Washtenaw Co. Board Gets Budget Update

Washtenaw County board of commissioners budget working session (June 16,2011): At its June 1, 2011 meeting, county commissioners added five new working sessions to their schedule, all focused on the 2012-2013 budget. The first one was held on Thursday.

County administrator Verna McDaniel updated commissioners on the budget process, including expedited labor negotiations that began formally on June 9. The county has targeted $8 million in concessions from employee compensation and benefits to help address a projected $17.5 million two-year deficit in 2012-2013.

Also in the works are business plans being developed by the managers of each county department – the goal is to get another $8 million in cuts from organizational changes and departmental reductions. Outside agencies – including human services nonprofits – are targeted for $1 million in cuts.

After her presentation, McDaniel fielded questions that covered a range of issues and concerns. She was asked to provide an update on efforts by former county administrator Bob Guenzel and local health care providers to develop a broad-based health care plan for Washtenaw County. She conveyed few details, but noted that the board would be briefed on the plan – called the Washtenaw Health Initiative – at their Sept. 8 working session.

Related to labor issues, commissioner Dan Smith urged the administration to identify potential layoffs as early in the year as possible. Saying that the board was resigned to the fact that there would likely be layoffs – though they hoped to keep them at a minimal level – Smith said it would be better for affected employees to know sooner rather than later, so that they can plan their next moves.

2012-2013 Budget Update: Presentation

The county works on a calendar fiscal year, from Jan. 1 through Dec. 31. The administration and board develop the county’s budget in two-year periods, with adjustments made at the end of the first year for the following year’s budget. They are currently developing the budget for 2012 and 2013.

McDaniel covered much of the same information she’d presented to the board at its May 4 meeting. The projected budget shortfall for the two-year period of 2012-2013 is roughly $17 million, and the changes they’ll make to address that shortfall need to reflect long-term changes in the organization, she said – it’s a new reality. ”This is a call for us to retool Washtenaw County,” she told commissioners.

She reviewed the strategy for dealing with the projected deficit: (1) an $8 million cut in employee compensation and benefits; (2) $8 million in reductions from organizational restructuring; (3) $1 million in cuts to nonprofits and other outside agencies.

When they started the budget planning process, the county’s financial staff had anticipated lower revenues and a higher deficit – closer to $20 million. Under that scenario, the administration’s plan had called for departments to generate $2 million in revenues as well as additional targeted reductions, McDaniel noted. But because revenue projections were later revised – following completion of the county’s annual equalization report, which is the basis for determining the taxable value of property in the county – the administration is no longer asking departments for that $2 million in new revenue, she said.

McDaniel then laid out a budget timeline for the remainder of the 2011 calendar year:

• June-July: Labor negotiations.
• July-August: County board holds working sessions on budget, administration develops draft budget.
• September: Administrator presents draft budget to the board.
• September-October: Board reviews draft budget.
• November: Board adopts budget for 2012-2013.

Decisions are being guided by priorities and principles set by the board, McDaniel said. Priorities are to support programs that: (1) help residents feel safe and secure; (2) address the basic needs of children and families; and (3) increase economic opportunity for residents. Other priorities are to partner with other entities to meet these goals, and to ensure the county’s fiscal responsibility by focusing on long-term institutional stability.

McDaniel also reviewed six principles that the board has identified to guide budget decisions:

1. Impacts and outcomes drive investment priorities.
2. Services are delivered optimally by the right provider – not necessarily by the county.
3. Social and financial returns on investment are calculated, articulated and balanced.
4. Both immediate needs and root causes are strategically addressed.
5. Programs are evidence- and performance-based.
6. Mandates that support outcomes and impacts are better funded.

As an example of service delivery by the “right” provider, McDaniel pointed to the Library for the Blind and Physically Disabled. It was previously run by the county, but was transferred to the Ann Arbor District Library in early 2009 – that was a move that made sense for everyone, McDaniel said, and has resulted in better services for library patrons.

