Fat Tuesday Budget Buster
It’s only fitting that after years of rampant and wildly misguided spending, the Mecklenburg Board of County Commissioners got its first look at budget projections for the coming fiscal year during a meeting that was held last month on Fat Tuesday.
That’s when commissioners learned the county faces a financial shortfall of at least $15.9 million, and potentially upwards of $63 million, according to preliminary forecasts from Budget Director Hyong Yi.
At first blush, the situation sounds dire enough to stop even the heartiest of Mardi Gras lovers dead in their partying tracks, with images of self-imposed austerity looming on the near horizon. A closer examination of the numbers reveals that there’s still plenty of Fat Tuesday pork left on the budget bone.
Even the most calamitous of scenarios, which projects a chasm of $62.8 million, could be resolved if the county cut less than 5 percent of its massive $1.4-billion budget.
With families across Mecklenburg County facing economic hardships of their own, how many have had to cut 5 percent, 10 percent, even 20 to 30 percent of their household budgets, and how many have done so to weather the current financial storm, albeit perhaps without niceties like premium packages for cable TV or 52-inch plasma screens?
Mecklenburg County GovCo? The current budget doles out $428,000 for Arts & Science Council diversity grants; $244,000 for outdoor pools; $1.1 million for indoor pools; and $70,000 for a Community Building Initiative. Then there’s the $665,000 to fund seven full-time positions in the county’s Department of Public Information.
Here’s some public information for you: The county ranks its programs and initiatives on a scale of priority levels. The cost of funding programs ranked near the bottom of the heap, the two lowest priority levels, totals $14.5 million. Toss in the three lowest priority levels and the total jumps to $20 million. That’s $20 million for what even county officials rank as low-level “priorities” – you know, things like $50,000 for the Center for Community Transitions; $90,000 for the Empowered Youth Initiative; $106,000 for horticulture/cooperative extension; $139,000 for grant development; $95,000 for the Latin American Coalition; and $368,000 for the ASC’s Arts Teach program.
The so-called “zero growth” budget scenario presented to commissioners, which includes flat revenues, predicts a gap of $15.9 million, and would require just north of a 1 percent cut to the county’s current budget to bridge. That’s less than the total cost of the programs and initiatives lumped into the county’s three lowest-priority categories.
Another scenario, which shows revenues falling by $20 million and county investment income dipping by $3.5 million, would leave the county facing a shortfall of $39.4 million, or less than a whopping 3 percent of the county’s total current budget.
Given the early budget projections, County Manager Harry Jones opined that the county would need a “redefinition of how we provide services.” One can only assume the new definition won’t include forking over $254,000 to a nebulous entity like the Centralina Council of Government.
The worst-case budget scenario yields a shortfall approaching $63 million and would likely stymie any significant capital projects. Under that scenario, the county’s appropriated fund balance would plummet $46 million and its general debt service would climb nearly $23 million.
Yi stressed that all three scenarios were based on preliminary estimates, and none included potential budget bumpers such as increased funding requests from Charlotte-Mecklenburg Schools or Central Piedmont Community College. Additional costs associated with any new state and federal mandates were also not factored into the projections.
Looking forward, Yi said, the county could find itself having to reevaluate how it manages for capital projects. The county currently funnels 50 percent of its excess fund balance, along with 3 cents on the tax rate, into pay-as-you-go capital projects (PayGo), which reduces the need to borrow money to build shiny new things and, in turn, reduces debt service.
It’s a strategy that works nicely if the economy is booming and revenues are filling county coffers, generating money to help fund operating expenses of new facilities. The strategy flounders, however, in a weak economy. Fifty percent of the fund balance pie still feeds PayGo, but lacking an influx of fresh revenue, funding that’s needed to operate new facilities evaporates and costs must be absorbed in existing budgets.
If the county sticks with its current capital management strategy amidst a stagnant economy that produces flat or falling revenues, it could find itself facing the option of either significantly reducing its borrowing and scaling back its capital plans, or building new facilities that it won’t have the revenue to open and operate.
“The policies that work in a growing economy,” Yi said, “don’t work as well in a shrinking economy.”
Fat Tuesday is done and gone, folks. Time to sober up. A good place to start would be a commitment from county commissioners to rein in excessive spending on low priorities, what Jones called low-hanging fruit, while immediately nipping any talk of a tax hike in the bud.
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