Column: Limited Edition
Washtenaw County administrator Bob Guenzel has done about as much as he can do. He has presented and updated the county’s projected 2010-2011 deficit over and over the last six months – best case scenario, worst case scenario, and everything in between. So what are the options? There are few.
The option of increasing future revenues is like trying to change the tire on an 18-wheeler that is still moving – downhill. It isn’t going to happen. Hoping to get voter approval to increase the county millage rate by 1 mill (back to the maximum 5.5 mills authorized in 1964, but which has been gradually rolled back thanks to the 1978 Headlee Amendment) likely cannot be achieved, given the current economic climate.
At any rate, millage reapportionment makes sense only if you could consolidate many of the functions of county and township government. But consolidation would put loveable Ebby Betts, the township treasurer for 40 years, out of a job. (Yes, Ebby is a hypothetical creature, but nearly every township has one.) Consolidation makes good business sense, which is why it will not happen. Year after year, proposed state legislation to modify township government dies in committee. Township dues paid to the self-serving Michigan Township Association to lobby the legislature protect these 200-year-old antiquated fiefdoms. Besides, everybody feels comfortable with Ebby.
With most of the county income coming from declining property taxes and dwindling state revenues, the commissioners need not spend much more time on the revenue side of the budget. The other revenue sources – fees, investment income (which in the tank), etc. – don’t amount to a mouse pelt big enough to nail on the wall.
The Ann Arbor Chronicle has provided exhaustive reporting on the county’s budget crisis. The reporting is so extensive that it numbs the mind with endless alternatives. Trying to sell a few buildings that likely have no buyers, or expecting interest rates to zoom up so the CDs will yield 3% instead of 2% isn’t going to beat off the alligator closest to the boat. Cutting expenses is the only viable option.
Now about the boat. Unfortunately – or fortunately, depending upon your perspective – the county commissioners and the staff are bunked up in steerage, one deck above the engine room and next to the pounding of the bilge pumps. How did they get there?
The gist of it is this. The county’s annual budget is about $105 million – not even a rounding error for AIG, the Wall Street scoundrels primarily responsible for this global economic meltdown. About 80% of the county budget is for wages and benefits. Of the 1,350 county employees, about 1,000 are unionized.
The union leadership is on the poop deck of this boat and will be giving directions to their helmsman on the bridge. The outside hull on this ship has a $30 million hole in it – that’s the projected deficit. Which course will they decide to take? Accept contract concessions for 2010 or gut the crew? Will the union leadership agree to reasonable wage and benefit adjustments so their members can continue to provide Washtenaw County with services that are desperately needed in this economic storm? Or will they decide that seniority is “all about us leader guys” and throw their younger shipmates over the side?
Their decision will determine what actions the county is forced to take. Personnel cuts will likely eliminate critical services needed by people who are already shortchanged emotionally and economically by this recession.
Once the course is set, there is no turning back.
[Editor's note: County administrator Bob Guenzel is expected to make budget recommendations to the county board of commissioners at their Sept. 16, 2009 meeting. He has said that the extent of cuts to services and jobs will depend in large part on whether unions representing county workers agree to negotiated wage and benefit cuts.]
About the writer: Del Dunbar, a CPA and partner with Dunbar & Martel, has lived in Ann Arbor since the 1960s.
I’d be interested in Del’s scenario for Ann Arbor city.
Nice work, Del. I both enjoyed and was informed by your article.
Seems to me that we need a strategy if the unions choose to take layoffs instead of pay/benefit cuts. The way I see it, the pay/benefit cuts don’t hurt me. The layoffs do. If they choose to protect the current pay package, it seems to me fair that the citizens move to protect themselves and their level of service.
How about outsourcing as an option? Theoretically, we should be able to get the same service at less of a cost (no legacy stuff). What’s your opinion, Del? Is this a viable strategy for rebuilding the service level if the unions choose the “nuclear” option?
Gary, county government, unlike city government, is a fragmented system of authority. The County Administrator acting on behalf of the Commissioners has budget authority over government activities but that is pretty much it. The department heads (the boots on the ground people) are elected positions (Drain, Treasurer, Clerk, Prosecutor, Sheriff, etc) and view themselves as directly accountable to the people. The judges, also elected and for lengthy terms at times view themselves as accountable to no one. Getting these elected officials to outsource union work to the private sector would be like trying to herd cats down to the river.
Ouch! Sounds like the only way is to cut budgets and wait until they die on the vine. Very painful.
