadership in identifying the importance of metrics during budget discussions earlier this year. Rabhi also agreed with Peterson about the importance of addressing unfunded liabilities. A lot of other communities have ignored the issue of unfunded liabilities, he said. The fact that the county is evaluating its options is the most fiscally responsible thing to do, Rabhi said. He asked Brabec how that issue could be incorporated into the budget priorities document, perhaps by noting the importance of long-term fiscal responsibility.

Rabhi suggested taking a certain percentage of any increase in revenues above what’s been budgeted, and using that excess to help cover unfunded liabilities – or adding it to the fund balance. In order for that to happen, that goal needs to be built into the budget priorities, he said. Fiscal stability and workforce sustainability are really overlays to the budget priorities, he added – saying you need those things in order achieve the other priorities.

Peterson clarified that he wasn’t necessarily saying that he wanted to continue the conversation about bonding, but it’s more about the obligation to employees. He alluded to Detroit’s bankruptcy, noting that the issue of unfunded obligations are affecting many communities – but it’s especially affecting people who were promised pensions. He’s concerned that if the county borrows money but doesn’t meet its investment goals, the shortfall will be made up on the backs of county employees. The county doesn’t have a strong reserve, he noted. The state constitution is supposed to protect pensions, but the constitution doesn’t mandate that governments have to make payments to cover those pension obligations.

Peterson also expressed concerns about the proposed four-year budget process. He didn’t see how the county could be responsive to possible fluctuations in contributions to WCERS and VEBA, if a four-year budget was in place. Anything can happen in this country, he said, citing specifically the panic after Sept. 11, 2001. If the stock market crashes, the county would have to meet its obligations out of the general fund, he said. Peterson added that he might be the only one to vote against a four-year budget, if the county doesn’t have a plan in place that is fiscally sound. At one point, the retiree obligations were fully funded, but “we got off track,” Peterson said. Time has passed, he said, but now the issue is how to get back on track.

LaBarre echoed Peterson’s comments, saying the county had to meet its retiree obligations – from a moral and reputation perspective. He considered the budget priorities as a guide for the future, with the assumption that the county won’t be bonding. It will be a long, hard process to develop a budget with the current constraints, LaBarre noted. But the intent is to meet the county’s retiree obligations fully, he said, even though that won’t be handled through bonding.

Brabec described the budget framework and priorities document as separate from a discussion about bonding, or about any other strategies the county might pursue to meet its retiree obligations.

Conan Smith suggested that one of the measurable objectives for the budget should be that the unfunded liabilities are addressed. He said his personal preference would be to fully fund it. [The allusion was to funding those obligations by borrowing the full amount through bonding, which Smith supports.]

Smith asked Brabec whether a separate budget work group could focus on employee issues. That’s possible, Brabec replied, but she also wanted to make sure that each of the work groups keep in mind the importance of employees.

Smith agreed, but said he still felt there should be a work group that addresses personnel issues. One example he cited is a “blurring” of compensation between supervisors and the employees they supervise. So the compensation of the leadership across the organization should be examined, he said. Smith also mentioned some commissioners want to revisit the “red circle” policy. [That policy authorizes the administrator to increase an employee’s salary above the position's pay range. If an assignment extends past six months, the administrator must provide a report to the board about employees on extended assignment.]

The county has been a place where people crave employment because of the expertise they’re surrounded by, Smith said. “Putting ‘Washtenaw County’ on your resume really meant something out in the world,” he said. It’s important to keep fostering that environment.

Rabhi described the budget as one of the tools to help address the unfunded liabilities, among other issues. He said he respected Peterson’s concerns about a four-year budget, but he felt the unfunded liabilities could be addressed during the budget process – even if the budget is taking a longer-term view. The county could be locking in that commitment to fund those liabilities for a longer period, he said.

Brabec pointed out that long-term fiscal stability is one of the county’s guiding principles. She proposed adding a resolved clause to the resolution that would highlight this point:

Be it further resolved that the long-term fiscal stability of the county continue to be of import throughout the budget development process.

Peterson said he’d be supportive of that.

Outcome: Brabec’s proposed addition was accepted as a friendly amendment.

Discussion continued. Peterson spoke at length about various impacts to county revenues, including cuts in federal and state funding. He didn’t understand how the county could develop a four-year budget with such huge legacy costs, as well as uncertainty related to state and federal grants. In four years, there will be a new president and possibly a new governor, he pointed out. The county also doesn’t know what the actuary will require in terms of contributions to cover unfunded liabilities for retirees. It’s setting the county administrator up to fail, he contended, if her budget projections are off. If her projections are wrong, the only thing that she could do would be to cut from the board’s priority areas, he said.

