1. Since 2005, the year that the economic downturn really kicked in for Gwinnett, the Commission has not presented a budget without either a draw on reserves or a tax increase;

2. The Commission trimmed only 3.2% from two-thirds of the budget (operating expenses), but 39% of the last third, capital expenses. In other words, the county put off building stuff but cut little from the actual daily cost of government;

3. The county must keep a certain amount in reserves or risk losing its Triple-A bond rating, which affects the cost of borrowing. The plan to use $18 million from reserves to balance the budget apparently puts the rating at risk. Oh yeah, and another factor that the bond raters use—the government’s ability and willingness to raise taxes;

4. The tax digest (the total value of taxable property) is projected to decline by about 9% this year, although it could be worse. This will not be the last year of declining property values;

5. A Superior Court judge is expected to rule any day on the service delivery strategies dispute between the county and the cities. I anticipate that the county will lose revenue (mostly tax receipts) as a result of the decision. It will not be possible for the county to absorb the loss without a tax increase. The only question is whether the judge’s decision will affect this year’s budget or the next;

6. The Commission Chairman must be the driving force behind meaningful cost cuts; however, we will not fill that position until late March. By that time, the non-tax options available to the Chairman will be severely limited;

7. The Commission is responsible for funding the budgets of the constitutional officers – the Sheriff, the District Attorney, the courts and judges, the Tax Commissioner, for example—but the Commissioners have been hesitant to include them in the belt-tightening.

Finally, the Commission is apparently not willing to make meaningful cuts to one of its largest expenses, personnel. In my dissent to the Engage Gwinnett final report, I suggested graduated reductions in salaries and changes to county benefits. You know that that hasn’t happened when the headlines are about deficits and reserves, and cuts to libraries and non-profit subsidies, and not disgruntled county employees.

From the AJC:

The new budget does not include another property tax increase. To offset declining revenue, it trims total operating expenses by 3.2 percent to $977.5 million. Total capital spending will decline about 39 percent to $337.2 million.

Gwinnett trims spending, but deficit looms  | ajc.com

We can argue on another day whether or not the library should be moving to a more cost-effective “digital” service strategy, or whether or not the county should be in the business of subsidizing non-profits and human services organizations at all. For the present, though, the Commission must focus on meaningful reductions in the cost of government.

As a member of the Engage Gwinnett committee, I concurred with the recommendation of my sub-committee (which focused on libraries, subsidies and parks) that these expenditures be reduced. In my estimation, though, cutting the library budget and reducing subsidies are not the kind of “meaningful” cuts that are required at this time. One of my suggestions (mentioned in my dissent to the group’s final report) was to impose graduated reductions in the cost of personnel.

The “cost of government services” and the “cost of government” are not necessarily the same thing. It is possible to reduce the cost of government substantially but minimally impact the quantity and quality of the services provided by government. The cost of personnel is one of the county’s largest expenses… and the easiest to reduce without substantially affecting the quantity and quality of services.

So far, the county has eliminated positions—reportedly 200 jobs in the past two years. Many of those spots—jobs in planning and development, for example—had been made unnecessary by the soured local economy. In the same time period, the county also reduced the number of authorized police positions, but many of those were vacant at the time.

With 4,871 authorized positions (2010 budget), 200 jobs represent only a 4.1% decrease in actual bodies on the payroll. The elimination of those positions caused essentially no impact on the provision of service. There are probably a few other positions that could be eliminated for minimal savings, but we are quickly approaching the point at which reducing the number of county employees will significantly affect the quality of service.

Nobody wants to lose a job, especially in this economy. I contend however, that substantial savings can be realized without eliminating more positions by imposing graduated cuts in salaries and benefits.

Government employees generally receive higher pay and better benefits than the private-sector employees (read “taxpayers”) who pay their salaries. When a private company faces a financial hardship—spending more money than they take in—their employees must share in the necessary hardships. The company must reduce expenses or it won’t last long.

Why should government not operate under the same constraints? Unrestrained public spending isn’t justified in good times or bad but, in today’s economy, no government employee has a right or an expectation to a particular salary level or benefits package, nor even job security, for that matter. I am confident that county employees will agree that a job at a reduced salary is better than no job at all.