McDaniel next gave an overview of budget-related initiatives that are in progress:

• The merger of the Washtenaw Community Health Organization (WCHO), the Washtenaw Health Plan and the county’s Community Support & Treatment Services (CSTS) department is underway. The WCHO is a partnership between the county and the University of Michigan that provides services for people with developmental disabilities, emotional problems, mental illness or substance abuse. Many of those same services are provided by CSTS. The board was briefed on the merger in September 2010, and will be updated again at its July 7 working session.
• A county building/space plan is being developed in conjunction with the organization’s overall restructuring, McDaniel said, because space needs will likely change. A briefing on the topic is set for the board’s July 21 working session.
• The move of the county’s juvenile court division – from its former Platt Road site to the downtown Ann Arbor courthouse – is complete. The move came in under its $300,000 budget, McDaniel said. It included renovating the second and third floors of the courthouse. Renovation of the courthouse’s first floor isn’t finished, she said – much of the work will be done in-house to keep costs down. [Board members had been briefed on these efforts by Donald Shelton, chief judge of the Washtenew County Trial Court, at their Jan. 19, 2011 meeting.]
• The administration is exploring next steps in moving ahead with collaboration among other local units of government, McDaniel said. The board held a working session on that issue on March 17.
• The board will be asked to give initial approval at its July 6 meeting to a merger of three county departments: the office of community development (OCD), ETCS (the employment training and community services department) and the economic development & energy department. [For details, see Chronicle coverage: "Three County Departments to Merge"] The move is expected to save $500,000 annually, McDaniel said. A final board vote on the merger is set for Aug. 3.
• The Michigan State University Extension program is restructuring statewide – the county is working with MSU on an updated memorandum of understanding regarding the Washtenaw extension services, McDaniel said. MSU has asked the county to indicate what levels of service they’d like, she said – that work is ongoing, and will be presented as part of the draft budget.
• Other ongoing work includes pursuit of new revenue sources and grants, updates on the county’s cash management policy, and a look at revising the policy regarding the county’s cost allocation plan (CAP). [The CAP sets a charge that’s levied on each county unit and designed to cover general costs like administration, technology, building use, and insurance, among other things. It’s intended to reflect the county’s true cost of doing business.] McDaniel said it might be time to “unfreeze” the CAP for the coming budget cycle.

Organizational changes at the departmental levels are being planned, McDaniel told the board. Originally, a target of $8.5 million in total departmental reductions had been set, coupled with a goal of increasing revenues by $2 million. But when the county’s equalization report was released in April, property tax revenues had declined by only 2.7%, rather than the projected drop of 8.5%. This lowered the projected deficit and allowed the county to consider the $2 million revenue increase as completed, she said. The targeted reductions were also lowered to $8 million.

Each department had been provided with a summary of its budget reductions over the past 4-5 years, McDaniel said, including a report on whether the reductions were structural or one-time cuts. The department heads have been given targets for reductions in 2012-2013, and have three weeks to complete a business plan and list of outcomes, as well as an assessment of how their plan will impact FTEs (full-time equivalent employees). It’s possible that some programs will be eliminated. The department heads will then need to work with union leaders to work out details – that’s the heart of the collective bargaining process, she said.

The equalization department has already completed its plan – McDaniel provided a copy to the board. [.pdf of equalization department business plan and "dashboard" metrics]

Another $8 million in cuts is targeted from employee compensation and benefits. That’s “not an easy target to achieve, but that’s what we’re going after,” McDaniel said. Formal negotiations began on June 9, and they’re working in an expedited process with the goal of reaching a deal by July 1. Union leaders have been given sample scenarios that McDaniel said commissioners had vetted in executive session earlier this year. [The scenarios describe different possible ways to address the $8 million in cuts.]

Finally, the administration has set a target of $1 million in cuts to funding for outside agencies over the next two years – currently the county budgets about $3 million annually to nonprofits and other outside agencies, including membership dues to organizations like the Southeast Michigan Council of Governments (SEMCOG).

By way of background, membership/dues for 2011 total $795,551. The highest amount in this category – $500,000 annually – is paid to the Humane Society of Huron Valley. In other categories, an additional $1.46 million in funding is budgeted to human services agencies in 2011, and $660,000 is categorized as “special initiatives” – including $200,000 to the economic development agency Ann Arbor SPARK. [.pdf of 2011 outside agency funding]

A board working session on outside agency funding is set for Sept. 22.

Finally, McDaniel provided a list of topics for budget-related working sessions in the coming months:

• July 7: Updates on the WCHO split from the county, the Western Washtenaw Recycling Authority, and the Ann Arbor Skatepark
• July 21: Head Start
• Aug. 4: Retirement funding, unfunded accrued liabilities, debt, and time owed to employees
• Aug. 18: County building/space plan, county/city of Ann Arbor dispatch consolidation
• Sept. 9: Health care reform, tax increment financing (TIF)

The remainder of scheduled working sessions for September, October and November will be budget-related, but specific topics have not been identified at this point.

McDaniel emphasized the need to be nimble and responsive in this process, and said that with the board’s direction and support, the administration can be successful in addressing the projected budget deficit.

2012-2013 Budget Update: Commissioner Questions, Comments

Conan Smith began by complimenting the new business plan that departments will be completing, saying the format made the information much more accessible.

