| November 1,
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
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.
to top of page
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
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!
to top of page
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.
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
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.
to top of page
Albany-Imposed Employee Pension Costs
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
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
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!
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.
to top of page
MANAGING IN DIFFICULT TIMES
The budget before you
reflects the following seven-pronged strategy to manage today’s fiscal
- 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.
to top of page
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
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.
to top of page
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.
to top of page
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
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
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.
to top of page
- Increase Revenue Table -
Other Albany Mandates
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
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.
to top of page
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!
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
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.
to top of page
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
WILLIAM R. STEINHAUS
Dutchess County Executive
to top of page
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
|Other Employee Benefits
|Contingency / Other
|Property Tax Levy (Net)
|State Medicaid Recoupment
|Appropriation of Fund Balance
|*2003 Tentative vs. 2002 Modified