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County to make more spending cuts
Kent County Fiscal Services Director Steven Duarte told members of the Finance Committee last week that expenses to the county’s general operating fund will have to be trimmed by roughly $6 million by 2015 to balance those budgets between now and then, and he wants most of those cuts to be made to the 2012 spending plan.
“We believe the cumulative eliminations will have to be $5 million to $6 million in changes. We’ll have to make cuts of about 3 percent,” said Duarte. “The majority would have to be cut in 2012. For me, the best thing to do is to deal with it in one year.”
Duarte suggested that the committee consider reducing spending by $5.2 million for the 2012 fiscal year, then cut roughly $600,000 for 2013 and the rest for 2014. The preliminary 2012 operating budget has expenditures of $165 million that he wants lowered to $159 million to match his revenue projection, and he would like to see this done by the time the new fiscal year begins Jan. 1.
Duarte said the reductions are necessary because the state is all but certain to cut statutory revenue sharing to all counties by 31 percent, which should kick in Oct. 1. The county stands to lose $4.1 million next year in revenue from the state for the 2012 budget.
“I don’t see the state giving us our revenue sharing back. If they cut anything else, we’ll come back and talk to you about it,” said Duarte to the committee.
Another reduction being bantered about in Lansing would also impact revenue to the county. “They’re also talking about a personal-property tax elimination, and that’s a $7.5 million cut,” said Daryl Delabbio, county administrator and controller. Erasing the personal-property tax is expected to be discussed in the fall; the tax plan the state House recently passed didn’t mention the tax.
Duarte reminded the committee that the county can use up to $2 million of its fund balance to fill any budget holes. But he said he preferred they not do that because the county’s cash balance is dwindling. The balance stood at $45.1 million March 31, the end of the first quarter. A year ago, it was $14 million higher at $59.2 million.
The county now has enough cash to cover 72 days of operation, compared to 97 days a year ago. Kent began dipping into its cash balance in January, while last year that didn’t happen until April.
“Our cash continues to decline,” he said. “It’s as drastic as it appears.”
A big reason the cash balance is lower is because the county has to front some expenses the state is responsible for locally and then wait for Lansing to make good on those dollars. For instance, the county funded the state’s share of its childcare budget in October and received the state’s payment six months later, and without any interest. “The state pays us on its timeframe. It’s the same for every county,” said Delabbio.
The committee also heard last week from Cathy Raevsky, administrative health officer for the Kent County Health Department. She said Michigan lawmakers are looking at cutting state funding of local departments by 10 percent, which would mean a $200,000 reduction in her next budget. Raevsky said her department has had to raise service fees, such as for restaurant inspections, and has had to lessen the number of clinics it operates.
Raevsky thought the Great Recession would reduce the number of restaurants her office would have to inspect, but the opposite is true. “We’ve seen an 11 percent increase in restaurants,” she said. She said she understood that higher inspection fees might make life more difficult for some restaurant owners, but she doesn’t want county taxpayers subsidizing the food-service industry.
Assistant County Administrator Wayman Britt told the committee that the state isn’t providing the funding it should for the health department. “It’s a very difficult balancing act,” he said.
Revenue to the Lodging Excise Tax fund was up by 35 percent to nearly $853,000 at the end of the first quarter over the same period last year, as collections increased and the hotel-motel occupancy rate went up. Commissioner Dick Vander Molen asked for a list of the operators that are behind in their tax payments. He also requested a list of how many events held at DeVos Place convention center actually result in hotel reservations.
The 5 percent lodging excise tax pays for the building’s construction bond, which is $5.6 million this year. The county has subsidized the fund with $2.1 million this year from general operations. Last year, that subsidy was $1.5 million.
“The next few years aren’t going to be fun,” said Vander Molen.
“We have to be flexible and conservative in dealing with this stuff,” added Commissioner Jack Boelema. “If this were my checkbook, I would spend conservatively.”