A good and sober assessment Del. I’m looking forward to the follow up article with The Solution!
Del…
I usually appreciate your insightful commentary, but here you said a lot without saying much of anything.
I think that you should have indicated that the Unions had renegotiated their contract in 2007 as the whole crisis was beginning to unfold, which the County Administrator has direct control over. I’m not defending the Unions, but a little leadership and foresight would have been useful then…
I realize that criticizing Bob Guenzel is tantamount to treason among County insiders, but I think his managment of the County has contributed mightily to the depth of cuts currently under consideration. While I don’t hold him responsible for the economic crisis, his managment of the County is not above reproach.
He grew the County buracracy, created additional departments and functions with very little regard for the outcomes and maintains very little oversight. The department heads, whether elected or not, run the county like individual fiefdoms.
In a crisis, we tend to focus on the immediate. It would be nice if there were some historical perspective and some lessons so that these draconian cuts could be minimized or avoided in the future.
I wish you would write that column.
Richard, to be fair to all involved (Gunzel, the unions, Del, etc…) no one could have foreseen the debacle that began in the summer of 2008 with Lehman Brothers, and continues today, way back in 2007. Whatever decisions and concessions were made back in 2007 are simply not sufficient given what has occurred since then. More tough decisions still need to be made.
Bob, That would be true if in fact there were cuts or concessions in 2007. The forecast at then was bleak and the administration still saw fit to give generous increases. This administration truly has very little leadership, almost no true oversight, and makes decisions with no apparent regard for the future. This worked well for them for many years when there were double digit increases and the cofers overflowed.
Bob…
I don’t disagree with you regarding 2007, but they did know that the economy had started to go south. They had put in place a hiring freeze in the fourth quarter of 07 just as they were approving the Union contract.
They also were well aware of the closure of Pfizer and the beginnings of the mortgage foreclosure crisis. Despite that, they still continued to projected modest revenue growth through this year. Now I don’t blame Bob Guenzel or the Board for the economic situation, there was enough information available and other counties were already taking steps to prepare for the crisis.
The Board, with a nice assist from the County Manager, delayed action on the budget until after the 08 election. It was very convenient and speaks to the lack of leadership at the County.
A lot of “coulda,” “woulda,” “shoulda” observations. Rather than assigning blame, how about some paths forward. How about prioritizing (e.g., drains first, Sheriff second, etc. Treasurer can belast–their ain’t going to be any money to watch. Seems to me that the only way forward is to cut as deep as needed and let the cards fall.
Thank you Mr. Dunbar for continuing this important discussion regarding the county budget.
The county often goes unnoticed despite the roughly $100 million in local investments we all make through our county government. By leveraging state and federal resources, the county spends roughly twice that amount to fuel our courts, our Sheriff and dozens of lower cost services from recycling programs to Head Start. Indeed, one of the challenges of managing county government is the wide range of services we provide. From mental health services to restaurant inspections, the county performs a diverse and important set of functions for the community.
With that said, I think it is important to let people know that Washtenaw County has been trimming and consolidating certain functions for many years.
We started by focusing on “back office” and administrative functions like IT, HR, facilities and the like. The strategy was twofold. One, since the citizens depend most on direct services, we should cut those last. Two, back office services are the best candidates for consolidation with other local governments. We made a number of significant moves along these lines years ago to prepare for the current downturn. For instance, we eliminated 25% of our IT staff and drastically scaled back technology purchases. We absorbed a number of departments into one “Support Services” department to save on supervision. More recently, we co-located our servers with the City of Ann Arbor and moved to share the cost of network administration staff. Our joint Community Development Office with the City of Ann Arbor is another example of a consolidation that saves administrative costs and therefore pushes more of the resources towards service delivery.
To set the record straight, our workforce at the county has worked with the citizens to accomplish all of this. In the recent past, the unions have taken concessions on health care. The unions have also agreed to contribute more to their retirement costs. In our current contracts, most of the unions agreed to a three year deal with 0%, 0% and 3% wage adjustments over the years 2007-2010.
This contract, with two years of no across the board wage increases for the county workforce, was a very significant way for the union to step up to the hard times we all knew were coming. However, I admit that the magnitude of the decline in property values took me by surprise. I knew it was coming, but I didn’t know it would be so drastic and so prolonged.
Now, we face 2010 with a planned wage increase of 3% and the typical skyrocketing costs for health care and retirement obligations. Coupled with the continued recession, this means trouble for the community – especially those who rely on the county for services.