2012-2013 Budget Update: Juvenile Detention

C. Smith then asked McDaniel to talk more about plans for the county’s juvenile detention program.

McDaniel reported that several meetings have been held regarding juvenile detention services and facilities – the group at the table includes representatives from the Washtenaw Trial Court and District Court; sheriff Jerry Clayton; Lisa Greco, director of the county children’s services department; and county commissioner Barbara Bergman, among others. The discussions have been robust, McDaniel said, focusing on whether to continue services at the juvenile detention center, or to move to an outplacement model.

Greco is drafting a report with recommendations, which will be given to the board later this year, McDaniel said. The group has decided it wouldn’t be prudent to close the center, she added, saying they’d just be shooting themselves in the foot. Instead, they are working on other strategies related to court sentencing, and possibly transferring some of the younger jail inmates to the 40-bed juvenile detention facility, to abate jail overcrowding.

Bergman noted that the facility is also being used as more of a community center – details about that will be included in Greco’s report.

2012-2013 Budget Update: Revenues, FTEs

Kristin Judge referred to a point that McDaniel made about completing the $2 million in revenue generation. Judge said she was uncomfortable with stating that it’s done, and noted that she’d made this point before.

From The Chronicle’s report of the board’s May 4, 2011 meeting:

Kristin Judge also weighed in against taking new revenue generation off the table. She reported that Macomb County has hired a grant writer who’ll be paid only based on the grants that person is able to bring in to the county. [Judge later learned that the grant writer hadn't been hired for Macomb County.] There’s revenue to be had from aggressively seeking grants, she said. If they take revenue generation off the table because there’s some good news in the short term, they’re missing the long-term view.

At the budget working session, Judge reiterated her concerns, and asked McDaniel to convey to department heads that they need to be continually seeking ways to raise revenue. ”Don’t take that off the table, please.”

Judge also asked if the administration was on track to give the board an update about the number of county FTEs (full-time equivalent employees). Such updates had been requested every six months, she said, and the next one is due July 1. McDaniel said she’d remind Diane Heidt, the county’s human resources and labor relations director, about the report.

Later in the meeting, Wes Prater asked for more details about the budget’s targeted revenue number – what was the administration expecting for 2012? McDaniel said that for the current year, the county’s total general fund revenues are about $99 million, including $61 million in property taxes. They’re anticipating a 5% decline for 2012 – so revenues will likely total $94 million in the 2012 budget, she said.

Prater clarified that the board would be seeing a draft budget for 2012-2013 in September. He asked that it also include audited financials from 2010, as well as estimated actual revenues/expenses from 2011.

2012-2013 Budget Update: Courts

Alicia Ping thanked McDaniel for a private tutorial she’d given Ping on budget issues – as a new commissioner, it had been extremely helpful. [Ping was first elected in November 2010 and took office in January 2011. Other commissioners elected to their first terms are Yousef Rabhi, Dan Smith and Rob Turner.] Ping noted that they were already looking ahead to 2013-2014, and specifically at costs associated with courts and the jail. Those are two pieces of the same pie, she said.

Ping related an anecdote that her husband, an attorney, had conveyed: A man had been given a jail sentence and a $1,000 fine, but told the court he didn’t have the money to pay; the judge said that would extend his sentence. Ping pointed out that in this case, the county not only didn’t get revenue from the fine, but it also incurred more expense by keeping the man in jail longer. Is there a solution to this? she asked. Are the courts working to address this issue?

McDaniel reported that the county’s criminal justice collaborative council (CJCC) – a group of elected and appointed representatives working in the criminal justice system – had developed a jail management plan, which in part addressed the situation that Ping described. McDaniel said she’s also been talking personally with court administrators and judges, and knows that they’re working aggressively to collect fines. In some cases, they’re using collection agencies – they know that those revenues are needed to keep the courts functional, she said. Revenues have dropped sharply for all the courts over the last three years, she said.

Turner said he’d met with Kirk Tabbey, the judge who presides over the 14A-2 District Court in Ypsilanti. It’s routine for people to tell the court they have no money, Turner said. Now, a new program is researching financial records, and finding that in fact many people do have the ability to pay. Once people are confronted, Turner said, they usually agree to pay the fines.

Bergman, who’s a member of CJCC and the community corrections advisory board, said the community corrections staff is working on that issue, too. It might be time to consider a work release program, she said – people could go to their jobs during the day, and return to jail at night and on the weekends. ”It may not happen immediately, but it’s certainly in the thinking stages,” she said.

