Commentary on 2009 Budget
03/08/09 9:55 pm
CEO Burrell Ellis presented his proposed 2009 budget on January 15, 2009, and the Board of Commissioners (BOC) has now acted to adopt a budget. As a member of the commission I am bound to represent DeKalb's best interest with my vote on the budget, and despite reservations I will outline, I voted in favor of the administration's proposal. The commission's Budget, Audit and Finance Committee did not recommend any amendments, and I voted against last-minute amendments offered from the floor.
This is not to say that I think the CEO's proposed budget was particularly well crafted, or to the great advantage of District 2, or DeKalb County as a whole. Instead, his budget would keep the government operating and give the commission and the public a benchmark for improving both the budgeting process and the equitable allocation of tax dollars over the next year. The budget, as amended by Commissioner Stokes with the support of Commissioners Johnson, Sutton and May, trades short-term gain for the prospect of further tax increases, staff furloughs, or program cuts, and their amendments should be vetoed.
The Budgeting Process
DeKalb's budget process is weak, and the BOC's role in establishing priorities is superficial and political, due to artificial time limitations and a lack of effort by the BOC's membership. As in the past, the process began in the summer with submissions from county departments to the budget office.
Also as before, the BOC was not allowed to review departmental submissions until the CEO's proposal was presented in January. Despite efforts to discuss budget priorities at BOC retreats in July, October and November, the BOC did not develop a budget resolution or other outline of priorities for consideration by the sitting administration, and there was no formal dialog between the BOC and the incoming administration.
Only with the release of the Ellis Transition Committee Report on December 19. 2008, did any outline of the new CEO's agenda emerge, and as in the past, the official release of the proposed budget on January 15 was the BOC and public's first look at the $601 million spending program the BOC must now vote on less than six weeks later. The BOC's committee process has offered no proposals to amend the CEO's plan. Surely we can do better than this!
In the future, the budget process needs to be more transparent and inclusive of the public and BOC. CEO Ellis was handicapped by a slow transition and the previous administration's resistance to the new administration's involvement. But without fundamental change in the process, the budget will remain a lopsided political contest.
The Organizational Act (DeKalb's "constitution") mandates formal dialog between the administration and the BOC in the preparation of the budget, but that dialog has been perfunctory. As in the past, the Ellis administration makes much of cutting $791 million in departmental requests by $190 million to arrive at its proposal, but without prior public review, the greatest part of the budgeting process is secret and inherently unilateral.
To make budgeting a meaningful process, the BOC should prepare by developing a formal budget resolution in July, outlining key BOC priorities such as millage rates, HOST allocation, and priority programs, presenting this resolution as a meaningful beginning to the public budgetary process. Departmental budget proposals should be made public upon their submittal to the CEO in August, rather than the current practice of waiting until the CEO's budget is presented. That way, budget hearings could proceed through the fall, and the evaluation of departmental budgets would be accessible to everyone.
If the public process begins in the summer, the release of the administration's budget will become a milestone rather than the main event, and the limited time between that date and budget adoption at the end of February can be spent measuring the CEO's proposal with a calibrated yardstick. Decisions could be better made on merit rather than politics.
Approach to Addressing the Revenue Shortfall
The Administration estimates a $60 million shortfall in revenues to maintain the status quo in county government services. That shortfall is comprised of loss of Dunwoody taxes and fees, falling sales tax collections, and flat property tax revenues. To reduce expense, the administration proposes to freeze salaries, keep more authorized positions unfilled across the government, and reduce capital spending for vehicles, buildings and transportation. To enhance revenue, there is a millage rate increase, offset for home owners by redirection of HOST revenues from capital projects to tax relief.
Given this year's weak budgetary process, this is perhaps the best we could expect from a time-compressed transition from a lame-duck administration to a new one facing an historic recession. However, current revenue projections may prove to be optimistic (as were last year's), and further reductions in DeKalb's meager capital maintenance program are unsustainable. While homeowners are sheltered this year, this budget does include a tax increase, which will fall on the struggling commercial sector, and which will be felt eventually by everyone.
DeKalb must consider structural changes in service delivery, and intensive review of departmental organization to meet service expectations. Absent such action, we can expect either declining levels of service or ballooning tax rates in the future. This process must be the top priority of the coming year, or the 2010 budget will be far more difficult.
