Monroe County Board of Commissioners. Presentation of Guidelines for 2018 Budget J. Henry Lievens, Board Chairman Jerry A. Oley, Board Vice-Chairman

Transcription

1 Monroe County Board of Commissioners Presentation of Guidelines for 2018 Budget J. Henry Lievens, Board Chairman Jerry A. Oley, Board Vice-Chairman Michael Bosanac Administrator/Chief Financial Officer May 2, 2017

2 2018 BUDGET CALENDAR: Presentation of Guidelines Preliminary 2018 Budget Budget Forecasting Model OUTLINE FOR TODAY: Executive Summary of BG: 1. PURPOSE OF THE BUDGET GUIDELINES 2. BUDGET ASSUMPTIONS-MANY & PRELIMINARY 3. PAST FINANCIAL MANAGEMENT STRATEGIES=RESULTS/OUTCOMES 4. FINANCIAL POSITION-INCLUDING TRENDS 5. PRELIMINARY 2018 BUDGET OUTLINE 6. CONCLUDING SUMMARY 7. NEXT STEPS

3 2018 BUDGET STATEMENT 1. GENERALLY FINANCES REMAIN STABLE 2. FISCAL DISCIPLINE IS ROOTED IN ORGANIZATION-some cost centers over spent in 2016-But 7 year trend shows good cost control 3. EXPENDITURE TREND LINES- have been adjusted to mirror resources of organization 4. HEALTH CARE & RHC TRENDING POSITIVE W/COST CONTROLS RHC Funded Ratio Improving 5. CLAIMS FOR LITIGATION REMAIN LOW vs. 30 YEAR TREND 6. SOME REVENUE GROWTH DUE TO INCREASED TAXABLE VALUES

4 1. PURPOSE OF BUDGET GUIDELINES Broad View of the Organization: Focus on Financial Decisions and outcomes from these decisions Outline Trends: Expenditures & Revenues in context of drafting the budget Present a Forecast: Years Budget Model Analysis of: Major Drivers/Changes Revenues & Expenditures- Changes in Net Position General Direction: Finances drive where we go; requisite data as foundation for budget PA 2 basis 2018 Preliminary Outline: Show Big Picture of budget/baseline variances vs. current year-no surprises from past forecast

5 2. Assumptions Used in Guidelines Revenue Sharing Payments Continue; but flat lined based on Governor s Budget Senate has discussed 1% more; but not expected $3.1 million in 2018 CIP County Incentive Program-threshold for Revenue Sharing County has met compliance requirements Property Taxes Tax Losses Slow but positive Growth; 2018 up 1.50% CRC=Monroe County inflation adjusted taxable value; 97% of values in 2000 Personal Property Tax Reform-expect State to continue payments.. double payment in 2016; consider it one-time extra revenue of $406,000 Michigan Tax Tribunal Decisions-Continue to adjust for in budget forecasts Other Revenue Overall Flat Projections= some up; some down Concerns with Central Dispatch Revenues=more GF to maintain operations Special Revenue Funds Special Attention throughout 2017 as we build 2018 Budget Dormitory & Dispatch-revenues Child Care Fund-expenditures & revenues

6 3. Major Drivers of Budget Property Tax Revenues Stability in revenue source continues in 2018; upward trajectory of trend line 65% of GF Revenues: 2008=$29.6 million vs. 2017=$27.26 million ($2.4 million less annually vs. 9 years ago) Long-term Forecast Growth.75% 1.50% % in years Organization Development Continue to Invest & Shift Funding & Personnel to Areas of Increased Service-Public Safety & Capital Have to continue to evolve to get most out of County resources; personnel & equipment Capital & Technology Fund Capital & Technology Needs-High Priority-Increased Funding to meet needs. Annual appropriation in baseline expenditures-enterprise-wide and target specific projects Tools & resources for employees; less employees=need for better resources & training 2 year project o replace mission critical payroll/hr/financial & budget systems Human Resources Small increases in staffing based on public safety officer ranks. Funded in part from tier 1 to tier 2 replacements Revenue growth not projected to be sufficient to add other non-public safety staffing. Increase police officer presence and response times in community-board s #1 priority.

