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   Dutchess County Seal                                2003 Budget Message

November 1, 2002

To Bradford Kendall, Chairman, Dutchess County Legislature; Members of the Dutchess County Legislature; and the People of Dutchess County

I submit to you today the Tentative Budget for Dutchess County for the Year 2003. Without question, this has been the most challenging work plan to construct since the early days of my administration when our community was confronted with the loss of ten thousand IBM jobs, which impacted our residents.

I remember quoting President Dwight D. Eisenhower during those dark days: “Our real problem is not our strength today; it is rather the vital necessity of action today to ensure our strength tomorrow.” And we took action; we created new jobs, we diversified our employer and employment base, we strengthened needed institutions and we accomplished this through partnerships and collaborations with shared concern and focus.

The issues confronting Dutchess County Government and the people we serve today while different in nature, are nonetheless similar in magnitude and will once again require leadership, vision, creative thinking, collaboration and the application for sound management---decisive action today to ensure our strength tomorrow.

THE BUDGET ENVIRONMENT

To differing degrees, county finances are in duress all across our state as the direct result of Albany-imposed mandates and the lack of economic growth. Many counties have depleted their “rainy day funds” and are left with few options. According to press reports, county property tax increases in excess of 20% are common all across New York State; some who initially endorsed exempting sales tax on clothing now are reversing course and advocate its return; many have sought state approval to increase their local sales tax rates; and others have advocated new fees on auto registrations and cell phones. I considered many of those options in crafting my 2003 Tentative Budget and rejected them for now. Simultaneously, county budgets from across our state call for massive position cuts—both filled and vacant, severe program reductions and significant rollbacks in financial support to community agencies. For example, Rensselaer and Chemung Counties confronted the need to reduce Sheriff’s road patrols; Schenectady refused a state order to hire more corrections officers; Onondaga closed its living museum and shut down its DARE program; Oswego cut more than ten percent of its E-911 dispatchers; Monroe reduced library and county park hours and eliminated $8 million of grants for programs run by non-county government community groups.

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Medicaid

The largest challenge in developing next year’s budget is the rapid growth in Albany-imposed Medicaid costs. As proposed, Medicaid costs total $40.5 million and represent 70 cents of every $1 of property taxes to be paid by our local homeowners and business property owners. To put this amount in perspective, your county government is forced to spend $111,000 per day for this one Albany-imposed program! In terms of gross county spending, the $40.5 million budgeted for Medicaid in 2003 represents 13% of all county spending and dwarfs all other county programs and services. For example:

  • Public Health (medical examiner, environmental health communicable disease,            $29.4 million
     nursing, long-term care services)

  • Sheriff (law enforcement and jail operations)                                                               $25.7 million

  • Mental Hygiene (substance abuse, outpatient, continuing treatment, mental                 $24.5 million
    retardation & developmentally disabled services)

  • Public Works (highway maintenance, facility maintenance, parks)                               $15.1 million
     

Medicaid Mandate - County Cost graph

The chart to the left demonstrates the rapid increase in the county’s cost of the Albany-imposed Medicaid program since 1999.  As I have reported, county government faces a $2 million deficit in Medicaid funding in this current year.  Growth in 2003 is estimated at 14%, which is consistent with counties around our state.  At this rate, Medicaid costs will increase $7 million over our 2002 adopted budget.

 

It is expected our local costs for the Albany Medicaid program will grow each year due to increases in the cost of medical care and the growth in our aging population.  However, also driving up costs is a series of enrichments our state government has added to the basic federal Medicaid package of benefits.  Just since 1999, Albany has added ten major Medicaid enrichments, four of which were added after September 11th, 2001, with their full knowledge of the financial difficulties facing state finances!  No other state in the nation offers such a rich package.  Clearly, it is within the state’s prerogative to define the benefit program it wishes to make available to New Yorkers.  Our problem in New York, however, is that Albany makes those decisions with the knowledge that the federal government will pick up fifty percent of the costs and counties will pick up twenty-five percent.  For twenty-five cents on the dollar, Albany can afford to be generous with your property tax dollars knowing legislatures and county executives across New York State will pick up the tax tab for them. 

