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Revenue losses hit hard

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County: Staff looks for ‘holistic’ approach to budget adjustments

By Arin McKenna

Like a one-two punch to the fiscal gut, county officials have been left reeling in efforts to shore up a budget that’s just been hammered.

Los Alamos County Council’s mid-year budget review at the end of January will be anything but routine. Two unexpected revenue losses have staff scrambling to address both short-term and long-term implications. 

Despite ongoing conversations with the lab and efforts to prepare for a downturn in federal spending, no one anticipated the news coming from Los Alamos National Laboratory in November. 

LANL’s fiscal year ends in September. County Administrator Harry Burgess said that the largest expenditures traditionally come in that final month. But the report that posted Nov. 15 was shocking for county officials.

“When we logged on the state’s reporting website, we learned that not only was it a decrease, but it was a significant decrease,” Burgess said. 

“The spending for the lab was approximately $3 million less for the month of September this year than it was one year prior. There have been fluctuations over time, but this was a greater amount than we’d seen before.”

Burgess said that the behind-the-scenes message he is getting is that the lab is trying to curtail certain kinds of spending to carry funds forward.

The next blow came two days after that report, when Burgess received a call informing him that the county would have to reimburse the lab $3.5 million for overpayment of gross receipts taxes in FY2011.

“Now, this has occurred in the past. We were told the last time it occurred that it would likely be the last time it ever occurred. So it was quite a shock to receive this news,” Burgess said. “We share this burden with the state, because some of those taxes go to us, some of them go to the state.”

Burgess said that the state has adjusted the lab’s taxable expenditures downward twice before, after LANL reviewed its taxable expenditures and questioned taxation of certain activities.

“Clearly this alters our revenue projections for this current fiscal year,” Burgess said. “Despite the news we’ve heard in the past, those were both unanticipated to the point where we need to curtail spending not only now but also in future years.

“We’re not going to run out of money to fund this year’s budget. However, it is clear that future budget years will be more difficult, and any actions we take at present will alleviate actions we have to take in May and in future years.”

Burgess said the impact is mitigated by the county’s proactive approach to establishing reserve funds beyond those required by the state. Approximately 25 percent of annual revenues are channeled into a revenue stabilization fund to adjust for lab expenditures that “fluctuate wildly.”

“We have approximately enough cash in the reserve funds to carry us through three of these types of cycles,” Burgess said. “However, the question becomes, when will the federal situation change and the budget at the lab actually increase to see a greater return at the county level? And I can’t predict that. I anticipate it could be longer than that.”

Burgess and his staff are evaluating ways to cut expenditures and preparing a mid-year budget revision to present to council. 

In the meantime, all major expenditures have been put on hold. 

“We’re poised to spend about $25 million on capital projects alone,” Burgess said. “I could not with good conscience recommend that the county council award contracts toward these projects or make other sizeable expenditures that were on our tickler for other future agendas until we had the opportunity to discuss this in a holistic perspective.

“I know that’s not the message that people want to hear, especially those that have been working so hard on these projects. And the message is not that they’re in any way cut or curtailed at this point. I just felt we had to look at every aspect of our budget before making those decisions regarding those multi-million dollar projects.”

Employee vacancies are also being evaluated on a case-by-case basis until after the budget discussions. Positions that affect public health or safety are being filled, and others such as shift positions which could increase overtime are being evaluated individually. 

“The process has been slowed down,” Burgess said. “I was asked if we were having a hiring freeze, and my response was, it’s pretty cold, but it’s not frozen.”

Burgess said his staff has already identified a number of avenues for reducing the budget.

“We’re going to have a fully vetted proposal before council in January, but I don’t have that plan fully detailed right now. This news is still three weeks old at best, and we’ve been actively looking at ourselves to see where we could come up with some savings.

Burgess will present his report to council at the mid-year budget review, tentatively scheduled for Jan. 29.