7 4. PAST STRATEGIES = OUTCOMES FOR ORGANIZATION/COMMUNITY Base Wage Increases 1% increase across all groups; absorb in budget Modest wage increase flattens Pension Growth Experience study in 2015 illustrated this effect Employee Cost Sharing Results RHC Contribution-$403,272 in 2016 & trending down Over time contributions go away as benefit no longer available Pension Contributions-$658,499 in 2016 w/ slight upward trend from BWA S going forward Health Care Plan 2018 projected cost increase of 3% in budget model; +$187,379 Employee Cost-Sharing-Plan amounts under State CAPS 2012 to 2015 active employee paid claims lower by $1.6 million 2016 & 2017 rates; 2 year trend of lower costs $168,187 less Departments Reorganizations Higher Level of Productivity/Improved Efficiencies Tier 2 Total Compensation fuels savings/more work hours organization-wide Budget Forecast Model/Financial management plan dependent on Tier 2 program Low Liability/WC Cases/Claims Property & Liability Rates/Discounts; lower by $198,990 from 2007 Savings stay in County-operations Seeing increase in frequency of claims in past months vs. prior 3-4 years; within an acceptable variance

8 5. FINANCIAL POSITION CONTINUED Outcome: Health Care & RHC Claims Active & Retiree Health Care Total Claims/Premiums $9,750,000 $9,656,869 $8,463,076 $8,711,730 $8,250,000 $6,463,873 $7,987,645 $8,048,402 $7,775,774 $7,055,472 $6,750,000 $5,250,000 $4,306, $4,945, $4,853, $4,499, $4,616, $3,978, $3,750,000 $3,506, $2,749, $2,250,000 $1,406,392 $750, $929, Active Claim Amt. Retiree Claim Amt. Total Claims =$13,691 claims per contract vs. 2015=$10,412 claims per contract =606 covered contracts vs. 2015=570 covered contracts

9 5. FINANCIAL POSITION-KEY TRENDS Expenditures-Retiree Health Care: RHC Funding Annual Obligation 2 nd Biggest $6.5 Million/Yr. Demographics Looking Forward Short funded full ARC by: $22.1 Million past 12 yrs. Trade-off/ Balanced Approach Funding ARC 80% Continue this level of funding Legacy Program Cost Projected Flat at this amount UAL Trend: $122.2 M 2013 $89.9 M 2015 =$32.3 M Positive gain More Retirees Than Active 5 yr cost trend is stable Going forward Healthcare mirroring helps w/new plans-control cost escalation Retiree Health Care Retirees/Beneficiaries vs. Active Eligible Employees Board s fiscal discipline got RHC under control $50 M in Trust UAL reduced Significantly Active Employees Retirees & Beneficiaries

10 5. FINANCIAL POSITION CONTINUED RHC-Other Post Employment Benefits-Trust Year End: Monroe County Retiree Health Care Trust Fund Market Value $50,000,000 $46,866,184 $45,000,000 $40,000,000 $36,725,030 $41,314,729 $41,495,230 $35,000,000 $31,250,910 $30,000,000 $25,000,000 $23,549,779 $24,761,923 $25,714,950 $20,000,000 $20,635,014 $18,222,996 $15,000,000 $10,000,000 $5,000, Positive trend Look to continue trend as assets in Trust grow. County has added $10.3 Million in cash to Trust from The balance of the Trust s value has come from investment growth. March 31, 2017 $50 Million of Market value in Trust.

11 Per Capita Cost 5. FINANCIAL POSITION CONTINUED RHC-Other Post Employment Benefits-Per Capita: Retiree Health Care Unfunded Accrued Liability - Per Year-End Valuations $850 $800 $750 $700 $650 $600 $550 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $- $227 $235 $304 $336 Negative Trend line $444 $452 $450 $398 $ $528 $504 $518 $810 $647 $596 Positive Trend line shows positive trend Look to continue 3 rd year with 12/31/2016 valuation results performance will be a positive due to 1). Lower RHC costs and; 2). Investment returns exceed discount target by 1%.

