County headed for budget crisis, says finance director

Blount County’s new all-Republican County Commission will apparently get an early chance to exercise that party’s mantra of smaller government and fiscal austerity.

According to a Monday night presentation by the county’s finance director, Stephen E. Jennings, to the commission’s Budget Committee, Blount is facing a $9 million deficit in the coming fiscal year if no action is taken to avert it. And Jennings says layoffs are a real possibility, although he also says he believes cuts elsewhere should be the first line of attack.

Jennings, a retired financial officer for Alcoa Inc., took over earlier this year as Blount’s budget director, and Monday night he outlined a bleak fiscal future for the county in advance of the annual budget season so that commissioners could have an accurate picture of the situation and to seek their guidance on how they want to solve the problem.

Jennings joined the administration of former Mayor Jerry Cunningham last February, in the middle of both a budget season and the most serious economic recession the nation has faced in decades.

He may have been among the first to foresee the coming tough times, because he advocated last spring that the county preserve its $2.23 property tax rate rather than opting to revert to the state’s certified rate of $2.04, which in theory would have resulted in the county gathering the same amount of property tax money following a reassessment.

Keeping the rate at $2.23 would have meant property owners would have paid about $47.50 more per year for every $100,000 of appraised value, or about $4 a month.

In addition, the commission at that time voted to use part of its fund balance and to reallocate some tax money to the school system to address a projected shortfall there.

Jennings warned at the time that the general fund balance was being drained “far too low.”

Monday night he showed the Budget Committee a sophisticated presentation of graphs and charts that he said reveals a county headed toward a financial train wreck unless the brakes are applied, and soon.

One of the most compelling graphs was a fever chart that showed county expenditures and revenues as they rose and fell from 2007 to the present.

It showed income just short of $135 million in 2007 and peaking at just over $140 million in 2008. As the recession grabbed the nation, revenues fell back to their 2007 levels by this year and are projected to rise slightly in 2011.

But the expenditure line rose from about $125 million in 2007 to a point in 2009 where it and the revenue lines crossed, meaning there was more money going out than coming in.

That projected gap, according to Jennings figures, stands at about $9 million unless action is taken to rectify it.

“We do not have the option to do nothing,” he told commissioners Monday. “We must take steps to balance the budget next year.” A balanced county budget is mandated by state law.

Among the imperatives the county will deal with are certain minimum levels of staffing and budgeting in the school system, below which funding can be reduced.

Jennings also noted that if the county is forced into using part of its rainy day fund to balance its budget, its credit rating could be adversely affected.

By far the greatest drain on the county’s finances is employees or their benefits, he said. Just over 73 percent of the county’s $150 million budget is accounted for in salaries and benefits, he said.

That amounts to about $109.5 million. Debt service totals another $5 million, or 9.3 percent of the budget. Everything else - highways, jail operations, general county operations, sheriff’s vehicles, fuel, asphalt and more - amounts to 17.6 percent.

Of the county’s employees, 87 percent make less than $50,000 a year and 54 percent make less than $30,000 annually.

The school system employs 2,116 people, followed by law enforcement and judicial with 396. The Highway Department employs 74, and there are 257 working for the county in various other capacities.

With employee, benefits and health care costs being the overwhelming majority of the county’s annual outlay, it may seem tempting to some to look there first for budget cuts, said Jennings.

But Jennings cautioned that an across-the-board personnel reduction is not practical because it could affect state school funding and because some departments are operating at minimums already.

But he said he believes the county should look at cuts in appropriations first before turning to layoffs or a tax increase.

Jennings made his presentation to the commission’s Agenda Committee, which comprises all 21 members, Tuesday night. The commission will meet on Thursday, Nov. 18.

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