As New Castle County’s economic recovery is slow to recreate lost jobs, and the sluggish real estate market is limiting transfer tax revenue, County Executive Paul Clark is preparing a budget for fiscal year 2012 that is full of cost cutting measures.
Clark’s description of the county’s budget situation is simple. “We spend more than we bring in.”
Solving that problem is much more complex, and Clark has enacted some solutions he believes can help in advance of his budget address before New Castle County Council March 22.
Over the past 5 weeks Clark has rolled out a series of what he calls “austerity measures” that are meant to pare down the $5 million revenue shortfall in the current budget. New Castle County faces an estimated $10 million budget shortfall next year.
“We need to pull [county spending] in quickly,” Clark said. “Our plan, and it is a good plan, was to slowly use the reserve until the economy came around. My job now is to stretch [the reserve] as far as we can.”
The county’s cash reserve is expected to be $44 million at the end of the current fiscal year.
Many of Clark’s austerity measures did not require council approval and went into effect immediately. “Why wait until the budget? If we can start to save now, it helps us for the next year.” said Clark.
Clark has eliminated $112,000 from the executive budget that was slated to pay a lobbyist to represent the county’s interests in Washington. He also halted more than $45,000 that his office granted to nonprofits and community organizations.
Clark has also directed managers of county departments to trim their budgets by a collective $1 million by June 30, the end of the fiscal year. He says they have already found $1.4 million in savings by lowering the employee mileage reimbursement rate, reducing telephone, utility and postage costs and cutting back on replacing computers. And Clark says many of the savings found in individual departments are not one time cuts that will reappear following the current fiscal year.
“If we didn’t need it this year, we probably don’t need it next year,” said Clark.
New Castle Co. budget debate
New Castle County Executive Paul Clark (D) interview excerpts
The spending cuts have received some favorable reviews from New Castle County Council members.
“The small change grows into the bigger [dollar] bills,” says Councilman George Smiley (D).
“I think anytime we can have cost savings by examining how we’re doing things, making some minor administrative changes, saving on supplies, reduce, reuse, recycle, that’s great. And I applaud all of those efforts.” says County Council President Tom Kovach (R).
But Kovach wants the county to go further. Kovach advocates changing the salary structure for incoming county workers. He also sees savings coming from consolidating functions duplicated by various agencies. He cites code enforcement as an example. Kovach says three agencies currently have code enforcement officers. He believes one code enforcement department could be more efficient and perhaps allow the county to shrink its workforce over time.
“When you are running out of reserves very quickly like we are,” says Kovach, “You must immediately put into place tough measures.
Clark is examining changes to the county’s two pension plans. One plan allows employees to contribute three percent of their salary; the other allows employees to put in five percent. Legislation is planned to freeze enrollment in the five percent pension plan. Clark expects that move to save taxpayers nearly a million dollars over the next ten years.
Councilman Smiley says the pension freeze is an idea that’s been around since 2006. “It came out of the financial task force, the advisory task force. That was one of their recommendations”
Clarke’s proposal to close the County’s five percent pension plan to new hires is largely supported by union officials representing county workers, although Richard Krett, president AFSCME Local 3109 representing the county’s professional and management employees, has some concerns.
Krett says the freeze could affect the long-term viability of the five-percent pension plan, leaving the county in a tougher spot down the road when it comes to funding the program. Krett also wonders if the pension freeze is enough.
“They’re basing the savings on hiring 25 new people each year for ten years. If these are really hard economic times, why are you hiring?” asks Krett. “There should be an across the board hiring freeze if you’re looking to save so much money.”
Clark says a hiring freeze is not a realistic approach as older county workers in specialized positions retire. ”If I need a mechanic, I need a mechanic. I can’t take a typist. A paramedic, a police officer—there’s going to be a need to bring people [with those skills] in the door.”
Clark realizes the county faces potentially contentious negotiations with its unions as current contracts expire. The unions have each agreed in recent years to five percent salary rollbacks to avoid layoffs.
New Castle County Council president Kovach believes those rollbacks need to continue. “I will be very disappointed if we hear anything but a continuation of the current (salary) rollbacks in the County Executive’s budget,” said Kovach.
But Clark sees room for negotiation.
“I think we can put together a package that will make them closer to whole, but there’s still going to have to be something in the package, benefits or something, that helps bring that [budget] gap down going forward,” said Clark.
Additionally, Clark is willing to look at other alternatives to help county workers, if county finances improve.
“I’m also trying to create a bonus program,” said Clark. “If we can save a certain amount of money, I might put it back on the table for them in the form of a one-time bonus.”
Clark says there are other proposals still being worked on as his team drafts its 2012 budget. “We’re still looking at things,” Clark noted.
And council members are ready to add their two cents during budget hearings that follow Clark’s budget speech next week.
For instance, Smiley says improving county finances means being realistic about the county’s main source of revenue – the real estate transfer tax. That starts by being conservative in estimating the revenue it will provide.
“We need to find that rock bottom [transfer tax revenue projection] – one we know we can rely on,” said Smiley. “You can build that into a budget for the future. Above that [projection], you have to take those funds and retire your debt ratio, fund one time improvements.”
Smiley also wants to see a distinct strategy put in place to ensure the government is building its reserves, not draining them.
“Our goal is to get the county government back to sustainability, to where revenue in matches money going out,” Smiley said. “We get all the austerity measures in place, we get our fiscal house in order. And one of the biggest pieces to the puzzle, we get state approval for new revenue streams, and the economy gets on the uptick.”
New Castle Co. budget debate
New Castle County Councilman George Smiley (D-7th District) & Council President Tom Kovach (R)
Kovach agrees council and the county executive have to tackle New Castle County’s budget issues head on.
“We can’t afford to kick the can down the road, hope the sun comes out and our real estate transfer tax somehow magically rebounds,” Kovach said. “Let’s be realistic. Let’s plan for the worst and hope for the best.”