Funding a massive public health care program on the regressive property tax is neither good public policy nor sound financial policy.  As the Dutchess County Executive and President of the New York State Association of Counties, I continue to call upon the Governor and our elected state Senators and Assemblymen to cap the counties’ share of Medicaid costs at the 2001 level, thereby paying future costs from the much more diverse and progressive state tax base.  Doing so is smarter and more fair. 

The Albany-imposed Medicaid mandate impacts this budget by siphoning money away from other high priority programs and services I care about thereby inflicting casualties in our collaborative government and not-for-profit service delivery network. 

We urge everyone to contact your State Senators and Assemblymen and tell them to CAP MEDICAID NOW!

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Other Mandated Payments

Two Albany-imposed mandated education programs required to be subsidized by local property taxpayers will again be major burdens on the county budget and local property tax bills.  These two education programs mandating specialized education services for children continue to be the obligation of county government instead of school districts where they rightfully belong.  The costs of these Albany-imposed mandated education services are expected to total nearly $17 million in the 2003 county budget. Albany will require almost $7 million of that amount be borne by local property taxpayers in our county operating budget.

Mandated Education Programs graph

Presently, counties have full fiscal responsibility for providing services to infants and toddlers with disabilities under the Early Intervention Program (EIP).  Counties must pay 100% of the cost for all these services up front with only partial state reimbursement of 50% at some later point.  Counties are also first payers for the Pre-school Special Education Program, (PSE). Albany requires the county to pay 100% of the cost of the service and then wait for reimbursement from the State, often up to one year later, causing a significant cash flow problem for counties for another Albany-imposed mandated program in which county government lacks meaningful policy control.  In addition to that reimbursement delay, the state is indefensibly not reimbursing counties the full rate of 69.5%, which is required by their own state law they passed; Albany continues to pay back counties only 59.5% of the PSE program costs.   

Other examples of Albany-imposed mandates of significant cost to local property taxpayers in the 2003 proposed county budget include:

  • The placement of juvenile delinquents in state-training schools at a total cost of over $1.1 million;

  • Family Assistance/Social Services $10.5 million; and

  • Foster Care and Institutional Care for Children $19.4 million,

for a total of $31 million.  Of this $31 million, Dutchess County local property taxpayers are required to cover an estimated $10.5 million.   

Paying the cost of all these Albany-imposed mandated programs limits county dollars that I would prefer to direct to services such as Sheriff’s patrols, highway maintenance, support of Dutchess Community College, county parks and local libraries, all of which are important to the residents of Dutchess County.

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Albany-Imposed Employee Pension Costs 

Pension Costs graph

Government employees in Dutchess County and other governments in New York State are provided pension benefits through the State government’s Employees’ Retirement System.  The system is funded from three primary sources—employer contributions, employee contributions, and income derived from retirement system investments. 

Through much of the 1990’s, strong investment earnings made it possible to maintain relatively low to moderate employer contributions, as low as $129,000 in 1992.

Pension costs are expected to more than quadruple next year—skyrocketing from an estimated cost of $1.2 million in 2002 to at least $5.2 million in 2003.  This dramatic increase results from plummeting retirement system investment earnings and a series of pension enrichments enacted in Albany, which

simultaneously increased benefits and reduced employee contributions.  While these enhancements are certainly beneficial to our hardworking employees, this is another example of the fiscal challenge county governments face locally when the State makes decisions for us, hands us the bill, and tells us to pay for it! 

Economic Slowdown 

The most apparent impact of the persistent economic slump, other than on pension system costs discussed above, is sales tax receipts and interest income. 

Year to date sales tax earnings are four percent above last year’s receipts.  A prudent projection of receipts for the remainder of this year results in a potential annual increase of approximately 3.5%.  That same annual growth rate is projected for next year under the assumption that our local economy has demonstrated sufficient strength to weather the economic downturn with modest growth since 2001 and will continue to do so at the current pace in 2003. 

Interest income is projected at approximately one half the amount that was earned in 2001.  This results from depressed interest rates.  However, it is also because we have lower deposit levels after the payout for employee contract settlements and for the $2 million deficit in the Albany-imposed Medicaid program. 