12 Percentage Funded 5. FINANCIAL POSITION CONTINUED PENSION- UAL increased by $6.3 M to $73.6 M over prior year is 3rd year of Amortization on UAL; 25 year schedule Lower Funded Ratio = Higher Employer Contribution-$6.76 million/yr. Trending Higher General, Sheriff & Dispatch Funded Ratio =15 Yrs. of Declining Funded Ratio County making ER semi-annual payments th Check Payment = GF Pays Cost ($50,000 CAP) Pension Fund Funded Ratio at Year-End Valuations 160.0% 140.0% 135.9% 129.2% 120.0% 100.0% 80.0% 118.1% 116.9% 108.1% 99.7% 97.3% 97.0% 92.5% 89.3% 83.2% 79.7% 79.3% 76.6% 74.4% 73.1% 60.0% 40.0% 20.0% 0.0% Funded Ratio 1. Need average gain of 1.17% in funded ratio in each of next 23 years to reach 100% funding level (Year 2041). 2. On average, need to gain $3.2 million/year on UAL to reach $0, assuming no unexpected growth in UAL. Assumes 7% investment return.

13 Percentage of Payroll Dollar 5. FINANCIAL POSITION CONTINUED Pension Contribution Rates Based on Year-End Valuations Year Ending Valuation Sheriff General Dispatch MCERS Trust Fund Market Value Year-End $200,000,000 $190,000,000 $180,000,000 $170,000,000 $160,000,000 $150,000,000 $140,000,000 $130,000,000 $120,000,000 $110,000,000 $100,000, Year End Market Value Annual Employer contribution of $8.83 million; benefit payments of $14.6 million (2015). Includes all employers. Market value at 3/31/2017= $196.5 million.

14 5. FINANCIAL POSITION CONTINUED Revenues: GENERAL FUND BUDGETS $55,000,000 $50,000,000 Average growth <1%/Yr $45,000,000 $40,000,000 $35,000,000 $30,000,000 $25,000, * 2019* 2020* 2021* 2022* 2023* * Forecast Amounts Average Annual Growth of GF Revenues=$389,557/yr. in years Year 2023 forecast includes GF revenue at approximately year 2005 level ($45.1 million) 18 years prior. Today=13 years ago. If this holds, then it is a negative trend.

15 5. FINANCIAL POSITION CONTINUED Continued Challenge- Larger % of Budget Dedicated to Pension & RHC: -$150 Budget Allocated to Pension & RHC 2003 vs Pension: + Retiree Health Care: = Total 2003 Employer Contr. = $49,000 ARC=$2.6 Million* $2.65 Million 2014 Employer Contr. = $4.8 Million ARC=$8.6 Million* $13.4 Million 2015 Employer Contr.= $5.41 Million ARC=$10.1 Million* $15.5 Million 2016 Employer Contr.=$5.5 Million ARC=$8.3 Million* $13.8 Million 2017 Employer Contr.=$6.1 Million ARC=$8.2 Million* $14.3 Million General, Sheriff & Dispatch Groups only Employees Retirement System Unfunded Actuarial Accrued Liability - Per Year-End Valuations $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 -$50 -$100 -$150 -$200 -$82 -$88 -$38 $15 $33 $36 Obligations as % of GF Budget: 2003 Current 6% vs. 28.2%* *Based on RHC funded at 100% of ARC (Funding 80% of ARC in 2017) 2017 ER only cumulative projected amounts to pay RHC & Pension = $12.6 million $78 $119 $202 $254 $ $307 $360 $388 *

16 5. FINANCIAL POSITION CONTINUED General Fund Operating Results-11 Year Trend: Year OPERATING RESULTS 2006 $134, ($528,397) 2008 ($3,412,980) 2009 ($1,979,822) 2010 $1,991, $2,019, $146, $507, $360, $269, $894,080* *Preliminary

17 5. FINANCIAL POSITION CONTINUED GF Operating Results Moved beyond performance of ; combined ($5.9 million operating deficit) $3,000,000 General Fund Operating Results $2,000,000 $1,991,171 $2,019,126 $1,000,000 $134,059 $146,879 $507,171 $360,275 $269,821 $894,080 $0 $(528,397) -$1,000,000 -$2,000,000 $(1,979,822) 5 Yr. Average $435,643 -$3,000,000 -$4,000,000 $(3,412,980) 1. 5 Yr. average is approximately 1% operating margin of General Fund results include double PPT payment; need to cover CCF deficit. 3. After adjusting for these; operating result closer to.6% in 2016.