Operating Inertia
DeKalb's budget has ballooned since 2000 on the crest of the now broken real estate bubble. New staffing, programs, and facilities, as well as expensive contracts for everything from technology to music festivals leave DeKalb with a bloated cost structure and a struggle to deliver basic public services. Our fire and rescue department is undercapitalized and dependent on grants for adequate staffing. Our police department lacks patrol officers and squad cars while resources have been instead devoted to luxury recreational vehicles and layers of upper management.
By themselves, two facilities -- the Lou Walker Senior Center and the new Sanford Performing Arts Center -- have an annual operating cost of over $2.5 million, dwarfing the county budgets of all other seniors and arts centers in DeKalb combined. This is in addition to over $1 million per year in debt service for loans financing their construction. State nutrition program cuts are being passed through in DeKalb's budget that hurt needy seniors, while extravagant expenditures persist at the independent Lou Walker Center. Neither the Walker nor Sanford Center is projected to attract offsetting non-tax revenues and so represent costly burdens on the budget.
Many opportunities for operating reform were identified in the Ellis Transition Team report, but inertia from past practices still dominates the current budget. Aggressive steps must be taken to control cost and prioritize the basics to provide essential services to seniors and maintain basic support for the arts countywide instead of lavishing resources on a few locations. "Special" facilities cannot be operated as stand alone cost centers, with dedicated staff and insulated budgets. Public tax dollars are not "other people's money" and all expenditures must be justified on merit.
Capital Spending
Sales taxes that are spent in other counties on roads and buildings are in DeKalb dedicated to MARTA and HOST tax rebates. It is therefore no coincidence that every year, DeKalb falls further behind in the basic maintenance of infrastructure and facilities. At our current pace, we are now 60 years behind on street repaving and have a total deferred maintenance liability of over $260 million. This translates into potholes and leaking roofs, unattractive public spaces, and unproductive work places. Energy leaks from old buildings, and sewage leaks from broken mains.
Even with Dunwoody no longer our responsibility, the proposed budget does little to change course on this road to ruin, with the HOST paving budget reduced by 20 percent, and overall road maintenance down 15 percent. Facilities Management, responsible for building maintenance, has been cut by five percent, despite a seven percent increase in utility costs. Overall building maintenance expenditures are down by four percent compared to last year. Prospects for the future are not bright, with new bond-funded facilities entering the building portfolio, and adding to future liabilities.
When it comes to new infrastructure, the CEO's proposed budget continues the last Administration's habit of shortchanging District Two. Since 2003 when the BOC first began diverting HOST revenues from tax relief to capital projects, District Two has received only 6 percent of these funds, compared to 33 percent for the leader, District Five. This year, District Two is proposed for only $300,000 or five percent of the HOST capital outlay of $5.5 million, exclusive of road resurfacing.
District HOST Percent
1 $ 11,455,000 12%
2 $ 5,795,000 6%
3 $ 15,786,552 16%
4 $ 9,265,000 9%
5 $ 32,400,000 33%
---------------------------------------
Total (a) $ 74,701,552 75%
Total (b) $ 99,028.054 100%
(a) Total District HOST Disbursed
(b) Total County HOST Disbursed. Includes countywide road resurfacing, etc.
DeKalb is steadily digging its own grave when it comes to the basic maintenance of public buildings and roads. One axiom of infrastructure investment is that the cost of timely repair is always less than the cost of replacement upon failure. In DeKalb, we have been busy cutting ribbons, but neglecting the more mundane responsibilities of our aging infrastructure. While DeKalb is not unique in this failure, our older buildings and roads, and the lack of available funding options makes this issue a critical concern.
District Two's allocation of new capital funding cannot be justified under any fair measure. The Ellis administration has continued the recent trend of shortchanging the heart of DeKalb in favor of expenditures at the fringe. This is not smart growth, or fair growth, and it must change now.
The Budgetary Outlook
In the short term, prospects are not bright. The Ellis administration's first budget has not made any great strides in either changing the transparency or equity of public expenditures, and the darkening economic horizon portends more difficult decisions ahead.