It might be different if the county were generating revenues that would offset its retiree costs, Peterson said.

Rabhi picked up on that idea, saying that without having “new dollars” on the table, the county will face similar struggles in the future. “I think it’s important that we strongly consider asking the voters of Washtenaw County if they’re willing to support some of the ongoing operations that we have,” he said. “We need to pose that question at least to the voters in the form of a millage of some kind.”

The county can’t rely on state and federal funding that has traditionally supported county-run programs, Rabhi said. Property taxes are constrained by various state laws and constitutional amendments, he noted. The problem of unfunded retiree liabilities was created over time and no single person can be blamed, he added, but it’s important to address it head on. So the voters need to be asked if they’re willing to keep the county’s commitments to employees while keeping the same level of programs and services. He noted that the liabilities are huge and will impact the budget for years to come.

Taxes are a sensitive issue, Rabhi said, but voters need to be asked. Are they content with shrinking county government to the point of maybe only providing the lowest level of mandated services? Given current realities, “we just can’t expect to continue the way we are,” he said, providing the current breadth of services. “I know that’s kind of a doom-and-gloom statement, but I think it’s the reality that we’re facing and it’s the challenge of local government.”

Conan Smith said he fully supported Rabhi’s suggestion to talk about new revenue. Regarding the funding for unfunded liabilities, however, he reminded commissioners of something that their bond counsel, John Axe, had told them: It’s perhaps a riskier proposition politically to fund those liabilities via a voter-approved millage, because that gives the board the unilateral authority to raise taxes if the funds aren’t sufficient to meet those obligations.

Smith also said he’d love to put a human services millage on the ballot, and is eager to have a conversation about that. A millage for police services is another option to discuss, he said.

Smith noted that the bonding scenario had been presented as a “tax neutral” solution. To cover the unfunded liabilities by bonding, the county wouldn’t need to ask for an additional millage, he said, “nor would we have to cut the general fund.” To him, the bonding question is “unresolved.”

Dan Smith (R-District 2) cited several concerns he had with the budget priorities resolution. His first priority above all else is the short-term and long-term financial stability of the county. It’s troubling to see that the county is contemplating putting $1 million less in its fund balance next year than originally contemplated, he said. A healthy fund balance is a critical part of financial stability. His second priority would be public safety and justice, and there are a lot of mandated and non-mandated services that fall under that category. A distant third priority would be roads, Smith said.

Conan Smith responded, saying he thought that public safety was a priority that was interwoven with the four priorities stated in the resolution. He cited sheriff Jerry Clayton’s focus on a “social justice” approach to public safety, and wondered if Brabec had talked to Clayton about his team’s role in the proposed working groups.

Brabec said she had talked to Clayton about the notion of a social justice campus, but hadn’t discussed it in the context of the budget work groups. She saw public safety as integrated into several of the priorities, primarily the priorities on creating a community safety net and ensuring economic opportunity.

Conan Smith also clarified with Brabec that roads would be part of the third priority – on ensuring mobility and civic infrastructure. He said he supported everything that Dan Smith had identified as priorities, adding that the board needs to ensure that the work groups tackle those subjects. “I think the framework allows for that,” he said.

LaBarre reported that the topic of the next working session, on Aug. 8, would focus on the budget. So commissioners can continue hashing out some of these issues then, he said.

As the discussion came to a close, Peterson again voiced his opposition to a four-year budget, saying he was “totally opposed” to that approach. Rabhi responded, noting that although an original draft of the resolution had mentioned a four-year budget, the most recent version had eliminated references to that. Brabec had made those changes in order to address Peterson’s concerns, Rabhi said.

Brabec added that the resolution is meant to provide a budget framework, regardless of the timeframe. The discussion about whether to develop a four-year budget will be addressed separately, she said. Peterson replied that “in front of all of these witnesses, I’ll take your word and hold you to it.” He indicated he’d vote for the resolution based on that assurance.

Outcome: Commissioners approved the budget priorities resolution on a 6-1 vote, with dissent from Dan Smith (R-District 2). Alicia Ping (R-District 3) was absent, and Rolland Sizemore Jr. (D-District 5) had left the meeting prior to the vote.

Financial Update

County administrator Verna McDaniel gave an update on the county’s financial condition, and a look ahead at the upcoming budget. [.pdf of McDaniel's presentation] She had previously given a report to the board on May 15, 2013, when she’d been advocating for a bond proposal. At that time, she had told the board that $6.99 million in structural reductions were needed in 2014, in order to provide a balanced budget for the four-year period of 2014-2017. If the county didn’t bond, she’d said at the time, all of that $6.99 million – including $5.06 million related to covering unfunded retiree obligations – would need to come from operational cost reductions.

