Poughkeepsie... Dutchess County Executive William R. Steinhaus announced the County’s 2005 year-end financial report has been completed. “Dutchess County’s finances remain sound, however, like most all local governments Dutchess continues to face significant fiscal challenges,” commented Steinhaus. “Our unaudited summary indicates the available fund balance we have worked hard to protect totals $19.7 million. Rebuilding our fund balance and maintaining our fiscal stability has been one of my top priorities.”
Moody’s Investors Service recommends 5% of total appropriations as a bare minimum level of fund balance. Dutchess County’s non-earmarked fund balance is 5.4% of total 2006 budgeted appropriations which positions the Dutchess fund balance just above that minimum level.
Total 2005 expenditures equaled $370 million. The attached chart summarizes the various categories of county spending in 2005. “While the county’s fund balance is encouraging,” Steinhaus commented, “we must continue our commitment and discipline to maintain our fiscal stability moving forward. As felt by most public and private organizations, the county continues to struggle with the cost of doing business especially from costs for pension, health insurance and worker’s compensation for employees.”
Union contract settlements for the CSEA and PBA will potentially mean multi-million dollar draw downs of fund balance in 2006. Other Albany imposed mandates such as training and education for handicapped children and costs for housing state prisoners in the county Jail continue to challenge Dutchess County’s ability to deliver core services. Costs for the state mandated Medicaid program will continue to grow. However, a new Medicaid Stabilization Plan the County instituted for future years will help the County absorb these increased expenses.
The new State Medicaid funding formula slows the growth of increased costs. In Dutchess, prior year encumbrances, represent approximately $13.3 million of taxpayer dollars. “I proposed and the county legislature endorsed in the 2006 budget, a Medicaid Stabilization Plan that sets aside this additional $13.3 million specifically earmarked fund balance to offset state mandated increased Medicaid costs to Dutchess County taxpayers in 2007 and beyond,” commented Steinhaus.
The county’s “rainy day fund” had dwindled from a healthy $24.3 million just five years ago to a mere $7.6 million at the end of 2003, demonstrating how rapidly uncertainties facing county government and run away state mandates can impact its finances. The 2005 fund balance is a result of controlled spending, a reduction in the use of fund balance to offset spending in the 2006 operating budget, growth in revenues, as well as a one-time revenue benefit due to the State’s new Medicaid funding methodology. The continued focus on replenishment of the county’s “rainy day fund” for the second consecutive year is a positive sign Dutchess County’s finances have reversed the prior trend of structural imbalance, although there are exposures in 2006 which could again threaten that financial structure.
Year 2005 total revenues equaled $383 million. Sales tax income totaled $126.9 million, an increase of $3.2 million, a very modest 2.6% over 2004. While this figure is on target with the 2005 adopted budget estimate, it’s $2.4 million less than the 2005 year-end projection of $129.3 million developed last fall during the 2006 budget process. Demonstrating the county’s continuing vulnerability, the latest 2006 sales tax receipts from NYS include a negative adjustment of $2.635 million due to the state’s refunding of overpayments previously made by a local vendor.
Compounding this loss, the state reinstated the year-round exemption from New York State sales tax on clothing and footwear under $110, effective April 1, 2006. Dutchess County previously opted into the state’s exemption plan. However, the year-round sales tax exemption was eliminated by the state legislature and Governor each of the past three years as part of the adopted state budget. Therefore, when projecting the 2006 budget, Dutchess County followed the state’s lead by anticipating the sales tax revenue on clothing and footwear would be received in the annual operating budget.
Projections show, considering both issues above, Dutchess County government stands to loose potentially $8.5 million in sales tax revenue by the end of 2006. Therefore, the outlook for achieving the 2006 budgeted sales tax is uncertain.
The State recently passed legislation giving localities an opportunity to re-impose the local share of sales tax on clothing and footwear under $110. If it chooses to close this substantial gap with sales tax revenue rather than increasing property taxes, Dutchess County would be required to take such action no later than June 30, 2006.
Moody’s reports Dutchess County’s “Aa2 rating further reflects the county's sizable $29.6 billion tax base with above average wealth indicators and low debt burden.” Dutchess County’s rating is higher than all but two counties in New York. Recently Moody’s confirmed the Aa2 rating to Dutchess County’s $10.3 million Public Improvement Refunding Bonds saving the county half a million dollars in interest costs over the life of the borrowing.
Steinhaus concluded, “Although there are numerous external impacts which are uncontrollable and uncertain, there are some areas where we will work to exercise control to ensure fiscal and programmatic stability and efficiencies. As the new year unfolds, Dutchess County government will continue to maintain strong fiscal stewardship and budget management to safeguard our “rainy day fund” and insure the taxpayers’ money is spent in the most responsible and prudent manner. Maintaining a solid fiscal foundation is critical to the county’s long-term fiscal strength and stability.”
The Annual Financial Report was released May 1 by Pamela Barrack, County Finance Commissioner and is required by law to be forwarded to the State Comptroller, the County Comptroller and the Dutchess County Legislature. It includes the operating results and balance sheets of all funds and account groups. The statements included in the report are reviewed in the annual comprehensive audit of county finances conducted by an independent accounting firm whose report will be issued later this year. There could be additional information received from the state after the May 1st release of the preliminary report as well as subsequent adjustments for the application of GASB principles, which may cause the 2005 year end fund balance to change.