I set aside my reservations and voted my hope that the Ellis administration will use the next few months to begin turning our leaky ship onto a new course. I am hopeful that a transparent and pragmatic approach to budgeting and expenditure emerges. CEO Ellis has promised as much in his inaugural and State of the County addresses this year, and we will be measuring his words against action in the coming year.
Postscript
On February 24, and acting outside the committee process, Commissioner Stokes offered a series of amendments to the CEO's Budget Proposal, with key new expenditures summarized below:
Public Safety/District Attorney/Courts Personnel and vehicles: $ 1,496,000
Human Services Programs: $ 502,000
Additional Board of Commissioners Central Staff: $ 135,000
TOTAL: $ 2,134,000
With the exception of the expansion of the commission staff, all of these expenditures are for valid programs. The problem is that they are all paid for by reducing funds reserved for the "27th Payday."
The 27th Payday is a $13 million payroll liability that occurs every eleven years or so. Because DeKalb County pays its workforce every two weeks (instead of twice a month) or 26 times a year, we periodically end up with an extra pay period. DeKalb's payday policy would make this liability come due on December 31 this year, but a change in that policy could push the liability into next year.
In any case, it's a certain expense that has been looming over the budget since I've been on the Commission. The CEO's proposed budget funded half the liability in this year's budget, with the intent of funding the other half next year, but Commissioner Stokes' amendments undermine this fiscally responsible reserve.
The Stokes amended budget sets the stage for one of three outcomes: Larger budget cuts next year, another tax increase next year, or employee furloughs to decrease the 27th payday liability. Absent an acceptable alternative, I and Commissioners Gannon and Boyer opposed the Stokes amendments, and instead voted to defer these newly proposed amendments to the budget committee where they could be properly vetted, and where more appropriate budget cuts could be identified to fund the increases. Commissioners Johnson, Barnes-Sutton and May joined Stokes in approving the amendments.
CEO Ellis has the option of vetoing any or all of these amendments, and if he does, I'll vote to uphold his veto, until other cuts are identified to preserve the 27th payday reserve. If he doesn't veto the amendments, we must be on the lookout for tax increases, furloughs or budget cuts in the next year to plug the hole created by these amendments. As I said before, I'll be measuring words against actions to represent your interests in DeKalb's government.
This is not to say that I think the CEO's proposed budget was particularly well crafted, or to the great advantage of District 2, or DeKalb County as a whole. Instead, his budget would keep the government operating and give the commission and the public a benchmark for improving both the budgeting process and the equitable allocation of tax dollars over the next year. The budget, as amended by Commissioner Stokes with the support of Commissioners Johnson, Sutton and May, trades short-term gain for the prospect of further tax increases, staff furloughs, or program cuts, and their amendments should be vetoed.
The Budgeting Process
DeKalb's budget process is weak, and the BOC's role in establishing priorities is superficial and political, due to artificial time limitations and a lack of effort by the BOC's membership. As in the past, the process began in the summer with submissions from county departments to the budget office.
Also as before, the BOC was not allowed to review departmental submissions until the CEO's proposal was presented in January. Despite efforts to discuss budget priorities at BOC retreats in July, October and November, the BOC did not develop a budget resolution or other outline of priorities for consideration by the sitting administration, and there was no formal dialog between the BOC and the incoming administration.
Only with the release of the Ellis Transition Committee Report on December 19. 2008, did any outline of the new CEO's agenda emerge, and as in the past, the official release of the proposed budget on January 15 was the BOC and public's first look at the $601 million spending program the BOC must now vote on less than six weeks later. The BOC's committee process has offered no proposals to amend the CEO's plan. Surely we can do better than this!
In the future, the budget process needs to be more transparent and inclusive of the public and BOC. CEO Ellis was handicapped by a slow transition and the previous administration's resistance to the new administration's involvement. But without fundamental change in the process, the budget will remain a lopsided political contest.
The Organizational Act (DeKalb's "constitution") mandates formal dialog between the administration and the BOC in the preparation of the budget, but that dialog has been perfunctory. As in the past, the Ellis administration makes much of cutting $791 million in departmental requests by $190 million to arrive at its proposal, but without prior public review, the greatest part of the budgeting process is secret and inherently unilateral.