On July 24, she told the board that revenues would be $2.4 million more than previously projected. [That's based on information from the equalization report that was delivered at the board’s April 17, 2013 meeting.]

She noted that many of the previous assumptions are unchanged. That includes projecting a 1% increase in property tax revenue each year through 2017, and getting $5.3 million per year in state revenue-sharing.

Her current analysis is that $3.93 million in structural reductions are needed, McDaniel said. In explaining the lower shortfall, she said the original estimated amount of $5.06 million in contributions needed to cover unfunded retiree obligations had turned out to be high, and was now estimated at about $2 million.

To address the $3.93 million shortfall, McDaniel said most of the reductions ($3.83 million ) will come from operational cuts. In addition, she’s proposing cuts of $100,000 to “outside agency” funding, which includes the county’s support of nonprofits. She also expects to eliminate a previously planned $1 million contribution to the general fund’s fund balance in 2014.

However, McDaniel also proposed that any additional revenues above the projected 1% increase in property taxes each year should be allocated to the fund balance as unearmarked reserves. Any surpluses at the end of each year would also be moved into unearmarked reserves, she said. The additions to the fund balance will be incremental, “as opposed to being baked in,” she said, “because baking it in will create an undue burden on the organization.”

McDaniel reminded the board that the county had made $30 million in reductions over two years in 2010 and 2011, and another $17.5 million in cuts during 2012 and 2013. With $3.93 million in proposed cuts next year, “we’re close to the finish line,” she said. “We think we can do this.” She plans to make a formal budget recommendation to the board on Oct. 2.

For the non-general fund portion of the budget, programs and services that are funded with federal and state grants face serious challenges, she said. Those issues were not addressed in her budget presentation, she added, but she wanted the board to keep it in mind. “Revenue is needed – we have to figure that out.”

Financial Update: Board Discussion

Conan Smith noted that when the budget had factored in bonding, the structural reductions were originally estimated at $1.83 million. If bonding were to move forward now, he said, there would be no need for operational reductions and the county could make its $1 million contribution to the fund balance. By abandoning the bonding proposal, he added, it is forcing cuts on the organization and reducing the contribution to the fund balance.

Smith then asked for an explanation of the relationship between the fund balance and the annual cash flow. Each June for the past couple of years, “we’ve cut it pretty thin,” he said.

Kelly Belknap, the county’s finance director, confirmed that the county had “dipped below zero” in the summer, in terms of its ability to meet payroll with cash flow. Each year, the county in May or June enters into a negative cash balance, she said, because property taxes aren’t collected until July. The county’s policy is to borrow internally from its fund balances that are outside of the general fund, she said. When tax revenues are received later in the year, those other fund balances are repaid.

Conan Smith clarified with Belknap and McDaniel that this is considered an acceptable practice, but not a best practice. He said he wasn’t trying to blame anyone, but wanted to make clear that there are “consequences of walking this particular path.” He noted that the other way to address it would be to make even deeper operational cuts to the general fund, which is not something that the administration is proposing.

Ronnie Peterson confirmed that the county was making actuarial-recommended contributions to both WCERS and VEBA. He noted that some employees are in the Municipal Employees’ Retirement System of Michigan (MERS), a statewide system. McDaniel reported that most employees in the sheriff’s offices are in the MERS plan, though she didn’t have specific figures on hand. She noted that the county also makes required contributions to that system, in addition to WCERS and VEBA.

Peterson wondered if the county could expect large fluctuations in the amount of contributions it would need to make to MERS in the future. That should be part of the board’s discussion, he said. McDaniel replied that the amount fluctuates each year, and it’s been going up. Those figures are included in the budget projections, she said. Peterson wanted to make sure that MERS was included in the discussion about legacy pension costs, saying that it also impacts the budget.

Conan Smith noted that the MERS system is the healthiest fund – saying that it’s about 88% funded. But the challenge is that the county doesn’t control the assumptions for that system in the same way that it can for WCERS and VEBA, he said. So in 2010, there was a $600,000 increase in the contribution that the county was required to make for MERS, for example. He agreed with Peterson that it was important to be aware of the volatility of MERS.

Outcome: This was not a voting item.