The Ireland Example: Graduated Pay Cuts

Like Gwinnett and most of the world, Ireland experienced a severe economic downturn, the deflation of a housing bubble and the resulting deficits. The Irish government has responded with a number of measures aimed at reducing personnel expenses, both in the short and long term. For example, government salaries have been reduced:

• Salaries up to $40,000 reduced by 5%;
• The next $54,000 reduced by 7.5%;
• The next $74,000 reduced by 10%;
• Above $168,000, reductions up to 15%

Of course, the salary break points and percentage reductions would be adjusted to better suit the county’s requirements. Additional adjustments might include a base salary below which no reductions would be imposed and an exemption for public safety employees.

More recently, Ireland established a maximum salary and has also introduced a 10 per cent pay reduction for all new employees. In addition, all new hires start at the first point of the salary scale.

Pension Benefits Reduced

Ireland is also addressing “pay after retirement”—pension benefits that have increased significantly in recent years. The number of government retirees grew from 76,000 in 2006 to about 103,500 in 2010, an increase of 36%. Total expenses increased by 56% during the same time period.

Ireland plans to reduce benefits for current retirees on a graduated scale by up to eight percent. The pensions of future retirees will be based on their career-average pay rather than their final salary. Also, public employees will retire later and increases, if any, will be tied to the consumer price index rather than to increases in pay for current employees, as is the current practice.

Gwinnett County should investigate similar adjustments, given the fact that the county’s accrued liabilities, mostly promised retirement benefits, exceeds $300 million with no real plan to fund them.

Shared Discomfort

To date, there has been hesitation by county leaders to include the budgets of the constitutional officers (Sheriff, Tax Commissioner, District Attorney, etc.) in the efforts to cut costs and establish appropriate service levels. The County Commissioners have little control over how the constitutional officers perform their duties or spend their money, but they do have control of the purse strings.

The budgets of the constitutional officers represent a significant portion of the budget. While they provide very important services to county residents, we must remember that their services are funded by tax dollars just like almost every other public service. Their budgets should receive the same level of scrutiny as the other departments and, when necessary, be subject to appropriate reductions in personnel and funding.

Time for Strong Leadership, Tough Decisions

Gwinnett is in dire need of strong, principled leadership. Unimaginative, short-sighted and self-serving politicians need not apply. County finance staffers cannot be relied upon to make the tough decisions… like cut their own pay.

It remains to be seen whether or not the County Commission… at least, what’s left of it… has the backbone to do the right thing. Their record has been less than stellar, to date. The field of Commission Chairman candidates may promise much but none, save one, have the experience and know-how to deliver.

It’s up to you to point county leaders in the right direction. If you see value in the ideas that I have described, you can tell your County Commissioners, Commissioners-Elect and Chairman candidates where to find this article by sending a single email to commishes@talkgwinnett.com. Your email will be forwarded automatically to all. The short link for this article is http://bobg.biz/j .

Now, we learn that the Commission will use part of the tax increase to make up for an expected 2010 budget shortfall. The Commission’s decision to use (arguably) 2009 tax money to balance the 2010 budget is not unexpected. Last year, while Chairman Bannister and staff were sounding the alarm and Kevin Kenerly was putting his "lame duck" status to good use (by RE-proposing the tax hike), Bovos was quietly moving 2009 expenditures into the 2010 budget. The items moved included almost all of the expenses that were used to justify the hike…. three fire stations and equipment, 58 police officers and money to keep the lights on at the little league ball fields.

The county ended 2009 in the black…. in other words, the 2009 (calendar) tax rate of 10.97 paid for everything that remained in the 2009 budget. It was ALWAYS Bovos’ plan to delay enough 2009 expenses to end the year balanced.

The 2009 tax hike (collected this year, as you know) was ALWAYS going to be spent on 2010 expenses. Bovos told the committee in December that he had hired a consultant and was already looking into using the revenue from the hike to pay down accrued liabilities instead of funding fire stations and police, as had been the "carrot" in 2009.

A large number of members opposed Aaron’s plan to use the tax money to pay down the county’s $300 million in unfunded liabilities. The subject was never brought up before the committee again; however, it remained on our radar screen. Some members supported using half of the revenue for unfunded liabilities and the remainder for the promised purpose. I wanted all of the revenue from the tax increase to be used to fund the promised services.

I do not know what the county actually did. As reported by the AJC, they are doing exactly what they had planned to do by taking a portion of the tax revenue to pay 2010 expenses. I do not know if they still propose to or have actually paid toward liabilities.