Bergman also criticized the state Dept. of Corrections, saying it didn’t provide enough funding for the Michigan Prisoner ReEntry Initiative (MPRI), a program to help prisoners transition back to the community. [For background, see Chronicle coverage: "Panel: MPRI Transforming State Corrections"]

2012-2013 Budget Update: Principles

Turner asked McDaniel what kind of feedback she was hearing about the budget principles that the board had developed. McDaniel said the other elected officials she’d met with were pleased with the board’s principles and priorities. [Other elected county officials include sheriff Jerry Clayton, prosecuting attorney Brian Mackie, treasurer Catherine McClary, clerk Larry Kestenbaum, and water resources commissioner Janis Bobrin.] Kelly Belknap, the county’s interim deputy administrator, has met with appointed officials about the budget plans, and those meetings also have been positive, she said.

Turner confirmed that it would be worth developing budget principles and priorities in future years as well.

2012-2013 Budget Update: Future Challenges

Leah Gunn pointed out that in the future, the county – like other local governments in Michigan – will face two major challenges. First, as of Oct. 1, 2011, people who’ve been receiving Temporary Assistance for Needy Families (TANF) will be cut off from funding, if they’ve been getting it for the past four years. [This change would occur assuming the current proposed budget for the state is passed. Its fiscal year begins Oct. 1.] This change will be a major challenge for local communities, Gunn said, as families turn to other resources for help, including many of the services that the county provides. This has been a safety net, she said, and it will no longer exist.

Secondly, the county’s state revenue-sharing trust fund will be depleted, Gunn noted, and she doesn’t expect there will be more funds forthcoming from the state. The county needs to plan for both of these challenges, she concluded. ”The economy may recover, but things are not looking good.”

Bergman also expressed concern regarding the housing market, and the number of people facing foreclosure. She said she didn’t really know how the county could prepare for this “perfect storm.” ”To me it becomes daily more scary,” she added.

Bergman then noted that former county administrator Bob Guenzel is working on a plan to bring broader health care coverage to Washtenaw County. She asked McDaniel for an update.

McDaniel reported that Guenzel is working with Ellen Rabinowitz, executive director of the Washtenaw Health Plan; Doug Strong, CEO of the University of Michigan Hospitals and Health Centers; executives of St. Joseph Mercy Hospital and others to prepare for federal health care reforms – specifically, the Affordable Care Act – that take effect in 2014 and that will expand Medicaid significantly. It’s a systemwide approach, she said, and the board would be briefed on details at their Sept. 8 working session.

Rabinowitz later told The Chronicle that the collaboration is called the Washtenaw Health Initiative and is being led by Guenzel and Norm Herbert, a retired UM finance executive who’s active on several community boards. She said a July 7 press conference is being planned to reveal additional details.

According to the group’s website, the initiative is “a voluntary, county-wide collaboration focused on how to improve access to coordinated care for the low income, uninsured, and Medicaid populations. The work of this group is on both how to improve care today for these priority populations and on 2014, when federal health care reform is expected to be more fully implemented.” The effort is exploring how to deliver primary care, mental health care, substance abuse services and dental care.

2012-2013 Budget Update: Handling Layoffs

Dan Smith asked when the board would see the results of structural changes that the administration is planning. He said the commissioners have all resigned themselves to the fact that there will probably be layoffs at some point, though they hope there will be as few layoffs as possible. His own workplace had layoffs in 2009, he said – one wave in June, and another in January. The people laid off in June were at least able to enjoy the summer and regroup. He hoped the county could let employees know as soon as possible if they are going to be let go, rather than to do it during the holidays late in the year.

McDaniel told the board that expedited negotiations with labor unions are intended to push the budget process ahead as quickly as possible. It’s complicated, she said, because there are 17 bargaining units representing county employees. The administration won’t know the full impact of restructuring until multiple pieces are in place, including labor concessions and departmental reductions. She also noted that they’re not just focused on FTEs. They’re looking at program changes and enhanced services in some areas too, as part of the restructuring.

D. Smith confirmed with McDaniel that the impact of restructuring won’t likely be known until the fall.

Present: Barbara Levin Bergman, Leah Gunn, Kristin Judge, Ronnie Peterson, Alicia Ping, Wes Prater, Yousef Rabhi, Rolland Sizemore Jr., Conan Smith, and Dan Smith. Rob Turner was absent for most of the meeting, arriving after the start of the board’s executive session.

Next regular board meeting: Wednesday, July 6, 2011 at 6:30 p.m. at the county administration building, 220 N. Main St. The Ways & Means Committee meets first, followed immediately by the regular board meeting. [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 comment sessions are held at the beginning and end of each meeting.

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