Financial Update: Public Commentary

At the beginning of the July 24 meeting, Doug Smith – wearing a Washtenaw Watchdogs T-shirt – told the board that commissioner Conan Smith has repeatedly stated that the county has made its scheduled contributions to the retirement accounts, and that the county is therefore not responsible for underfunding those accounts. “He’s deceiving you – whether he’s deceiving himself is not clear,” Doug Smith said. In 2000, the WCERS account was overfunded by $4 million. Since then, it has been progressively underfunded until it became underfunded by more than $40 million in 2007. That was before the financial crisis of 2008, he noted, and before the pension plan was re-opened for new members. That means the county board watched the fund lose ground by about $6.5 million each year between 2000 and 2007, Smith said, and nothing was done to investigate or correct the situation. The county didn’t pay its annual contribution to VEBA in full until 2010, even though it was severely underfunded, he said.

Smith referred to a New York Times article he’d given to the board, which reported that actuaries have been making unrealistic assumptions about returns on investments for many years. That means pension funds are much more underfunded than industry practices would estimate, he said. For Washtenaw County, actuaries are still using an unrealistic net gain on investments of 7.75%, he said. For the WCERS account, the actual return has been 3.4% since 2000. If the actuary used a more realistic number, the current underfunding would be much higher than $300 million, he argued.

In 2007, the board made a decision “so stupid that it must have been on purpose,” Doug Smith said. Even though the county had eliminated the defined benefit pension plan in 1984 in favor of a defined contribution plan – which by 2007 covered about 80% of county employees – the county in 2007 decided to let all employees buy back into the pension plan. It was a “gift to employees, including Verna McDaniel, at taxpayer expense,” Smith contended. McDaniel is employed by taxpayers, he said, and she is not serving them well. The entire problem with underfunding the retirement plan rests with the board, “and I’m tired of hearing Conan Smith say otherwise,” he concluded.

During the final opportunity for public commentary at the end of the meeting, Doug Smith asked for confirmation of his understanding of McDaniel’s presentation: Even if the administration isn’t happy about making budget cuts, the roughly $4 million cut over four years is manageable without the bonding. He also wanted confirmation that the budget was being prepared with the assumption that the county would not be bonding.

Financial Update: Public Commentary – Commissioner Response

Conan Smith acknowledged that Doug Smith was right: “I had missed the shorting of the VEBA in 2006-09. I’d been told differently, and I didn’t validate that information.” He said he’d go back and look at what the rationale was for that decision, but “it almost doesn’t matter. We’ve got to deal with it looking into the future.”

Conan Smith also affirmed that “absolutely the budget is manageable.” There are sufficient general fund revenues to cover the contributions that must be made each year toward unfunded retiree obligations. “The question is always: What are the consequences of doing that?” he said. The county has been making operational cuts ever since he got elected, Smith said, and it would be possible to make more cuts. But “we have cut to the bone already,” he added. Making additional cuts would result in measurable, immediate reductions in services to residents, he said.

As for bonding, it’s almost inevitable that they wouldn’t be able to bond this year, he said, because of the timing needed to move through the bonding process. Given that the board must adopt a balanced budget by Dec. 31, it would be irresponsible of McDaniel not to present a budget on an assumption that no bonding would take place, he said.

Andy LaBarre addressed Doug Smith’s comments that had questioned the motives of commissioners. LaBarre felt those comments were wrong. He said he appreciated the service of Conan Smith, Yousef Rabhi and Verna McDaniel. “I just wanted that said for the record,” LaBarre concluded.

Communications & Commentary

During the evening there were multiple opportunities for communications from the administration and commissioners, as well as public commentary. In addition to the remarks reported earlier in this article, here are some other highlights.

Communications & Commentary: SafeHouse Center, Human Services Funding

Three representatives of SafeHouse Center – a nonprofit that provides support for people affected by domestic violence or sexual assault – addressed the board at the start of the July 24 meeting. Barbara Niess-May, the nonprofit’s executive director, thanked the board for its support of SafeHouse as well as other safety net services in the community. It makes an enormous difference to people who find themselves struggling and needing an extra hand during a difficult time. She noted that the coordinated funding program is critical, and she encouraged commissioners to keep it a priority. Any loss to that funding would impact the quality of life for many people, including survivors of domestic violence and sexual assault.

About 10 years ago, SafeHouse took on the task for providing sexual assault services on behalf of the county, Niess-May explained. There was an agreement about how much funding it would take to support that work, she said, but those amounts subsequently have been reduced. Like everyone else, SafeHouse is doing its best to do more with less, she said, but the need has not lessened. SafeHouse serves about 5,000 women, children and men each year, with a staff of 24 and 150 volunteers. SafeHouse is “definitely leveraging every last bit that we can,” she said. SafeHouse serves as a support for law enforcement, and works cooperatively with the county prosecutor’s office, “and in the end, we save lives,” Niess-May said. A loss of funds would mean a drastic reduction of services.