18 5. FINANCIAL POSITION CONTINUED History of General Fund Reserves: Highest Lowest Current 22.2% of Budgeted Expenditures (2016) 2.3% of Budgeted Expenditures (1992) 22.2% of Budgeted Expenditures (12/31/16) $13,000,000 $12,000,000 $11,000,000 $10,000,000 $9,000,000 $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 Unreserved/Undesignated General & Budget Stabilization Funds $11,712,337 $11,059,292 $11,093,606 $9,996,813 $10,076,107 $9,448,213 $9,764,596 $8,759,405 $10,569,849 $9,145,865 $9,120,778 $8,480,615 $7,245,039 $8,462,970 $8,128,366 $6,131,184 $5,002,013 $1,938,514 $1,947,741 $1,947,741 $1,947,741 Budget Stabilization Unreserved/ Undesignated Total Reserves * Projected

19 PRELIMINARY BUDGET OUTLINE Other Funding: Transfers-Out Contingency $264,321 Increase to Dispatch, Child Care & Dormitory Maintain $50,000 Capital Outlay Maintain $320,000-Sheriff Fleet Capital Improvement Maintain $200,000-Facility Projects Capital-Technology $550,000-Enterprise-wide Operations Fund Payroll/HR/Finance Application SW

20 7. Forecast GENERAL FUND BUDGET FORECAST FORECAST FORECAST FORECAST FORECAST FORECAST Charges for Service $ 4,990,495 $ 5,021,721 $ 5,045,709 $ 5,060,351 $ 5,064,635 $ 5,070,675 $ 5,060,716 Fines & Forfeits $ 32,500 $ 32,500 $ 32,500 $ 32,500 $ 32,500 $ 32,500 $ 32,500 Interest $ 90,000 $ 90,000 $ 90,000 $ 90,000 $ 90,000 $ 90,000 $ 90,000 Intergovernmetal Revenues $ 5,469,298 $ 5,262,134 $ 5,203,605 $ 5,203,605 $ 5,203,605 $ 5,203,605 $ 5,203,605 Licenses & Permits $ 241,800 $ 241,875 $ 241,950 $ 242,026 $ 242,102 $ 242,179 $ 242,256 Local Unit Contributions $ 2,229,311 $ 2,264,693 $ 2,306,847 $ 2,349,306 $ 2,332,019 $ 2,347,478 $ 2,363,361 Other Revenue $ 1,745,248 $ 1,752,809 $ 1,751,476 $ 1,758,241 $ 1,758,248 $ 1,758,151 $ 1,758,214 Taxes $ 28,132,482 $ 28,444,394 $ 28,857,659 $ 29,277,123 $ 29,702,880 $ 30,135,022 $ 30,573,647 Transfer In $ 391,938 $ 396,122 $ 395,725 $ 397,528 $ 319,389 $ 321,297 $ 323,257 Budgeted Use of fund balance $ 618,731 $ - $ - $ - $ - $ - $ - Grand Total General Fund Revenues $ 43,323,072 $ 43,506,247 $ 43,925,472 $ 44,410,680 $ 44,745,379 $ 45,200,907 $ 45,647,555 General Fund Expenditure Category Full Time Wages $ 14,465,440 $ 14,697,017 $ 14,732,140 $ 14,857,560 $ 14,845,706 $ 14,894,760 $ 14,933,755 Other Pay $ 1,859,099 $ 1,805,234 $ 1,807,863 $ 1,810,362 $ 1,751,377 $ 1,753,222 $ 1,755,080 Fringes $ 13,011,046 $ 13,157,530 $ 13,494,115 $ 13,830,320 $ 14,123,581 $ 14,418,633 $ 14,717,623 Employee Turnover ADJ $ - $ (56,703) $ (74,789) $ (77,883) $ (71,305) $ (69,166) $ (67,091) Supplies $ 1,199,515 $ 1,264,830 $ 1,181,303 $ 1,277,871 $ 1,194,537 $ 1,291,302 $ 1,208,168 Services/Other charges $ 3,379,878 $ 3,345,274 $ 3,347,219 $ 3,363,910 $ 3,371,661 $ 3,386,674 $ 3,396,348 Utilities/Maintenance $ 1,168,631 $ 1,185,280 $ 1,188,565 $ 1,194,192 $ 1,199,913 $ 1,205,730 $ 1,211,647 Capital Outlay $ 399,898 $ 320,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 $ 300,000 Contingency* $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 Other Agencies $ 1,282,357 $ 1,290,686 $ 1,291,715 $ 1,292,801 $ 1,293,891 $ 1,294,988 $ 1,296,089 Transfer Out $ 7,125,937 $ 7,464,599 $ 7,022,671 $ 7,162,324 $ 7,239,427 $ 7,264,021 $ 7,287,061 Grand General Fund Total Expenditures $ 43,941,803 $ 44,523,746 $ 44,340,803 $ 45,061,456 $ 45,298,789 $ 45,790,164 $ 46,088,680 General Fund Operating Surplus/(Loss) $ (618,731) $ (1,017,499) $ (415,331) $ (650,776) $ (553,410) $ (589,257) $ (441,126) Beginning Fund Balance $ 10,155,242 $ 9,536,511 $ 8,519,012 $ 8,103,681 $ 7,452,905 $ 6,899,495 $ 6,310,239 Ending Fund Balance $ 9,536,511 $ 8,519,012 $ 8,103,681 $ 7,452,905 $ 6,899,495 $ 6,310,239 $ 5,869,113 Unreserved Fund Balance $ 9,343,524 $ 8,326,025 $ 7,910,694 $ 7,259,918 $ 6,706,508 $ 6,117,252 $ 5,676,126 Unreserved Fund Balance as % of Expenditures 21.26% 18.70% 17.84% 16.11% 14.81% 13.36% 12.32%

