Proposal to Double NorCo's Rainy Day Fund Fails By a 4-4 Vote

At last night's meeting, Northampton County Council nixed a proposal to double its rainy-day fund from 5% to 10% of general fund expenditures. The measure, which required five votes to become county law, was supported by Council members John Brown, Jeff Corpora, Tom Giovanni and Lori Vargop Heffner. It was opposed by Council members Ken Kraft, Kelly Keegan, Jeff Warren and Ron Heckman. Council member John Goffredo, who could have tipped the balance one way or the other, was absent.

Before the vote, incoming Executive Tara Zrinski told Council that she already has serious reservations about the budget proposed for next year. (I outlined them here). She also opposes doubling the rainy-day fund. "Let's call this what it is," she said. "It is an unfunded mandate that fails to meet our statutory and moral obligations while burdening future administrations and misleading the public on fiscal stabilization." She called the 10% figure an "arbitrary hurdle that is out of step with the intent of GASB (Governmental Accounting Standards Board) That intent, she asserted, is "clarity and transparency, not artificial inflation of reserves for optics over substance." 

She is particularly irked that Council would even consider this ordinance in the face of a proposed budget that already "slashes essential services" like two prison rehabilitation programs. She noted that a 10% rainy-day fund would require her administration to pony up approximately an additional $8 million. She added her displeasure at the failure to fund the pension fund for retirees. "This is not good government. It is an act of willful neglect."

Council member Ron Heckman said he agreed with many of the points made by Zrinski as well as Council member Ken Kraft's warning the previous day that doubling the rainy-day fund would make a tax hike necessary. He agreed that "10% is a bit of a reach," and proposed increasing it to a more manageable 7%. His suggestion failed. Only Council members Vargo Heffner, Giovanni and Corpora agreed with him. The remaining members present (Kraft, Keegan, Corpora and Brown) voted No. 

John Brown argued that the rainy-day fund needs to be doubled as a matter of fiscal responsibility. "I believe we'd be having a very different conversation today if the state budget had not passed," he observed. Just two weeks before, he noted that 170 county employees were in danger of being furloughed. He did agree that NorCo finances are in dire straits, and predicted that in mid-January, the county will have to take $10-15 million from the general fund for Gracedale to cover a deficit. 

Heckman, like Kraft the day before, said there would need to be a tax hike to find the money. Keegan pointedly asked Brown if he'd support a tax hike to double the rainy-day fund. He said No, but provided no suggestions about where the county could find the money. 

Vargo Heffner proposed changing the effective date of the new rainy-day fund until 2028, but that measure died for lack of a second.  

She then warned, "We're going to have to raise taxes anyway. It's coming. Just plan on it." 

So ends the attempt to beef up the county's rainy-day fund. 

Should NorCo Council Double Its Rainy-Day Fund Even If It Means Tax Hike?

Over the past year, NorCo has watched the money well run dangerously low.  On the federal level, there was a record-setting shutdown because Democratic senators refused to go along with a continuing resolution to keep the government going with a continuing resolution. There was similar gridlock from the state, which was unable to adopt a budget until very recently. In the absence of federal and state funding, important human services administered through the county were in serious danger of interruption. Had the crisis continued, there is little doubt that the county would be forced to use its rainy-day fund. But is it set high enough? Executive Lamont McClure has proposed $8.6 million in next year's budget for what is more technically known as its stabilization fund. That is slightly more than the 5% of the year's expected total spending and this complies with current county law. But NorCo County Council is poised to vote tonight on a new ordinance that would require 10% of a year's expenditures to be kept in reserve.  The only way that money could be spent would be with the approval of County Council. 

This ordinance is set to take effect at the beginning of 2027. It will basically force incoming Exec Tara Zrinski to seek a tax hike to garner the funds needed for this surplus. Is this a good or bad idea? This is a subject that was discussed at a Council committee meeting last night. 

Though the ordinance is sponsored by Council members John Brown and Jeff Corpora, it was President Lori Vargo Heffner who took ownership last night. "I'm the one who initiated this," she said, explaining that the convergence of the federal and state shutdown made her think an increase is necessary because there is "no wiggle room" at 5%. "If something like this happens again, we're in trouble. We don't have money." 

Council member Ken Kraft opposed the idea. He agreed that the combined shutdown and budget impasse put the county "in a pickle," but that the only way to increase that rainy day fund in 2027 would be to propose a tax hike next year, and this would be unfair to incoming Exec Zrinski. Council member Kelly Keegan likened the situation to moving out of a house and shacking the new owner "with a hideous color of pink."

Council member John Brown explained that the rainy-day fund was much higher but was reduced by $11.8 million in last year's budget. He said the fund was used to balance the budget instead of being kept in reserve for emergencies. Brown tried to restore the funding in last year's budget, but his efforts failed because his proposals would have thrown the budget out of balance. "That's what led us to where we are today," he concluded.

Kraft countered that what McClure (and County Council) did was still in compliance with county law because the rainy-day fund was still higher than the required minimum. "I understand what you're trying to do by tying [Zrinski's] hands, but I don't really want to do that at this point to a new administration." 

There is speculation among some that this is actually a mean-spirited effort to force Zrinski to raise taxes during her first year in office. The counter argument is that a larger reserve is really necessary. Aside from emergencies like those faced this year, the county is going to have to pay more if it wants to keep good employees, keep the retirement fund fluid and continue paying health benefits. 

If the Council members who support this increase have no political motives, then I'd suggest that they also pledge to increase the tax rate to enable incoming Exec Zrinski to do their biddibg. Let the political faoout, if any, be on them and not on her.