The Budget and Finance Committee conducted a work session on Tuesday, May 28, 2019, at the Smith County Chamber of Commerce.
All Smith County Commissioners and all county department heads were invited and encouraged to attend.
The purpose of the work session was to discuss options that would allow the committee to pass a budget for the upcoming fiscal year.
The county’s financial strain was recently brought to light when county officials realized that projected budget numbers were not matching up with the county’s actual fund balance.
The Budget and Finance Committee revealed that the county could be nearly $900,000 in the red by the end of the next budget year if no action was taken.
As it turns out, this deficit was a few years in the making.
Ben Rogers, a representative from the statewide County Technical Assistance Service (CTAS), was invited to the budget work session to address the County Commission and field questions about the county’s situation.
Rogers reviewed audit numbers from the past two budget years, 2017 and 2018, in order to explain how the county landed in this position.
Complete numbers from previous Smith County audits can be found on the state Comptroller’s website. You can view them by clicking here.
The numbers show that the county has been over-budgeting revenue and under-budgeting expenses for several years, leading to a deficit in funds.
For example, in 2018 a budget was passed estimating that the county would bring in $1,514,025 in patient charges related to ambulance calls in the county. In reality, the county collected $1,056,408 in ambulance service revenues, amounting to an over-estimation of more than $450,000.
Similarly, in 2018 the county set the budget based on a predicted $1,097,450 to be collected from state prisoner boarding. In reality, the county collected $1,062,761 in revenue, amounting to a difference in just under $35,000.
This difference is much smaller than the $450,000 deficit, but several such differences throughout the budget add up.
Additionally, these revenue numbers remained over-estimated when the county set the 2018-2019 fiscal year budget, leading to additional deficits that accumulated this past budget year.
Therefore, if nothing changes, the county will begin the new budget year with approximately $20,000 in the county’s general fund.
To address this cash flow problem, the options, as Rogers put simply, are for the county to cut expenditures and/or raise revenue.
The Budget and Finance Committee has made approximately $1 million worth of cuts in the existing budget, but some source of raised revenue is necessary to adequately address the problem the county is facing.
Some options to raise revenue are through property, sales, and wheel taxes.
The $50 wheel tax and 3/4 cent sales tax in Smith County were recently removed, but those taxes were being used to fund the county’s Education Debt service for the expansive school remodeling project started in the early 2000s. That debt will be paid as of June 30.
Since both taxes were passed by referendum, the County Commission does not have the authority to redirect those funds to use the money for anything other than what was specified at the time of voting.
Therefore, by law, the County Commission by itself only has control of the property tax rate.
The addition of a wheel tax or a sales tax must be passed through referendum (i.e. public vote). This process takes time, and the county would be unable to pass a new wheel tax or a sales tax before the budget for the upcoming year must be balanced. This deadline is at the end of August.
In short, the county needs an immediate solution. The Budget and Finance Committee views the wheel tax and sales tax as long-term options to possibly be pursued in the future.
During Tuesday night’s work session, Budget and Finance Chairman Joey Nixon presented three options as potential, immediate solutions to the county’s financial problems. Nixon described these as “two bad options and a horrible option.”
- Option A: a large property tax increase
- Option B: 25% cuts across the board for county departments
- Option C: do nothing and let the state take over the operation of Smith County government
Concerning Option A, the Budget and Finance Committee feels that it would take no less than a 59 cent property tax increase in order to generate the necessary revenue.
At the work session, the committee opened the floor to various county department heads to speak about how a potential 25% cut would affect their day-to-day operations.
These department heads painted a bleak picture; the proposed cuts would likely mean laying off many employees, closing the county Fitness Center and Senior Center, shutting the doors of one of the county’s three ambulance stations, and even closing the county jail.
If the County Commission cannot make a decision and balance the county’s budget, the Commission will risk the state forcing Option C. In that case, the state Comptroller’s office would control all decisions about budget cuts, as well as set the property tax rate in the county.
Commissioners viewed the third option as the worst-case scenario. Ben Rogers told the Commission that, in his opinion, to do nothing was to divert their responsibility as elected officials.
You can watch the full Budget and Finance work session below.
https://www.youtube.com/watch?v=TAlcgMCczdA&feature=youtu.be
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