Carroll County is not in compliance with its own fund balance policy, but the county’s financial health is starting to trend in the right direction after several years on the downward slope.
That was the summary of the presentation Carroll County Administrator Steve Truitt shared with the Carroll County Board of Supervisors on August 14 during a review of the county’s fund balance policy. Truitt noted how a few months earlier, the county’s auditor told supervisors Carroll’s fund balance and financial strength were diminishing.
“I am not going to change that story too much other than to say although the trend line over the past several years has been in the wrong direction, the last year we just finished went in the right direction,” Truitt said. “There are some actions we can take to go in the right direction and there are other actions that if we can get a little help from our friends maybe get out of this hole a little sooner than otherwise.”
Truitt said Carroll’s fund balance policy has been in place since 2011 and mandates the size and composition of the “money we have laying around called the financial reserves.” He noted there are basically two types of funds – the money the county can’t spend and the money the county can only spend on certain things that have been set aside for specific purposes. Additionally, there is the fiscal stability amount – the amount Carroll is supposed to keep on hand to ensure it has enough money to take care of business. That amount is currently set at 12 percent of the county’s current budget to go along with 2.5 percent of the total budget that must be set aside to match grants.
“And everything else is where all the other money comes from. And right now we don’t have enough everything else to cover everything,” Truitt said. “The way to determine if you are in compliance with this policy is at the end of the fiscal year on June 30, what we call the general cash balance, has to be divided by our new budget and has to be greater than or equal to 12 percent. If so you are in compliance.”
Truitt showed how Carroll was in compliance with its fund balance policy roughly half of the year, from November 2016 to May of 2017. The policy only concerns if the county is in compliance on June 30, however, the end of each fiscal year. To meet the fund balance policy in 2017, Truitt said Carroll would have needed approximately $10.1 million to meet the 12 percent requirement of its total budget. It was short, coming in at $6.3 million.
“We are actually at 8.6 (percent) and the target is 12. So the good news is we are not broke. The second piece of good news is that we are better off than we were last year,” Truitt said. “The bad news is we are not in compliance and we are not as strong as we need to be. And the choices that we have for getting into compliance are not attractive.”
The county administrator said Carroll’s auditor agrees the county can still be in good financial shape even if it doesn’t meet the 12 percent requirement of its total budget. It can also be argued the county doesn’t need to set aside 2.5 percent of its total budget to match grants.
“I think everybody agrees that while we are being conservative with the grants and we are not throwing money at stuff and we are conserving our cash, maybe we don’t need to set aside an entire million for grant matching,” Truitt said. “Maybe we only come up with it when we have a deal we just can’t pass up. So that would be a 2 percent change in fund balance and a one percent change in that, and we are almost there. Now, compliance is one goal, financial health is another. We want both.”
One possibility for improving the county’s financial health would be to move toward twice-a-year tax collections for real estate taxes. Doing so would cost more money and take more effort, however.
“While not improving our actual cash position, it would bring us into compliance an additional three to four months per year and reduce the total amount required to be in compliance,” Truitt said. “I talked to (county treasurer) Bonita Williams and (Commissioner of the Revenue) Fran (Zimmerman) and neither one are excited about it, but they are willing to do it if it will help us get in a better away. (In Virginia), 36 counties do once a year, all the rest do twice a year. It’s kind of the wave of the future and something to think about.”
Another thing the county can do is get even tighter on its county general budget, Truitt said. The county could simply do an across-the-board-cut of 2.5 percent, which would save $500,000 on the county’s general budget. A 5 percent cut would save about $1 million.
“That is a lot of money but it’s not enough to solve our problem by itself and it could very well cause problems that might even end up costing us more depending on where they end up taking us,” Truitt said. “Another thing, something we are mostly in favor of even though some citizens may not enjoy it, I think when people take a ride in the ambulance they should pay their fare. If we put hard billing in we think we can get $300,000 more out of that and that will just about pay for a new fire truck.”
Truitt said Carroll could also look at doing some things on its personnel side – how many people does it need and how much should it pay them? He said Carroll typically loses about seven employees a year for various reasons. By not filling three of those seven positions each year, he said the county could save $130,000 to $135,000.
He said Carroll could also “slow roll” the remaining positions and wait three months to fill them for an additional savings of $45,000. Other options would be to eliminate holiday bonuses for a savings of $24,000, and put a moratorium on pay increases for a year for a savings of an additional $65,000. Doing so could create issues with morale of employees, however.
“All these things add up to a little over a million. That is a lot of money but it doesn’t solve the whole problem, and again it may create as many as it solves,” Truitt said.
Last year, Carroll reduced the budget of all departments by about $620,000. Unfortunately, he said the county had to set aside an additional $1.4 million over what it budgeted for jail costs, social services and child protective services. It is disheartening to make those kinds of budget cuts, he said, when they don’t make a dent in rising costs of those services alone.
“Having said that, I am not saying to the police, ‘Stop arresting lawbreakers,’ and I am not saying to the courts, ‘Don’t put them in jail.’ So what you have left then are some other big-ticket items that also very sensitive,” Truitt said. “You have the schools, and nobody is against a great education for our children, but it is a great pile of money that we need to watch just as closely as we watch the rest of it. The debt service will go away with time and we have to make sure we don’t let it get any bigger while we are getting them.”
Truitt said he talked to the county treasurer and they agree it’s very important to collect as much of the taxes that due to the county. Carroll still needs to collect about $4 million in back taxes over the past 10 years.
“We are working with our partners, with law firms and other things. It is no fun to chase after those kinds of things, but it’s important. We can always raise taxes. Nobody wants to raise taxes. Nobody wants to pay more taxes,” Truitt said. “But those are our choices to get completely in compliance. We have to do some combination of everything I talked about and anything else I didn’t talk about. What will make the county a better place to live is to get the money we already have and manage it as well as we have and try to put it where we will get the most benefit for each dollar.”
Supervisor Dr. Tom Littrell said he thought the county used to only need 10 percent of its total budget to be in compliance. Truitt said the county’s auditors told him there is no absolute number. Urban areas with huge budgets such as Fairfax or Loudoun, for instance, would have to have a number like 15 percent to be in compliance. Likewise, he said he felt like Carroll could get by with a lower percentage.
“The approach is we will be careful with our money and we will continue to be aggressive with the budget, and if we see things where we budgeted more than we need, we will turn it back over. But also we need some help to meet the current goals of 12 and 2.5 percent,’ Truitt said. “The good news is we will get there one of these days and we will be in good shape. But that is a very stringent standard for us right now with the amount of debt we are carrying.”
Supervisor Joshua Hendrick said Truitt’s presentation was great information, but basically a summary of what the county has already been doing over the past three years trying to solve the same issues. It won’t get better overnight, he said.
“It took 10 or 15 years to screw it up that much. I got voted out on a tax increase and I would go back and do it again. It was the best thing we could do,” he said. “Manage the money we have the best we can. Are we going to be in compliance? Absolutely not, not 12 months out of the year. We have to wade out the debt, because no other options are pretty.”
Supervisor Phil McCraw agreed with Hendrick. Some debt will come off the books, but it will be about four years until that happens.
“We did what we had to do. It wasn’t pretty. I can afford tax increases, but I can’t afford to live in a county that isn’t getting things done the way it needs to be done,” McCraw said. “So we have to put our nose to the grindstone, watch our money, and not go into any more debt. It is not going to be easy but it can be done.”
Allen Worrell can be reached at (276) 779-4062 or on Twitter@AWorrellTCN