Why Dean Browning Believes Lehigh County Budget is Excessive

An advocate of transparency, Dean Browning today shared his concerns with Lehigh County's budget. His memo to other commissioners is reproduced below. I have highlighted some of his more important points.

Commissioners:

Based on the number of phone calls and emails that have been generated in the last few days it looks like we should have an interesting meeting tomorrow night. By popular demand, (and since it looks like we’ll earn our money tomorrow) I have withdrawn the motion that would have reduced the Commissioner’s salaries to the old level of $5,500. Given the number of motions and the passion that surrounds any proposed reduction or delay in spending we could be in for a long night or review and discussion. Since I have a number of motions I’d like to try and expedite that process by giving you my thoughts in advance for the items I have proposed. The reason for this is twofold; one – to reduce the amount of time that will be required to explain my thinking (or lack thereof) and two – to give those that are in opposition some time to think through their rebuttal and to develop a convincing counter argument. My hope is that this will speed up the process and reduce the amount of back and forth on each item.

To that end, I’ve divided my motions into several groups and will be sending a separate email on each later today or tomorrow morning. As a prelude to that, I do want to review my general thoughts on the 2009 budget. One email I read today pointed out that the budget for 2009 is only up 1.1% over that for 2008. And that is indeed true if you look at the County’s total budget of over $400 million. However, that number includes pass through revenue and expenses. To me, the more relevant amount is that which is paid for by County real estate tax dollars. That is the number that drives what our residents and businesses pay in property taxes. The year to year budget increase for this component is 3.7%. From our budget review, you’ll recall that much of that increase resulted from two functions, namely the Courts and Corrections. These are areas where the County is specifically charged with the responsibility and in my opinion these can not be short changed.

Having said that I think we need to keep in mind some of the existing trends and how they project into the future. Specifically, the 2009 budget calls for us to spend $12,000,000 more than we generate in property tax revenue. With recent trends in spending and in property tax revenue that gap will widen over the next several years. While that is happening we will continue to spend down the balance in the Tax Relief Fund (TRF). As an aside, I feel the creation of the TRF followed by the 2006 tax decrease has resulted in some negative, unintended consequences. Namely, it makes it difficult to make the necessary, prudent financial decisions to close the gap between spending and revenue. For example, those that will want an additional $200,000 for the Zoo will say, “why can’t you give us the money when you have a surplus fund of over $16 million?”

Nonetheless we are where we are and since there is a finite amount of money in the TRF I believe we need to take steps now to slow the growth in spending. I believe this is necessary to reduce the adjustment required when the TRF is depleted and/or to extend the period of time before we reach that point. The purpose of the adjustments I have suggested is to accomplish that by either:

* reducing spending in areas where we can accrue that benefit over time or
* deferring spending in other areas until we have a better picture of how we will finish out 2008 and/or until the economy begins to expand again and thereby increases our revenue base.

So where does Browning propose making cuts? I'll explain one cut in the post below. Rail advocate Paul Marin is going to be in the wrong county tonight.
Update: Where We Are, Where We've Been and Where We Are Going.

This is the question Browning poses in another email to Commissioners. It explains why he believes Lehigh County should reduce its deficit from $12 million to $10 million.

As we look at the budget for 2009 we are projecting $90,195,486 in tax revenue compared to $102,734,017 in expense covered by county property taxes which gives us a net shortfall of $12,538,531. I know the plan is that by drawing down the Tax Relief Fund (TRF) that we can hold property taxes at the current level through 2011. Assuming everything that went into that assumption comes to fruition, I’m still very concerned about what type of budget will we be looking at in 2012. I know that several years down the road but I believe that if we don’t takes steps now the problem will be that much bigger and more difficult to solve when the time comes.

I know the past is not a predictor of the future but there are some trends we should be aware of as follows:

In 2006 the budgeted expenses covered by county taxes totaled $92,250,299. This increased to the $102,734,017 listed above which is a 3.7% compound annual growth rate. During that time our budgeted tax revenue increased from $85,594,785 to the $90,195,486 listed above which is a 1.8% compound annual growth rate. However, this is really not representative as the budget for 2009 assumes a slight decrease in tax revenue. So to get a more accurate feel for the growth in our tax revenue we should back up a year and look at the growth from 2006 to 2008. During that time period the growth rate was somewhat more robust at 2.8%. Note that I selected the period of 2006 through 2009 for this analysis as that is the time during which the tax rate has been stable at 10.25 mils.

Again, the past the past is not the future but if we continue on the path of increasing expenses at 3.7% while growing revenue at less than that at 2.8% we will be faced with a deficit of $16,500,000 in 2012. And that’s assuming we don’t have to do things like step up our contributions to the pension fund or absorb the costs of programs where the state or federal government freezes or cuts their reimbursement to us. Even with then, bridging a gap of $16,500,000 without the TRF would require a tax increase of 17%.

I know it is hard enough making projections through 2009 let alone 2012 so things may turn out better. However, I truly believe that it is incumbent upon us to take some steps with this year’s budget to reduce the gap between revenue and expenses and thus lessen the impact of the compounding in the out years. Personally I think we should be looking for ways to reduce the 2009 deficit to a number that is under $10,000,000 even if this means cutting expenses or deferring programs into 2010 or until our property tax revenue starts to grow again.

Just my opinion as one of nine.