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MANAGING IN DIFFICULT TIMES

The budget before you reflects the following seven-pronged strategy to manage today’s fiscal realities:

  • reduce workforce costs
  • Spread the pain
  • Reduce or eliminate programs
  • Reduce duplication and overlap
  • Use technology to cut overhead
  • Create “Cost Cutting Brigades”
  • Increase revenue  

Reduce Workforce Costs 

I am pleased to say I have avoided the need to fire or terminate any county staff--there are no layoffs in the 2003 Tentative Budget!  This was an option I rejected as a means of finding new monies to pay for the Albany Medicaid increases.   

The Executive and Budget Office, in cooperation with agency heads, have for many years reviewed the classification and need to fill each position that became vacant before authorizing recruitment to fill the vacancy.  This was done in order to achieve the savings target included in each annual budget.  This year, however, as the Medicaid deficit became apparent, I took a more aggressive step and directed staff to suspend all existing hiring approvals and to authorize the filling of only the most mission critical positions. 

In addition, we negotiated with two of our employee unions an increase in the physician and prescription co-pay amounts as a means of stabilizing health insurance premium increases.  This change is lowering the cost of health insurance coverage for both the county and our employees.  The jail union leadership has refused to accept this mutually beneficial offer. 

While we avoided layoffs, we have deleted thirty-one vacant positions in the tentative budget for a net to county savings of $569,000.  The need to create new positions, primarily to address the growing demand for child and adult protective services, reduced that net savings to approximately $227,000.  However, the tentative budget also includes a net to county salary offset of $1.5 million to be realized through retirements. 

At its August meeting, the Legislature approved legislation to enable eligible county employees to obtain additional benefits if they retire before the end of this year.  Preliminary indications suggest a number of employees will take advantage of this offer.  While some have already made their intentions known, others continue to weigh the impacts before deciding.  The early retirement program will need to be managed to achieve the desired financial target.  However, doing so will not be invisible to our residents and clients.  Rather it will be seen and felt as services, programs and administrative support systems suffer staffing shortages.  This is also true with the thirty-one vacant positions which we eliminated.

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Authorized Positions graph

It is important to emphasize, Dutchess County Government employs fewer people today than it did a decade ago.  Ours is a very lean government which depends greatly on the ingenuity and hard work of its managers and employees.  To assume that our workforce can be slashed without impact is foolish and irresponsible.  Once a clearer picture is available in December of which employees will leave and which will stay, senior staff and I will reassign remaining staff as needed to continue high priority programs, will analyze position classifications vis-à-vis redefined duties, and will authorize promotions and recruitments to satisfy critical needs.  Again, I restate--There is little question that programs and services will be negatively impacted.  Our objective will be to minimize those impacts to the greatest extent possible.

 

Spread the Pain

There is no miracle cure or simple solution to ease the pain in this budget or the destabilizing impact that will inevitably result from the simultaneous retirement of so many employees. The executive office and department heads will have a daunting challenge to maintain operational stability due to the early retirement program.

I do not believe “across the board” cuts to budgets is a wise choice because doing so ignores program priorities and the effectiveness of service delivery. Accordingly, the 2003 Tentative Budget does not take this approach. However, Executive and Budget staff worked closely with commissioners and department heads to determine the impacts of holding spending at current levels or less. These impacts were analyzed and proposed growth above those levels was generally rejected.

Reduce or Eliminate Programs

The role of government is to provide services to the public. The debate often centers on which services and at what level they are to be provided.

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At the outset of development of the 2003 budget, we faced the very real possibility of having to propose a property tax increase of over 50%. Through the efforts of many, however, we were able to identify strategies and efficiencies to significantly reduce that property tax shock.

As a result of these efforts, we have saved a number of programs that otherwise would have been reduced or eliminated entirely. Included in this “saved category” are Sheriff’s road patrols at current levels and the School Resource Officer Program; highway paving and maintenance; flu clinics and programs for the elderly; criminal prosecution services at current levels; water quality testing and West Nile Virus initiatives; availability of parks facilities at current levels; community planning and economic development programs; our very important Domestic Abuse and Forensic Nursing Programs at current levels; grant funding of the Bardavon and other community partners and more. Of particular note, my Tentative Budget provides for the restructuring and strengthening of our county Medical Examiner’s Office as was approved overwhelmingly by the Legislature earlier this year.