It isn’t that the unions have made no concessions or that the Board of Commissioners has spent the last years on a spending spree. The reality is much more troubling. We have all been trying to make this county government work for the community – together.
It is my sincere hope that this partnership between the Board of Commissioners and our workforce can continue and that we will all place the citizens first when we look towards the coming years. The Board and the employees all serve the public and we hope to do it well.
Well stated, Mr. Irwin. I certainly don’t hold the county responsible for not predicting the economic collapse of such a magnitude nor do I fault them for not predicting Pfizer, GM, etc. Anyone that says they should have seen this significant a downtown coming is blowing smoke from somewhere. They must have gotten rich playing the flip side of the market if that is the case.
Actually, Michigan has been in a recession since 2007 and there have been a number of books and columnists pointing out weakness in our national economy since 2005. The BOC was informed about the state of Michigan’s finances and the deficit in state payments as early as 2003. I left the BOC at the end of 2004, already the scarred veteran of having to vote over and over again for job and program cuts.
(All that said, I was concerned by the overly optimistic projections by the former budget director, who said “the best predictor of the future is the past”. I think the BOC should have taken a more conservative approach to the housing bubble.)
The County is responsible for many state and federal programs. It has been the invisible government to many because it has been responsible for the actual machinery that runs the system, without too much of the drama. I am very concerned about its continued status. How about life without an Environmental Health/Public Health department when we have more West Nile/Swine Flu….future problems? How to deal with our mentally ill population without CSTS? The Treasurer has been doing a sterling job to prevent people from losing their houses through foreclosure.
I hope that county government, and our well-being as a community, will prevail. “Let the cards fall where they may” is not a responsible approach. We need to focus on vital services and consider what will be essential.
I want to thank Jeff Irwin for his cogent commentary. Also, I would like to remind people that since 2001 Washtenaw County has eliminated about 1000 positions. I would say that we were anticipating as well as we could. As for “taking a more conservative approach to the housing bubble”, I do not recall anyone at the time saying any such thing, including Vivienne Armentrout. Hindsight is easy. Now we are looking at elimination whole programs that provide vital services for the citizens of Washtenaw County. We have already imposed salary and benefit reductions to non-union employees, and Del’s description of the Board and management being in steerage is quite apt.
Leah, Gordon Burger not only said that about using the past as the best predictor of the future repeatedly during every budget review, he wrote it down.
Best wishes to the current BOC. I’m glad I don’t have to make the decisions you do. I’m very sad about the excellent programs being lost.
I referred to “housing bubble” – not “history” – that bubble expression was not used. And, this past year has been the first time that property values have declined since the Great Depression of the 1930′s – that is a lot of history. Increases for 70 years shows a trend.
I, too am very sad about excellent programs being at risk, and we are hoping that we can retain the most vital services for our citizens. Thank you for your good wishes, Vivienne. Having been there, you know it is not an easy task.
No, I didn’t intend to say that the “housing bubble” expression was used at the county in previous years. My syntax must have been confusing. But I think that projections were too optimistic and that this led to overspending in certain areas. Of course, the entire country got ensnared in that illusion so this was hardly a uniquely local phenomenon.
While I appreciate the willingness of the two commissioners to answer some of the questions, I think that my underlying point that the board has showed very little leadership either prior to or following the economic collapse remains valid.
It is true that the board choose to maintain a rosy budget picture until after the 2008 election, so as to avoid having to make painful cuts or to create controversy with the Unions.
Jeff…while I agree that the County has taken steps to consolidate services and departments, these have largely been reactionary. And, the departments were created with very little consideration of fiscal impact and outcomes to county residents. The County has a nearly brand new building that is largely empty, because of the lack of planning and foresight. The building will become a drain on county resources and provide very little in return. This is at a time when the County should be prioritizing its needs, and funding them particularly the Washtenaw Health Plan and mortgage foreclosure crisis intervention. Also…the County took over the Community Development office, not because it made sense fiscally for the County, but because the City of Ann Arbor, which has been forced to cut their budget, needed them too.
The County Manager hired the administrators including Mr. Burger that have made costly mistakes and poorly managed the departments. (Wireless Washtenaw?) Though, I understand that Mr. Guenzel is beyond reproach among the County insiders. He also allows some of the key departments to be run like personal fiefdoms most notably ETCS.
So…while I don’t blame you for the downturn, if past performance is an indicator of future behavior, I have very little confidence that the leadership exists on the Board to make the tough decisions that will help County residents through this mess.