21 PRELIMINARY BUDGET-SUMMARY OF CHANGES vs. 2017

22 Millions 5 Year 9. Budget FUND BALANCE Model Scenario FORECAST #1 Forecast Budget Model (Amounts in Millions) $50 Monroe County General Fund Revenues, Expenditures & Fund Balance $40 $30 $20 $10 $- $(10) Revenues 42,377,689 43,065,980 42,718,390 43,534,930 44,434,739 43,323,072 43,506,247 43,925,472 44,410,680 44,745,379 45,200,907 45,647,555 Expenditures 42,303,866 41,775,331 42,250,317 43,118,725 43,593,262 43,941,803 44,523,746 44,340,803 45,061,456 45,298,789 45,790,164 46,088,680 Fund Balance 6,298,269 7,779,680 8,480,615 9,120,778 9,962,255 9,343,524 8,326,025 7,910,694 7,259,918 6,706,507 6,117,251 5,676,125 Add to/(use of) Fund Bal 73,822 1,290, , , ,477 (618,731) (1,017,499) (415,331) (650,776) (553,410) (589,257) (441,126) Unres Fund Bal-% of Exp 14.89% 18.62% 20.07% 21.15% 22.85% 21.26% 18.70% 17.84% 16.11% 14.81% 13.36% 12.32% Includes Fund 101 only

23 9. PAST FORECAST-BEST EXAMPLE OF 5 Year Budget Model Scenario #1 BOARD S PRIOR WORK AVOIDING THIS TODAY Forecast Budget Model (Amounts in Millions) Includes Fund 101 only

24 10. SUMMARY Continuing in period of Financial Stability-Budget flexibility in Reserves & Cash flow. Leveraging cash for Pension advanced payments Budget continuous effort all year-budget figures consistent with prior projections Continue funding necessary capital expenditures=automation, Fleet & Facilities GOING WELL: Property Tax Growth 1.5% Cost Control In Place See Financial Results Health Care & RHC= + Trends Able to Fund Essential Capital Low Debt-No Debt in 2019 TAKEAWAYS CONCERNS: Revenue to Expense Margin razor thin UAL of Pension & RHC Balanced Budget dependent on use of Reserves More Funding to SRF s to maintain Trend line of Court Appointed Fees

25 11. NEXT STEPS May-June Audit June.. Budget Workbooks July-August. RHC & Pension Valuations & Budget Development September Deliver 2018 Recommended Budget Provide Budget for 2018; & Projections for 2019 Update Board at Key Policy/Governance Points Incorporate Key Strategies in Budget as Outlined in Guidelines

26 END OF PRESENTATION QUESTIONS???? RECOMMENDED BOARD ACTION: MOVE TO ADOPT THE 2018 BUDGET GUIDELINES AND USE FRAMEWORK & ASSUMPTIONS IN FORMULATING RECOMMENDED 2018 LINE ITEM BUDGET