While we were fortunate to be in the position to maintain many highly valued services, the Tentative Budget does include casualties. With a sense of great personal loss, I am forced to reduce funding of my Children’s Health Initiative by $400,000, a program which has accomplished so much in the past three years (just a temporary pause, I hope). I was also forced to eliminate county grants to libraries with the sincere hope they are able to replace this loss with local municipal or library district revenues or grants from other institutions. Let’s remember, local libraries are not part of county government. They are local and when trying to be sure we have money for necessities like the 911 Dispatch Center or for sand and salt to keep our roads safe, it is difficult to say we also can be so altruistic to non-county government organizations who have other revenue sources. Other casualties include the grant we have provided to the Civic Center in past years, as well as reductions in grant amounts for the Arts, Cooperative Extension and other environmental services, mediation services, and others.

Understandably, legislators, the media, interest groups, and residents will focus much attention on what county government cannot afford to do. That must be balanced, however, with an understanding of the numerous very important programs and services that will continue to be provided for our residents. After all, we will still be spending over $300 million. It is also important to understand that none of the casualties of this budget would have occurred had it not been for the Albany-imposed Medicaid mandate siphoning dollars away from these high priority local programs.

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Reduce Duplication and Overlap

Throughout my tenure I have sought opportunities to restructure service delivery systems to achieve greater efficiency while also improving program effectiveness. I have included $100,000 in the 2003 Tentative Budget for the purpose of an organizational review of Dutchess County’s health, social and human service delivery system. This study will include the departments of Aging, Health, Mental Hygiene, Social Services, Veteran’s Affairs, and the Youth Bureau.

Changing conditions call us to an even higher level of action. When organizations are most challenged by economic downturns, increased costs, and higher demands for services, a comprehensive internal look must be made of the organization.

Business and industry re-engineer all the time and we want to continue to do that in county government. My goal is to find more opportunities to identify promising innovative solutions. Improved, more cost-effective and integrated service delivery must be explored under the existing environment. What was up to standard just a few years ago may not be good enough for county government today and tomorrow.

The study will identify possible overlap, duplication, and mandated versus optional services. The objective will be to identify recommendations for operational improvements and realignments, including consolidations as well as alliances with community partners. The goal is to continue to improve services, service delivery and, very importantly, save taxpayers money.

A similar organizational review is also envisioned in the 2003 Budget for criminal justice agencies for just as changing conditions require us to review existing human service delivery systems so, too, do they require us to analyze criminal justice services.

Use Technology To Cut Overhead

One reason Dutchess County government employs fewer people today than a decade ago is my ongoing commitment to using technology wisely. Included in the 2003 budget is funding to bring the Mental Hygiene Department’s management system into compliance with the federally mandated Health Insurance Portability and Accountability Act, hardware and software efficiencies for public safety systems in the Sheriff’s Office and Probation Department, enhanced fiber optics to improve data sharing with the Department of Social Services and others and hardware and software to improve Web based services. These “no frills” investments are critical if we have hope in achieving service targets with a reduced workforce.

Create “Cost Cutting Brigades”

Earlier this year I formed a task force consisting of representatives from the Executive and Budget Offices, Personnel, Finance and the Comptroller’s Office to analyze workflow and internal control procedures in a county department and to recommend methods to improve each. That very successful “pilot project” has encouraged me to continue the approach in 2003, particularly as it becomes necessary to sustain service delivery objectives with reduced staff.

