Working Document Committee of the Whole March 25, 2014

Transcription

1 Working Document Committee of the Whole March 25, 2014

2 Introduction The 5-Year Budget is a working document. It is frequently being fine-tuned to take more details into account and updated as assumptions change. It is based on the Fiscal Year 2014 Budget. It takes into account 5 years of historical data. It is shaped by the input of Departments & Offices. It accommodates future plans & commitments. 2

3 Revenue Assumptions & Sources The property tax levy will remain frozen. Sales Tax revenue will increase 2% per year. Income Tax revenue will increase 2%, 2%, 2.5%, 2.5% and 2.0% for years respectively. Departments and Offices provided projections for revenue associated with their Department or Office based on their knowledge of trends. Utilized Illinois Department of Revenue Forecasts. Return on Investment is estimated at 0.5%. 3

4 Expense Assumptions Expense related to debt service is based on debt service schedules. Election expense will be smoothed out by reserving in years during which there is only one election half of the funds needed for years in which there is a second election. Includes 9.75% reduction in health care cost in fiscal year Includes 2.5% reduction in dental insurance cost in fiscal year

5 Other Assumptions Capital will be funded according to amount of excess revenue over expenditures in the previous year. The increase in non-payroll expenditures is limited to the lessor of a maximum increase of 2% per year or to the adjustment required to breakeven. 5

6 Excess FICA Fund Balance The FICA Fund balance is equivalent to more than 1 year s worth of FICA expense. Only 7 months of FICA expense is required to be on hand at the beginning of year for cash flow purposes. The excess FICA fund balance will be drawn down over the next 10 years by drawing down 10% per year of the excess to help fund the increase in FICA expense resulting from payroll increases. 6

7 4,500,000 FICA Fund Balance 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 Beg Year Balance 7 month's Expense 1,500,000 1,000, ,

8 Excess IMRF Fund Balance The IMRF Fund balance is equivalent to more than 1 year s worth of IMRF expense. Only 7 months of IMRF expense is required to be on hand at the beginning of year for cash flow purposes. The excess IMRF fund balance will be drawn down over the next 10 years by drawing down 10% per year of the excess to help fund the increase in IMRF expense resulting from payroll increases. 8

9 7,000,000 IMRF Fund Balance 6,000,000 5,000,000 4,000,000 3,000,000 Beg Year Balance 7 month's Expense 2,000,000 1,000,

10 Current Scenario Payroll increases in general will be limited to 2%, 2%, 2.5%, 2.5% and 2% for years There are additional increases (such as merit and step increases) specific to the collective bargaining agreements currently under consideration. If we are not able to cut costs or enhance revenues, and if non-payroll expense remains flat, we will encounter a $176,000 deficit in 2017 and a $993,000 deficit in

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12 Current Scenario (Cont.) In order to avoid these deficits, this scenario requires that all non-payroll expenditures be cut by 0.90% each year or that revenue be increased by $250,000 each year in order to avoid deficits. 12

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14 Property Tax Freeze Protection Fund Given the potential of facing a $993,000 deficit in year 2018 if we are unable to cut costs or enhance revenue during these next 5 years, I am proposing that we set aside $1,000,000 in a Property Tax Freeze Protection Fund. This Fund will act as an insurance policy to ensure that we will have enough to fund operations through 2018 without increasing the property tax levy. Like all insurance policies, we should not plan on using it, but do everything in our power to cut costs & enhance revenue instead. 14

15 Excess Revenue Over Expenditures Greater than budgeted revenues and less than budgeted expenditures have resulted in excess revenue over expenditures in Fiscal Year 2013 of $9.7 million: $1.9 million of less than budgeted expenditures $3.0 million Income Tax Revenue $1.5 million Sheriff Board & Care Reimbursements $1.4 million Sales Tax Revenue $1.2 million Probation Salary Reimbursements $0.6 million Revenue Stamp Fees $0.1 million Other Revenue 15

16 Proposed Allocation of Excess Revenue Over Expenditures $1.0 million to Property Tax Freeze Protection Fund $2.0 million to Emergency Reserve Fund $1.6 million to Health Insurance Fund $1.5 million to IMRF Fund $3.6 million to Capital Fund $9.7 million total allocation 16

17 Property Tax Freeze Protection Fund The Property Tax Freeze Protection Fund would be a new fund. The ultimate benefit of such a fund will be to avoid a property tax increase for as long as possible. Funds would be used to supplement revenue in lieu of a property tax increase. The $1.0 million initially reserved will function as an insurance policy to ensure that there will be enough to fund operations through 2018 without a property tax increase. 17

18 Emergency Reserve Fund The Emergency Reserve Fund would be a new fund. Between fiscal years 2008 and 2009, Other Tax Revenue (such as sales tax and income tax) declined $3,000,000 as a result of the Great Recession. The Emergency Reserve Fund is intended to reserve funds that can be drawn upon to supplement revenue in the event of such a severe economic event, or to fund an emergency expenditure that exceeds the capacity of the General Fund contingency. 18

19 Major Other Tax Revenue 30,000,000 25,000,000 Revenue Shortfall Compared to 2014 Budget 20,000,000 Actual Revenue 15,000,000 10,000,000 Actual Projected Excess Projected Revenue Compared to Budget 5,000, Budgeted Revenue 19

20 Emergency Reserve Fund (Cont.) It is proposed that use of the fund be restricted to declines in General Fund Other Tax Revenue that exceeds the total budget for General Fund Other Tax Revenue by 1% ($200,000 for FY14), and/or that use of the fund be restricted to emergency expenditures in excess of 10% of the General Fund Contingency ($112,500 for FY14). 20

21 Health Insurance Fund Allocation The $1.6 million allocation to the Health Insurance Fund will establish the reserve required for selffunding. This amount is derived from an actuarial calculation provided by Blue Cross & Blue Shield. Since we are budgeting claims expense according to our average claims experience, the purpose of the reserve is to provide a source of funding for those years in which our claims expense may exceed the average. 21

22 IMRF Fund Allocation The $1.5 million allocated to the IMFR Fund would be reserved for an additional payment to the IMRF fund at the end of Fiscal Year This additional payment would reduce our unfunded pension liability, thereby lowering our required monthly payment in future years. Our unfunded pension liability as of 12/31/2012 less the additional payment made 11/30/2013 is $43.3 million. We will receive an updated unfunded liability balance as of 12/31/2013 in the next few weeks. 22

23 Capital Fund Allocation The $3.6 million allocated to the Capital Fund will insure that we will have enough to fund all of the capital repairs and maintenance that are currently identified for years 2014 through The schedule of capital repairs & maintenance is constantly being updated and therefore should be considered a work in progress. 23

24 Recap of Proposed Allocation of Excess Revenue Over Expenditures $1.0 million to Property Tax Relief Fund $2.0 million to Emergency Reserve Fund $1.6 million to Health Insurance Fund $1.5 million to IMRF Fund $3.6 million to Capital Fund $9.7 million total allocation Must be decided upon at tomorrow s Finance Committee for April 8th County Board approval. 24

25 General Fund 2014 Budget Facts Total expense budget = $80,614,632 Total salary & wage budget = $47,328,000 Total Property Tax Revenue budget = $33,013,000 Total Other Tax Revenue budget = $20,523,000 Total Other Tax Revenue 2013 actual = $23,278,000 25

26 General Fund Budget Factors 0.5% change in salary expense = $265, % change in health insurance expense = $43, % change in dental insurance expense = $2, % change in other expenses = $92, % change in return on investment = $160,000 26

27 Questions? 27