Budget Update Remarks
Madame Chair; members of the Commission, thank you for the chance to officially share an update with respect to the budget and our efforts to address the current shortfall.
How We Got Here
As you are keenly aware, the issue at hand is the budgetary shortfall that has been projected for 2008-2009. At the beginning of the budget process, a 10 million dollar "hole" was identified with subsequent projected additions lifting that 10 million dollar outlook to 14 million, 17 million and finally 29 million dollars if we included new items.
My presentation today is to offer updates of our progress in cutting and making necessary adjustments to address this serious budgetary gap. In short, with an overview I will provide and the more detailed accounts that will come later, we can present you today with a zero-balance budget - - the steps that have been made and the actions that must be taken to achieve it.
Budget without Increasing Taxes/No Help from Nashville
Before listing our work, I feel it necessary to reiterate that our overriding theme has been to make every effort to address this financial gap without a property tax increase. As you know, this process is fraught with challenges for now and the future given that we are already overly dependent on the property tax to fund the operations of county government. Additionally, our recent bid for an alternative revenue source was shot down by the state legislature. Once again, no relief will be coming from Nashville.
Property Tax Receipts Flat for Now
There is, however, good news to report. We have received the certified roll from the Assessor of Property which reveals that property tax receipts will at worst be flat. As was originally shared with the Commission, we conservatively estimated a 1 percent reduction in this revenue stream which equaled out to 5 million dollars. To be candid, one of our most troubling uncertainties was the impact the ongoing housing and foreclosure crisis would have on property tax receipts locally. We are not out of the woods on this issue by any means especially with the coming year. However, we seem to have at least temporarily dodged a bullet so to speak.
Focus on Employees
As we discuss cuts and adjustments, there is an obvious need to focus on employees. As you know, 70 percent of our costs are related to personnel. I do realize that some individuals in the community hear this percentage and immediately say that we are overstaffed in the ranks of personnel and that we have to shrink government. I would agree with the need to shrink government and make us more finely tuned. But we must not, in so doing, undercut the fundamental need for employees. Those who embrace the precept of government being "of the people, by the people and for the people" must recognize that it is administered "with the people." We are no more than static policies and rules if we do not have the delivery system afforded us by competent and committed "people" working for Shelby County Government.
This process is difficult. Given the constraints within which we are forced to operate, layoffs will be unavoidable. To minimize layoffs, however, we are still assessing the effect of the previously discussed buyouts of employees. With the serious inquiries we've received, the final impact of buyouts could be savings of 2 million dollars or more. Additional savings could be realized as a result of the hiring freeze that should be implemented immediately. Of course these cuts and vacated positions do not occur in a vacuum. At some point, we will have to assess precisely what effect overall cuts including layoffs, vacated positions, unfilled vacancies, position eliminations are having on the essential services we are bound to deliver to our citizens. In this connection, I must warn that the effects will not be felt immediately. This is troublesome in that if we are not vigilant, the service impact will not be detected until costly steps are required to reverse negative consequences. It is for this reason that I will also submit to you a mechanism for an ongoing assessment of our ability to satisfy our citizens' minimal service needs.
We are also studying a leave policy that is equitable and that, as a primary objective, will institute changes without erasing previously accumulated leave by employees. In this construct, present employees will still be able to receive sick leave payouts in line with current practice at the time of their retirement. However, future employees will no longer be eligible to receive this payment upon retirement for unused leave time.
Working with Sheriff and Other Elected Officials
An unfortunate consequence of finding 29 million dollars of the General Fund to cut is that the majority of services within this range fall within law enforcement or health services.
We are working closely with the health department, which as you know is jointly governed by Memphis and Shelby County, to ensure that an appropriate balance is struck between austerity and the health of our citizens. I might also report that pursuant to the recommendations of the MED Blue Ribbon Committee, we remain in active pursuit of a partnership that will ensure The MED's stability into the future.
We are also working closely with the Sheriff. Regarding cuts, there is a preliminary amount of 4 million dollars that he has put on the table for discussion. I will add that the experts engaged to assess our immediate and long term jail needs, while not identifying any immediate capital expenditures that will impact this budget, have recommended new spending of approximately 2 million dollars. This amount will better enable us to manage our jail population in the present structure and will give us a brief respite from beginning actual pursuit of capital dollars for a new facility. In light of this, we are continuing our discussions with the Sheriff to find additional savings. This effort to trim expenses may in fact be helped by recent trends in staffing needs.
We have been in talks with other elected officials as well. Unfortunately not all elected officials have found a way to cut their budgets. It is, however, imperative that all offices participate in this process, and I encourage you to monitor these situations closely.
Of the 29 million dollars we are focused upon, 6 million dollars is not included in your proposed budget but are increases requested over current service levels. On a per request basis, you will have the opportunity to accept or reject the increases sought. However, I must caution that any new increases will deal a serious blow to our overall budget balancing efforts.
