Revenues looking up

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County> FY2015 budget no longer facing 5-percent reduction

By Arin McKenna

Sharp declines in Los Alamos County’s Gross Receipts Tax (GRT) revenue —approximately 20 percent over the past three years — may have bottomed out, at least for the time being.
At Tuesday’s county council meeting, County Administrator Harry Burgess and Deputy County Administrator/Chief Financial Officer Steven Lynne reported that an additional projected 5-percent shortfall has been averted by the passage of a federal spending bill in January.
With 80 percent of the county’s revenue derived from Los Alamos National Laboratory spending, federal cutbacks in recent years have had a major impact on county revenues. Automatic spending cuts known as the budget sequestration, which went into effect in 2013, hit the county especially hard.
Sequestration cuts were scheduled to increase this year if Congress failed to reach an agreement. In November 2013, county staff asked council for budget guidance based on an anticipated 5-percent decrease in revenues. Council set a target of a 5-percent reduction in general fund expenditures for FY2015.
The decreased expenditures would have made cutbacks in service levels unavoidable. Council asked staff to minimize the negative impacts.
Burgess and Lynne reported that the federal fiscal year (FFY) 2014 budget passed in January provides a greater level of Department of Energy (DOE) funding than previously projected and appears to restore some funding levels reduced under the sequestration process.
Although the DOE has not yet finalized budget allocations to individual labs, LANL sources are confident the lab spending will be either flat or increase slightly.
In light of the new information, staff recommended targeting a flat general fund budget for FY2015, rather than the 5-percent reduction originally proposed.
“We don’t want to bring a budget that is unnecessarily restrictive and has unnecessary cuts,” Lynne said.
“We think a flat budget will allow us to mitigate the most severe negative cuts. This is much more palatable, from a service level perspective.”
Inflationary pressures, such as a 14-percent increase in medical costs, and council’s direction to provide at least a minimal salary increase for county staff will mean that some budget items will decrease, but significantly less than originally projected.
“There could be some noticeable impacts, particularly with the wildcard on the indigent fund, but in general we’re looking to eliminate most of the very negative impacts,” Lynne said, referring to legislation underway to intercept at least 1/16 of New Mexico counties’ indigent fund GRT for the state Department of Health. The county anticipates needing $400,000 to $800,000 of general fund moneys to cover local indigent fund services.
Burgess assured council that staff will continue looking for efficiencies even without budget reductions.
“We continue to have these discussions whenever a position becomes vacant with respect to whether or not the same services can be provided internally without filling that position. Retirements have prompted reorganization,” Burgess said.
“Within our senior management team, we did urge everyone to continue to develop that 5-percent reduction, and through that process identify a variety of areas where each department feels they will be able to find some additional savings.”
Councilor Rick Reiss argued that staff should continue with the 5-percent budget reduction, since the DOE allocations are not yet firm.
“We really don’t have any evidence that the lab will spend in the right places where it will generate GRT,” Reiss said, noting that business people like himself do not rely on projections. “If you’re a small business person, you don’t start spending it before you have evidence that in fact it’s creeping up.”
Lynne pointed out that the county has always had to rely on LANL projections, in part due to a two-and-a-half month delay in GRT reporting.
“The evidence doesn’t come until we’re in that year and the money is spent, in any year,” Lynne said.
“The updated estimates at this point are based on discussions with several different entities. Because of the consistency that we’re getting from a variety of sources that we’ve talked to, we think it’s reasonable to adjust the estimate at this point in time.
“My feeling is it’s not wishful thinking. It’s substantive at this point. And that’s based on the same methodology we use every year.”
Reiss found no support for his suggestion that staff develop a budget with a 5-percent reduction that could be adjusted upwards if the projections were confirmed.
“I think there are consequences to a 5-percent cut that I don’t want to see for arbitrary reasons,” Councilor Kristen Henderson argued, noting the staff has proven that it is willing to monitor the situation and make adjustments.
“If you’re left with money on the table, then you have to put it somewhere, but it’s not under the control of the budget process,” Izraelevitz said.
Staff will bring the new budget guidance back as a consent item for a council vote at a regular meeting.
“This is the first good budget news we’ve had in a while,” Council Chair Geoff Rodgers said. “Think about that. A flat budget is now good news.”
Rodgers also asked staff to include suggestions for increasing salaries for the county clerk, assessor, sheriff and probate judge during budget hearings. The state legislature approved a 15-percent increase for elected officials, but Rodgers suggested a smaller increase in order to achieve parity with the 2-percent increases staff has been receiving.
Izraelevitz argued that the increase should be more, since the clerk and assessor have not received raises since 2009, the probate judge since 2006 and the sheriff since 1998.
He suggested an increase of 2-percent per year dating back to the last increase, not to exceed the 15-percent maximum.
Councilor support appeared to be split between those two options.
Council also heard a report on the first year of the county’s new Social Services Division. Read more on that in Thursday’s Los Alamos Monitor.