Molly Resnik, one of SafeHouse’s co-founders and a long-time volunteer, said she knew there were a couple of people at the board table who had been there in the early 1970s when organizers started putting together services for survivors of domestic violence and sexual assault. It’s heartening to see the continuity, she said, but frightening to see that in many ways, “we’ve gone backwards in response to budget cuts.”

Until recently, she had served on the board of the Ann Arbor Area Community Foundation, a partner in the coordinated funding approach. She’s very aware of the importance of prioritizing and of coordinating an approach to meet community needs. The one problem is that some services – like those offered by SafeHouse – “don’t comfortably fit into categories.” It’s been put into the category of emergency housing and homelessness, she noted, but it’s not exactly a fit. As the U.S Dept. of Housing & Urban Development (HUD) and others have redefined what homelessness means for the purpose of funding, it’s leaving SafeHouse out in the cold. Resnik said that for her, it comes down to saving lives. She has no doubt that there are women and children alive today because SafeHouse was there. She asked the board to remember that SafeHouse stands out, and somehow the community needs to reinvigorate the comprehensive services it offers.

The president of SafeHouse Center’s board, Rob Oliver, noted that the organization is effective despite cuts by the county, federal sequestration and funding cuts from the HUD. That’s why money from the county is so important. SafeHouse has hired a consultant to help with fundraising, so the nonprofit is doing as much as it can to be sustainable, he said. Oliver recalled his own experience with domestic violence years ago, saying that thanks to Resnik, his family had a place to go when they had to flee an abusive stepfather. Now, other families also have a place to turn. He urged commissioners to support SafeHouse and its work.

Several commissioners responded, expressing support for human services funding in general and SafeHouse specifically. Conan Smith noted that there are fiscal pressures on all local governments, and some of the cuts are because of economic conditions. But some cuts are because of decisions that the board chooses to make, he said, so having people come and articulate the critical importance of maintaining certain investments is really important. People need to know that even making small cuts to organizations like SafeHouse can have a direct impact on people’s lives, he said.

Ronnie Peterson said SafeHouse had brought its secret weapon by having Molly Resnik speak to the board. Washtenaw County government was part of the birth of SafeHouse, he said, and it’s important to make sure that this kind of safety net service is always a part of the county’s institutional funding. He joked that some people might think his politics have swung to the right because of his friendship with Dan Smith, a Republican commissioner. But Peterson said he’s always been focused on the delivery of services and outcomes. Every community should have a SafeHouse, he said. If the county can make a major long-term commitment to the humane society, Peterson added, then it should make a commitment to SafeHouse too.

Yousef Rabhi said he supported SafeHouse, and he thanked the representatives for advocating on behalf of the nonprofit. The partnership between SafeHouse and the county goes way back, he said, adding that he plans to continue advocating for human services funding in general, and for SafeHouse specifically. Although SafeHouse has a separate line item in the county’s budget, its funding has been decreased significantly over the years, Rabhi said. That decision needs to be reviewed.

Communications & Commentary: Thomas Partridge

Thomas Partridge called for an FBI investigation of municipalities in Washtenaw County, including the city of Ann Arbor, because of egregious, long-standing violations of civil and human rights of residents. In particular, he cited budget manipulations and priorities that resulted in the loss of substantial amounts of money between 2008 and today. He contended there’d been investment losses at the Ann Arbor Transportation Authority, Ann Arbor Public Schools as well as at the University of Michigan.

At his last turn at public commentary, Partridge told commissioners that priority items are being ignored, including plans for affordable housing, ending homelessness, an affordable countywide transportation system, and affordable, accessible education and health care. County residents are suffering, he said, and Washtenaw County is being left behind compared to other areas in the state. Commissioners should be seeking additional revenue sources, and lobbying the state legislature to allow for a progressive income tax, he concluded.

Present: Felicia Brabec, Andy LaBarre, Kent Martinez-Kratz, Ronnie Peterson, Yousef Rabhi, Rolland Sizemore Jr. (present during the first part of ways & means committee only), Conan Smith, Dan Smith.

Absent: Alicia Ping.

Next regular board meeting: Wednesday, Aug. 7, 2013 at 6:30 p.m. at the county administration building, 220 N. Main St. in Ann Arbor. The ways & means committee meets first, followed immediately by the regular board meeting. [Check Chronicle event listings to confirm date.] (Though the agenda states that the regular board meeting begins at 6:45 p.m., it usually starts much later – times vary depending on what’s on the agenda.) Public commentary is held at the beginning of each meeting, and no advance sign-up is required.

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