2010 Budget Looms Large
In rounding out these steps toward a balanced budget, it is worth reiterating that the budget I have been discussing is solely for 2008-2009. It does nothing to deal with the looming forecast for 2010. In addition to working off the new appraisals in 2010, I see nothing on the horizon that indicates we will be pulling out of what I believe to be a recession. While it may not be your will or within your ability to adopt a 2 year budget, we ask that you, in deliberating on the current budget, give serious consideration to what stands before us in the 2009-2010 budget.
Future Revenue Needs for Shelby County Government
With the intense focus on efficiencies since my election to office and all of the good work we have shared in the way of streamlining government, the reality is that the financial problems we are experiencing will reoccur despite our best efforts if we do not make some more substantial changes in how we are funded. I have said for the longest time that we can not cut our way out of our financial dilemmas. Our presentation of a road to a balanced budget today does not contradict this statement. In fact, devoid of a change in how county government is funded, Shelby County's future financial woes will be Exhibit A in proving this point; namely, we can not cut our way out of our problems.
It is against this backdrop that I will be presenting for your consideration a resolution creating a Committee on Future Revenue Needs for Shelby County Government. The resolution will call on the Budget Chair of the Commission; other county, state and municipal officials; and representatives from a number of sectors including but not limited to the 1) Municipal Bonding and Finance 2) Tennessee County Services Association 3) Banking and Finance 4) Human Services Providers and 5) Civic Organizations 6) Education representatives and 7) the Local Business Community.
We will charge this committee with returning findings within a short (120 day) window to allow us to utilize their findings as a part of our fiscal plans for 2009-2010. I strongly believe that the involvement of the private sector will give a more universal acceptability to arguments regarding the course Shelby County must take to better balance services with available resources.
Short Term Focus to Long Term Gains
While I realize that our attention at this time is focused mainly on completing a budget for fiscal year 2008/2009, I would be remiss if I did not call your attention to a few topics which must be addressed in the short term. While my term is approaching an end, I am asking you to work with me on the following subjects beginning immediately.
First, in an effort to assure the public that we are spending our present dollars as efficiently as possible, we must bring about radical change in the way that we fund the capital needs of our schools. We have made great progress by way of the Needs Assessment Committee. However, that process depends to a large extent upon the volunteer participation of the school systems. In an ideal world, volunteer participation would work. We must be candid, however, and admit that we do not live in an ideal world, but a highly political world. It is past the time that this body exerts its just prerogatives and insists that the school systems work together when it comes to capital expenditures. I have long been an advocate of the formation of a Joint Board of Control as permitted by Tennessee law that would allow us to address school needs strictly on a "what is needed" basis and not a mechanical formula. We seem to forget that the much heralded "three for one" formula came only as a result of legislative inaction and is not a part of a generic law of the State of Tennessee. The Joint Board of Control concept has been on the books for many years and is ideally suited for jurisdiction such as ours that have more than one school system.
We already have a ruling from the State Attorney General that we do not have to honor the mechanical "three for one" formula if we have a method that ensures the needs are met without any discrimination and arbitrary considerations. I will deliver to you under separate cover materials we have developed on that concept.
Secondly, we must intensify our efforts to find a viable methodology for operating the MED. As we have advised you by way of earlier communications, the MED, in its present mode of operation simply is not viable. If you share the belief, as I do, that it is not a question of whether we will have some form of universal health care but what form, we should work for the day that most, if not all, medical/health care consumers will have choices. It behooves us to place the MED in a position of being a hospital of choice and not of last resort. We can not do that if the MED continues to be known only as a "safety net" hospital where you go when you can't go anywhere else. We are currently in negotiations to that end and contemplate asking your support for some type of partnership arrangement in the near future.
We must also completely change our current methods of seeking enhanced economic and job development. The incremental will not work. We must pursue something revolutionary. For example, an example only, I ask the question whether we should give consideration to bond financing of the development of industrial parks or research campuses which would allow us to offer something other than payment in lieu of taxes, (PILOTs). I ask this by example and by example only. The bottom line is that in order for us to gain and retain the attention of the world, we must make a splash and not a sprinkle.
Finally, the day when a highly urban government can operate on property taxes alone is way past. The County Powers Relief Act legislation calls for a study to be conducted in 2010 to determine whether there is a need for diversified revenue base for our county. We should take the lead in that effort as we have been the hardest hit by our presently constrained revenue sources.
A Balanced Budget
As you will see in further detail, layoffs; new employment policies; an extended hiring freeze; employee buyouts; no funding for expanded services; deep cuts and job eliminations in law enforcement and the administration; and our continued focus on streamlining services are a part of the roadmap to the balanced budget we're presenting today.
However, this short term, painstaking accomplishment can not lull us into thinking that we have fixed the real long term problems. Given our overdependence on the property tax; no new revenue streams; a lack of autonomy for the county; and a restrictive governance structure, you know as well as I do that our best efforts this year fail to address the systemic issues that will continue to perplex future Mayors and legislative bodies for the county.
Thank you for this opportunity.