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Increase Revenue

- Increase Revenue Table -
  2002 Modified 2003 Tentative Difference $
Albany-Imposed Medicaid $33.5M $40.5M $7.0M
Other Albany Mandates 54.5 59.7 5.2
Pension Mandate 2.2 5.2 3.0
$90.2M $105.4M $15.2M
Other Than Albany-Imposed Mandates 213.5 208.9 (4.6)
Total $303.7M $314.3M $10.6M

It is obvious from the above discussion that the Albany-imposed Medicaid burden together with other state mandated costs have had a serious detrimental impact on county government programs and services and our relationship with our community-based not-for-profit partners. The 2003 Tentative Budget totals $314.3 million, $10.6 million (3.5%) greater than the current budget as modified by the legislature. As demonstrated on the chart at left, if you subtract out Albany-imposed mandated payments for Medicaid, pension and other human service programs, we have squeezed down the remaining appropriations to $4.6 million LESS THAN THE CURRENT YEAR 2002 MODIFIED BUDGET. However, the full impact of these Albany-imposed burdens cannot be absorbed without totally undermining county government’s ability to serve the public. We are forced, therefore, to consider revenue increases to preserve essential programs and services.

The Tentative Budget includes numerous small increases in existing fees. These increases range from aircraft tie-down fees at the airport, to environmental engineering fees in our Health Department to the fees charged for services provided by the Sheriff and more. Of particular note, however, is the Budget includes anticipated revenue of $300,000 to be derived from an increase in the Hotel/B&B Room Tax. This tax, which is paid by out-of-town visitors, would increase from three percent to four percent effective in April. The proposed rate is consistent with those of other New York State tourism destinations. Albany County has proposed an increase from 3% to 6% in their tax; Niagara and Warren Counties (Lake George) have each proposed new “bed taxes” at 4%. Please also be mindful my budget includes new tourism promotion funds for Internet Web marketing.

Also included in the budget is a twenty-five cent bus fare increase to help offset lost federal transit aid. The $1 proposed rate mirrors the rate adopted by the Mayor and City Council for the City of Poughkeepsie transit system.

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Property Tax Levy graph

It is important for the residents and businesses of Dutchess County to be assured that the Executive and Legislative branches of this government have been united in our effort to reduce the property tax burden. In fact, the property tax burden has been reduced seven times during my ten-year tenure as County Executive. As a result of an exhaustive amount of work and some very unpleasant, difficult choices, this budget includes an average county property tax increase of 9.6%. County property taxes only represent approximately 13% of the average tax bill for all land taxes. The increase will cost the hypothetical “average” owner of a home assessed at $150,000 an extra $46 per year. Even with the additional amount to be raised by property taxes, however, I am proud to say because of the seven tax cuts in my past ten budgets, the property tax levy for the Dutchess County share of the property tax bill will still be below the 1989 level!

 

LOOKING FORWARD

To quote perhaps one of the most often quoted individuals of the twentieth century…Yogi Berra, “The future ain’t what it used to be.”

This is not a year of business as usual. The Albany-imposed Medicaid mandate has changed tomorrow’s fiscal realities. Despite the casualties and program and service impacts included in this budget and despite its call for increased fees and taxes, it also calls for a significant appropriation of fund balance.

I have been unyielding in protecting the County’s fund balance from those who, if they had their way, would have squandered it on pet projects, new recurring county obligations and new entitlements. A journalist recently confided to me that he too was guilty of advocating spending down county reserves. It was my belief that the good times enjoyed at the top of the economic cycle would inevitably be followed by the harsh reality of economic decline. While I would certainly have preferred a strong economy, unfortunately, I have been proven correct.

Fund Balance graph

I have proposed the prudent use of $4 million of the remaining fund balance in 2003 to maintain essential services and minimize the impact of Albany-imposed mandates on our local property taxpayers. Doing so does not solve our dilemma, however, it merely provides more time to develop long-term strategies to address tomorrow’s fiscal realities. It must be clear to everyone by now, the solution rests in Albany. Dutchess County and counties across New York State must have their collective voice heard that a fundamental restructuring of the Medicaid financing relationship is needed. The regressive property tax simply cannot support what is very quickly becoming universal health care for New Yorkers.

Always the realist, I know such fundamental restructuring will not occur overnight. Therefore, one objective of this budget, and a key policy recommendation to the county legislature, is to set a course to rebuild and replenish our fund balance through a combination of revenue enhancements, program discipline and continued fiscal control. It is essential these reserves be reestablished to their prior levels in order to preserve our enviable bond rating. If we do not, we will pay more to borrow money and with no rainy day fund, county government will face a fiscal storm of huge proportion.
 