I am not accusing the Chairman and Aaron of being deceptive, except that the end result of their failure to provide all of the facts is that the taxpayer has been deceived…. several times… over the past year. One of the new fire stations is near my home; it still sits empty, although the chain link fence that had surrounded the building has been taken down.

While this year’s budget is balanced, next year’s spending plan already is $31 million in the hole. In a recent interview, Bovos said that could grow as declining property values continue to erode tax receipts.

Update: The GDP article on the same topic reports that part of the tax increase is being used for unfunded liabilities:

The money, from a millage rate increased imposed late last year after property tax bills had gone out, includes $18 million to reduce this year’s deficit, as well as $10 million to pay outstanding debt and $5 million for the Gwinnett Hospital Authority to complete a commitment to give $5 million for five years. Another $21.2 million will be applied to the county’s accrued liabilities, which include retiree health care and pensions.

If my math is correct, the tax hike revenue has been spent. It remains to be seen whether or not the county will open the fire stations and hire the cops.

Gwinnett commission taps tax hike proceeds to balance 2010 budget  | ajc.com

The vast majority of the 120,000 residential property notices issued in the first batch will show an average value decrease of 17 percent or $35,000 of market value, Pruitt said. The sum of all decreases for residential property totals approximately $4.2 billion of market value.

As I explained in “Tax Digest Time Bomb,” the lower tax value may not necessarily translate into a lower tax bill. In fact, as a result of the 2009 tax increase that is being continued for 2010, you will probably pay a lot more than in previous years.

Gwinnett property owners may get good news  | ajc.com

Budget `Bait and Switch`

Bannister presented his 2010 budget to the other Commissioners and to the public on December 1, as required by law. The law is designed to give the public ample opportunity to review the document prior to its adoption. The required public hearings were also held.

A day or so before Christmas, however, Bannister sent the Commissioners a revised budget which increases spending by $6.3 million. Not only that, but Bannister juggled a number of capital projects, fast-tracking a park development in his home city of Lilburn while postponing a new park a few miles from the home of Mike Beaudreau, the only Commissioner to vote against the 2.28-mill tax increase.

Even worse, Bannister’s unilateral revision of the published budget may be illegal.

Some of Bannister’s changes:

• $500,000 subsidy to Partnership Gwinnett;
• $82,000 related to the county’s AAA bond rating;
• $6,500 for the County Administrator’s attendance at various conferences.

Bannister proposes to pay for these additions by transferring $500,000 less from the operating budget to the capital budget later in the year, as has been the usual practice. The artful number tweaking allows Bannister to increase non-capital spending without adjusting the operating budget’s bottom line by a single dollar.

Capital spending will increase by much more than the $6.3 million that Bannister proposes to add to the budget. He will make up the difference by deferring other projects including the Harbins Community Park in the Archer school cluster.

Bannister wants to postpone the engineering phase of the District 3 park from 2010 to 2013. He will instead spend that $1.2 million on the Lion’s Club Park in Lilburn this year, rather than in 2012 as planned. There appears to be no justification for this swap except to punish Beaudreau for his continuing stand against wasteful spending and tax increases.

Other additional capital spending:

• $250K for an airport feasibility study;
• $500K for a “nuisance abatement project;”
• $7.6M for fire stations #31 and #10 (relocation);
• $110K for a police aviation fuel truck.

The revision will also postpone development of the Rabbit Hill Park from this year to 2013.

Bannister proposes to increase the budget despite the county’s expectation that 2010 will be worse economically than previously projected.

Budget Deception

State law appears to prohibit the revision of the published budget proposal, except by a majority vote on an amendment during a public meeting… or by starting the public hearing process anew.  The Chairman cannot simply change the budget published on December 1 on his own.

The Chairman’s plan to adopt a budget different from the one that was presented to the public is tantamount to a lie. But then, deception appears to be Bannister’s stock in trade.

After the  2.28-mill tax increase was adopted, the county’s finance director announced that the additional revenue might be spent to reduce the county’s accrued liabilities, even though the increase had been sold as necessary to fund police officers, fire stations and recreation. Apparently, a decision on what the money will actually be spent has not been made.

I strongly encourage you to contact the Commission and send Bannister a message similar to the following:

Commissioners, I do not want you to approve a budget different from the one for which public hearings were held, except by amendment in a public meeting. I do not want you to increase spending. Chairman Bannister, I insist that you honor the expectations created by last year’s millage increase hearings and budget hearings.

To be effective, you must send your email before the Commission’s 2 pm meeting today.