To make budgeting a meaningful process, the BOC should prepare by developing a formal budget resolution in July, outlining key BOC priorities such as millage rates, HOST allocation, and priority programs, presenting this resolution as a meaningful beginning to the public budgetary process. Departmental budget proposals should be made public upon their submittal to the CEO in August, rather than the current practice of waiting until the CEO's budget is presented. That way, budget hearings could proceed through the fall, and the evaluation of departmental budgets would be accessible to everyone.
If the public process begins in the summer, the release of the administration's budget will become a milestone rather than the main event, and the limited time between that date and budget adoption at the end of February can be spent measuring the CEO's proposal with a calibrated yardstick. Decisions could be better made on merit rather than politics.
Approach to Addressing the Revenue Shortfall
The Administration estimates a $60 million shortfall in revenues to maintain the status quo in county government services. That shortfall is comprised of loss of Dunwoody taxes and fees, falling sales tax collections, and flat property tax revenues. To reduce expense, the administration proposes to freeze salaries, keep more authorized positions unfilled across the government, and reduce capital spending for vehicles, buildings and transportation. To enhance revenue, there is a millage rate increase, offset for home owners by redirection of HOST revenues from capital projects to tax relief.
Given this year's weak budgetary process, this is perhaps the best we could expect from a time-compressed transition from a lame-duck administration to a new one facing an historic recession. However, current revenue projections may prove to be optimistic (as were last year's), and further reductions in DeKalb's meager capital maintenance program are unsustainable. While homeowners are sheltered this year, this budget does include a tax increase, which will fall on the struggling commercial sector, and which will be felt eventually by everyone.
DeKalb must consider structural changes in service delivery, and intensive review of departmental organization to meet service expectations. Absent such action, we can expect either declining levels of service or ballooning tax rates in the future. This process must be the top priority of the coming year, or the 2010 budget will be far more difficult.
Operating Inertia
DeKalb's budget has ballooned since 2000 on the crest of the now broken real estate bubble. New staffing, programs, and facilities, as well as expensive contracts for everything from technology to music festivals leave DeKalb with a bloated cost structure and a struggle to deliver basic public services. Our fire and rescue department is undercapitalized and dependent on grants for adequate staffing. Our police department lacks patrol officers and squad cars while resources have been instead devoted to luxury recreational vehicles and layers of upper management.
By themselves, two facilities -- the Lou Walker Senior Center and the new Sanford Performing Arts Center -- have an annual operating cost of over $2.5 million, dwarfing the county budgets of all other seniors and arts centers in DeKalb combined. This is in addition to over $1 million per year in debt service for loans financing their construction. State nutrition program cuts are being passed through in DeKalb's budget that hurt needy seniors, while extravagant expenditures persist at the independent Lou Walker Center. Neither the Walker nor Sanford Center is projected to attract offsetting non-tax revenues and so represent costly burdens on the budget.
Many opportunities for operating reform were identified in the Ellis Transition Team report, but inertia from past practices still dominates the current budget. Aggressive steps must be taken to control cost and prioritize the basics to provide essential services to seniors and maintain basic support for the arts countywide instead of lavishing resources on a few locations. "Special" facilities cannot be operated as stand alone cost centers, with dedicated staff and insulated budgets. Public tax dollars are not "other people's money" and all expenditures must be justified on merit.
Capital Spending
Sales taxes that are spent in other counties on roads and buildings are in DeKalb dedicated to MARTA and HOST tax rebates. It is therefore no coincidence that every year, DeKalb falls further behind in the basic maintenance of infrastructure and facilities. At our current pace, we are now 60 years behind on street repaving and have a total deferred maintenance liability of over $260 million. This translates into potholes and leaking roofs, unattractive public spaces, and unproductive work places. Energy leaks from old buildings, and sewage leaks from broken mains.
Even with Dunwoody no longer our responsibility, the proposed budget does little to change course on this road to ruin, with the HOST paving budget reduced by 20 percent, and overall road maintenance down 15 percent. Facilities Management, responsible for building maintenance, has been cut by five percent, despite a seven percent increase in utility costs. Overall building maintenance expenditures are down by four percent compared to last year. Prospects for the future are not bright, with new bond-funded facilities entering the building portfolio, and adding to future liabilities.