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Rebuilding our reserves will be a particularly difficult undertaking because not only will 2003 be a difficult year, but 2004 and 2005 are sure to be as well! Why? Because the Albany-imposed mandates have created a structural deficit in our county’s finances that will be extremely difficult to overcome. I feel as if we are looking into a long dark tunnel searching for the light at the other end. I know it is there and I know we will find it, but the journey will be a difficult one. There are no simple answers, no quick fixes, and no way to avoid the difficult journey.

We face these trying times ahead with the knowledge that difficult decisions will need to be made requiring a few pounds of political courage in both the Executive and Legislative chambers. I have tried to submit a plan which is both sound and fair given the difficulties we face. Just as we did in the mid 1990’s, we need to take decisive action now in order to ensure the strength of our community and our service delivery system in the future. The people of Dutchess County expect nothing less from us. I look forward to working with you in the weeks ahead as you review, and act on this plan for Dutchess County in 2003.

In closing, I wish to express my thanks to my entire Executive Office and Budget Staff, to all my Executive Department Heads and to the independently elected officials for their assistance, understanding, cooperation and support throughout the difficult process of developing the Year 2003 Executive Budget.


Sincerely,

WILLIAM R. STEINHAUS
Dutchess County Executive

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BUDGET SUMMARY

The 2003 Budget includes appropriations of $314.3 million, a $10.6 million or 3.5% increase over the 2002 budget as modified by the County Legislature. Note the modified budget includes multi-year retroactive salary and employees benefit increases for most union-represented employees. When Albany-imposed mandate costs are factored out, 2003 non-mandated spending is actually $4.6 million less than the current 2002 modified budget.

- 2003 Tentative Budget Summary Table -
 2003 Tentative Budget
2002 Adopted 2002 Modified 2003 Tentative Amount Change* % of Change*
Appropriations
Salaries $83,155,347 $88,161,250 $88,497,408 $336,158 0.4%
Pension 2,211,588 2,244,588 5,200,000  2,955,412 131.7%
Other Employee Benefits 22,397,482  22,871,343 23,721,644 850,301 3.7%
Total PS: $107,764,417  $113,277,181 $117,419,052 $4,141,871 3.7%
Equipment  1,081,175  1,230,176 507,717 (722,459)  -58.7%
Supplies  5,938,391 6,181,102 5,673,797 (507,305) -8.2%
Utilities 3,126,942 3,118,415 3,068,247  (50,168) -1.6%
Insurance 1,197,650  1,197,650 1,803,350  605,700 50.6%
Contracted Services 70,509,930 74,324,147 70,554,521  (3,769,626)  -5.1%
Mandated Payments  88,097,168  87,998,721  100,191,947 12,193,226  13.9%
Contingency / Other  1,400,000 1,001,054  1,150,000 148,946  14.9%
Resale  480,080  480,080 394,772 (85,308) -17.8%
Debt Service 12,969,589 12,969,589  12,200,179 (769,410) -5.9%
Interfund  1,381,512  1,887,149  1,333,680  (553,469)  -29.3%
Total OTPS:  $186,182,437 $190,388,083  $196,878,210 $6,490,127  3.4%
Total Appropriations: $293,946,854 $303,665,264 $314,297,262 $10,631,998  3.5%
Revenue
Property Tax Levy (Net)  49,975,154  49,475,154 57,453,000  7,977,846 16.1%
Sales Tax 87,785,982 87,785,982  94,800,000 7,014,018 8.0%
Interest Earnings 1,589,628  1,589,628 1,139,606 (450,022)  -28.3%
State 58,340,477 58,606,967 64,084,971 5,478,004 9.3%
Federal 25,884,160  27,916,810 30,361,188 2,444,378 8.8%
Other  61,149,976 62,534,599 59,938,497 (2,596,102) -4.2%
Total Revenue: $284,725,377 $287,909,140 $307,777,262 $19,868,122  6.9%
State Medicaid Recoupment 0 0  2,200,000  2,200,000 ---
Appropriation of Fund Balance 9,221,477 15,756,124  4,320,000 (11,436,124) -72.6%
Total Available: $293,946,854 $303,665,264 $314,297,262  $10,631,998  3.5%
*2003 Tentative vs. 2002 Modified

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