Boone County hopes to avoid running out of money

By Bob Balgemann

Reporter

BELVIDERE – The finance primer held for Boone County Board members, especially the five who are new to the board, gave officials plenty to think about.

Paramount among the issues was a five-year forecast prepared by County Administrator Ken Terrinoni, who has been working up county budgets for more than 25 years. As such, he is well versed in its financial strengths and weaknesses.

The five-year projection shows the county running out of money in the 2017-18 fiscal year. Of course, there’s plenty of time between now and then to erase that deficit. And elected officials have been quick to say that Terrinoni has a knack for fixing such problem areas.

An audit report from Sikich Accountants stated that the Great Recession hit in 2008 and largely was over the end of 2009. But it has continued to linger in Boone County, fueled by the high unemployment rate. Terrinoni also has pointed out revenue, while improving, has not reached the 2008 level and expenses are outpacing what’s coming in.

The five-year forecast is updated annually.

Numbers presented during the Feb. 12 get-together showed expenses continuing to trump income.

If things continue in the deficit scenario, which is 2 percent revenue increase and 4 percent increase in expenses, the county’s cash balance will be a negative $356,500 on Nov. 30, 2018.

To avoid that, Terrinoni said county income would have to increase by 6 percent starting with the 2015-16 fiscal year, which goes into effect Dec. 1, 2015. Then revenue and expenses would have to be the same – up 3 percent each year – through the end of the 2018-19 fiscal year.

Even that would result in a loss in fund balance, but the Nov. 30, 2019 balance would be $2.992 million as opposed to a negative $2.135 million if nothing is done. The fund balance is projected to be $2.806 million on Nov. 30, 2015, down from an estimated $3.202 million last year.

Current challenges

The county has the usual challenges, among them providing salary increases for its employees, many of whom are covered by union contracts. There are other annual increases as well, such as retirement contributions, health insurance contributions, vehicle purchases and various infrastructure projects.

New demands on county revenue include paying various fees for indigents, when they engage in court actions, and increases in the per diem for jurors. Those are new unfunded mandates and the impacts won’t be known until later this year.

There was the recurring question of why can’t the county spend some of the $20 million fund balance it has in all of its accounts. The recurring answer was most of them have restrictions on how their dollars may be spent.

Current fiscal difficulties have arisen despite county attempts, from the administrator’s office through the individual departments, to keep spending in line.

In addition to the aforementioned unfunded mandates, an analysis by the administrator’s office noted the Great Recession in Boone County really didn’t reach bottom until 2012.

“The recession, unlike any other, had a tremendous negative impact on the traditional revenues used to operate county programs and departments,” the report stated. “Some revenues, such as the inheritance tax, were no longer distributed to counties by the state.

“Making matters worse, the state of Illinois continues its practice of delaying income tax payments to local governments by as much as five months. This has caused more negative impact on cash flow and further complicated methods to forecast this vital source of revenue.”

Declining revenue at the county jail, for housing inmates from the U.S. Marshall’s Service and DeKalb County, is occurring because more aggressive law enforcement has increased the local population. While a 20-bed wing isn’t being used, the sheriff’s office does not have enough corrections officers to operate that space.

Annual transfers to the general fund from the public safety sales tax, for jail staffing, is planned to in 2018. A previous county board has promised to end the tax in that year.

Other issues include collective bargaining for most county employees, increasing health care costs and possible groundwater pollution at the former county-city of Belvidere landfill.

County board member Karl Johnson, who’s also chairman of the finance committee, said the purpose of special board meeting was “so we can better understand our finances.” That included a look at the future and work that’s needed to protect those finances.

2012-13 budget year

The 2012-13 budget year is in the books and Terrinoni’s report, called “the management discussion” in the annual audit, stated that while recovering from the Great Recession continued, “although at a tepid pace. The recent (economic) downturn is the longest recession since World War II.”

What he termed as “elastic revenues” counted on by the county have not returned to 2008 levels. Those include sales taxes, income taxes, corporate replacement taxes, real estate filing fees, building permits and interest on investments.

In addition, the county lost $150,000 in annual income when the sheriff’s department no longer provided part-time law enforcement services to the village of Poplar Grove.

With an unemployment rate higher than the national average, he said, “Illinois and Boone County are not experiencing a meaningful recovery.”

All general fund revenue sources in 2012-13 brought in $157,963, or 1.1 percent, more than generated. But that was caused by a transfer of $350,000 from the Maple Crest retirement home fund. Absent that, the general fund would have experienced a deficit of $192,037.

General fund expenditure were under projections with the exception of $50,000 in grant funding for the new Veterans Assistance Commission (VAC) and more than $200,000 for employee health insurance.

VAC funding now is coming from a 3 percent tax levy approved by voters April 9, 2013.

The audit for the recently concluded 2013-14 fiscal year will be finished and presented later in the spring.