When it comes to new infrastructure, the CEO's proposed budget continues the last Administration's habit of shortchanging District Two. Since 2003 when the BOC first began diverting HOST revenues from tax relief to capital projects, District Two has received only 6 percent of these funds, compared to 33 percent for the leader, District Five. This year, District Two is proposed for only $300,000 or five percent of the HOST capital outlay of $5.5 million, exclusive of road resurfacing.
District HOST Percent
1 $ 11,455,000 12%
2 $ 5,795,000 6%
3 $ 15,786,552 16%
4 $ 9,265,000 9%
5 $ 32,400,000 33%
---------------------------------------
Total (a) $ 74,701,552 75%
Total (b) $ 99,028.054 100%
(a) Total District HOST Disbursed
(b) Total County HOST Disbursed. Includes countywide road resurfacing, etc.
DeKalb is steadily digging its own grave when it comes to the basic maintenance of public buildings and roads. One axiom of infrastructure investment is that the cost of timely repair is always less than the cost of replacement upon failure. In DeKalb, we have been busy cutting ribbons, but neglecting the more mundane responsibilities of our aging infrastructure. While DeKalb is not unique in this failure, our older buildings and roads, and the lack of available funding options makes this issue a critical concern.
District Two's allocation of new capital funding cannot be justified under any fair measure. The Ellis administration has continued the recent trend of shortchanging the heart of DeKalb in favor of expenditures at the fringe. This is not smart growth, or fair growth, and it must change now.
The Budgetary Outlook
In the short term, prospects are not bright. The Ellis administration's first budget has not made any great strides in either changing the transparency or equity of public expenditures, and the darkening economic horizon portends more difficult decisions ahead.
I set aside my reservations and voted my hope that the Ellis administration will use the next few months to begin turning our leaky ship onto a new course. I am hopeful that a transparent and pragmatic approach to budgeting and expenditure emerges. CEO Ellis has promised as much in his inaugural and State of the County addresses this year, and we will be measuring his words against action in the coming year.
Postscript
On February 24, and acting outside the committee process, Commissioner Stokes offered a series of amendments to the CEO's Budget Proposal, with key new expenditures summarized below:
Public Safety/District Attorney/Courts Personnel and vehicles: $ 1,496,000
Human Services Programs: $ 502,000
Additional Board of Commissioners Central Staff: $ 135,000
TOTAL: $ 2,134,000
With the exception of the expansion of the commission staff, all of these expenditures are for valid programs. The problem is that they are all paid for by reducing funds reserved for the "27th Payday."
The 27th Payday is a $13 million payroll liability that occurs every eleven years or so. Because DeKalb County pays its workforce every two weeks (instead of twice a month) or 26 times a year, we periodically end up with an extra pay period. DeKalb's payday policy would make this liability come due on December 31 this year, but a change in that policy could push the liability into next year.
In any case, it's a certain expense that has been looming over the budget since I've been on the Commission. The CEO's proposed budget funded half the liability in this year's budget, with the intent of funding the other half next year, but Commissioner Stokes' amendments undermine this fiscally responsible reserve.
The Stokes amended budget sets the stage for one of three outcomes: Larger budget cuts next year, another tax increase next year, or employee furloughs to decrease the 27th payday liability. Absent an acceptable alternative, I and Commissioners Gannon and Boyer opposed the Stokes amendments, and instead voted to defer these newly proposed amendments to the budget committee where they could be properly vetted, and where more appropriate budget cuts could be identified to fund the increases. Commissioners Johnson, Barnes-Sutton and May joined Stokes in approving the amendments.
CEO Ellis has the option of vetoing any or all of these amendments, and if he does, I'll vote to uphold his veto, until other cuts are identified to preserve the 27th payday reserve. If he doesn't veto the amendments, we must be on the lookout for tax increases, furloughs or budget cuts in the next year to plug the hole created by these amendments. As I said before, I'll be measuring words against actions to represent your interests in DeKalb's government.
(Commissioner Jeff Rader represents District Two on DeKalb County's Board of Commissioners. He was elected to the position in 2006 for a four-year term.)
Please encourage your neighbors to sign up for my e-mail updates. Go to my web site, www.commissionerrader.com, and click on the "news signup" link at the bottom.
Please encourage your neighbors to sign up for my e-mail updates. Go to my web site, www.commissionerrader.com, and click on the "news signup" link at the bottom.