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.

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.

Program Amount
Public Health (medical examiner, environmental health, communicable disease, nursing, long-term care services) $29.4 million
Sheriff (law enforcement and jail operations) $25.7 million
Mental Hygiene (substance abuse, outpatient, continuing treatment, mental retardation and developmentally disabled services) $24.5 million
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 full knowledge of the financial difficulties facing state finances.

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.

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

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.

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

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.

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. Through much of the 1990s, strong investment earnings made it possible to maintain relatively low to moderate employer contributions.

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.

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.

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

Managing In Difficult Times

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

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.

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.

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.

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.

Reduce or Eliminate Programs

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.

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. I was also forced to eliminate county grants to libraries, 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.

Reduce Duplication and Overlap

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. The objective will be to identify recommendations for operational improvements and realignments, including consolidations as well as alliances with community partners.

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, enhanced fiber optics to improve data sharing, and hardware and software to improve Web based services.

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.

Increase Revenue

The Tentative Budget includes numerous small increases in existing fees. Of particular note, however, is the budget’s 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.

Also included in the budget is a twenty-five cent bus fare increase to help offset lost federal transit aid.

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.

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 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.

We face these trying times ahead with the knowledge that difficult decisions will need to be made requiring 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.

Sincerely,

WILLIAM R. STEINHAUS
Dutchess County Executive

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. When Albany-imposed mandate costs are factored out, 2003 non-mandated spending is actually $4.6 million less than the current 2002 modified budget.

Category 2002 Adopted 2002 Modified 2003 Tentative Amount Change* % Change*
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%
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

2002 Press Releases