Travis County Commissioners Court Voting Session Agenda Request

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1 FILED FOR RECORD 6/20/2017 9:00 AM Dana Debeauvoir - County Clerk, Travis County,TX Item 11 Travis County Commissioners Court Voting Session Agenda Request Meeting Date: June 20, 2017 Agenda Language: Consider and take appropriate action regarding update on the development of the Fiscal Year 2018 Budget and remaining key budget calendar dates. Prepared By/Phone Number: Jessica Rio and Travis Gatlin, Elected/Appointed Official or Department Head: Jessica Rio, County Executive, Planning and Budget Commissioners Court Sponsor(s): Commissioner Margaret Gómez Background/Summary of Request and Attachments: The Planning and Budget Office annually provides the Commissioners Court with an update on the development of the budget. Staff Recommendations: The Planning and Budget Office will publish the Preliminary Budget in late July with all staff recommendations. Issues and Opportunities: Please see attached backup. Fiscal Impact and Source of Funding: The First Revenue Estimate, which only includes the General Fund, was made available on May 24th, and the Second Revenue Estimate is expected later in June. A total of $720.4 million in General Fund resources is available in the First Revenue Estimate Required Authorizations: Jessica Rio, Planning and Budget Office, (512) Joe Hon, County Judge s Office, (512) AGENDA REQUEST & BACKUP MATERIALS DEADLINE: Agenda requests and backup materials must be submitted in PDF format via to agenda@traviscountytx.gov by 12 noon on Tuesday in order to be considered for inclusion in the following week s voting session. Revised

2 PLANNING AND BUDGET OFFICE TRAVIS COUNTY, TEXAS MEMORANDUM TO: FROM: Commissioners Court Jessica Rio, County Executive, Planning and Budget Travis Gatlin, Budget Director DATE: June 13, 2017 SUBJECT: Update on Fiscal Year 2018 Budget Process and Calendar The FY 2018 budget process is well underway. The Planning and Budget Office (PBO) has started to share initial draft recommendations for the FY 2018 Preliminary Budget with offices and departments and is meeting with them to incorporate their feedback into our final recommendations. While these meetings are primarily scheduled to discuss FY 2018 budget submissions and requests for additional resources, they also serve as an opportunity for PBO to discuss performance measures, related program results, and specific programmatic goals of an office or department in hopes that the FY 2018 Adopted Budget will prioritize resources to deliver the results you and our residents expect from the County. Commissioners Court is scheduled to adopt the budget on September 26, The FY 2018 Preliminary Budget is scheduled to be published on July 24, 2017 and the certified roll from the Travis Central Appraisal District (TCAD) is expected shortly thereafter. Additionally, the upcoming Special Legislative Session could affect the development of the budget. Today s update will include the latest information available on cost drivers, as well as a preview of budget requests, early revenue estimate information, and the budget calendar for July, August, and September. Vision, Mission, and Goals On May 30, the Commissioners Court approved the County s vision, mission, and goals, which will contribute to the thoughtful formulation of budget priorities in coming years. This information will be incorporated into the implementation of the performance 1

3 management component of SAP s Budget Module. PBO and the County Auditor s SAP Support Team have worked closely with offices and departments implement a planned enhancement to the County s Enterprise Resource Planning (ERP) system that will connect countywide goals and department-specific goals to performance measures. This will allow for better transparency, tracking, and reporting on how the County is meeting its goals. The first year of implementation is still in progress and information will be fully incorporated into the system before the publication of the FY 2018 Adopted Budget. Budget Drivers The Commissioners Court approved the FY 2018 Budget Guidelines in late February. This year, the external uncertainty created by the loss of Office of the Governor grants, as well as political discussions at the state and federal level, led staff to propose increased levers to protect the County s financial strength and increase its flexibility. Nevertheless, there are annual cost drivers that need to be addressed, and this year s Guidelines included estimates related to the big ticket budget drivers. In February, PBO estimated that incremental cost drivers would total approximately $26.9 million. The table below summarizes cost driver estimates formulated in February. FY 2018 Estimates (Budget Guidelines) Countywide Drivers Benefits, interlocal agreements, and Waller Creek TIF Program Specific Drivers (such as inmate costs, BCP transfer, indigent attorneys fees, facilities related costs, OOG grants, Civil Court, pilots and other Commissioner Court priorities) Total Range $10.9 M $16.0 M $26.9 M After reviewing FY 2018 budget submissions, we believe many of these noted cost drivers are tracking to the estimated amounts summarized above. While it is still too early in the process to provide the Court with more concrete budget figures, we are confident that the budget parameters discussed in early spring can be accommodated within the FY 2018 Preliminary Budget. Special Session As you are aware, the Governor called a Special Session which includes the potential for the Legislature to pass laws impacting property taxes generated at the local level as well as a concerted effort to limit the growth of local governments budgets. It is believed this legislation may attempt to artificially control how local governments manage budgets and tax policy and could further complicate an already complex property tax setting process. 2

4 Travis County has a long history of being at or near both the Effective Tax Rate and the Effective Maintenance and Operations Tax Rate, which is used to calculate the Rollback Rate. Over the last 30 years, Travis County has been at the Rollback Rate of 8% above the Effective Maintenance and Operations Rate plus required debt service just once, in FY During the past ten years, the County has only been near the Rollback Rate once, in FY 2009, which was during the last economic downturn and when the County was opening a new jail building and managing Court growth. The County has demonstrated careful management of public resources and has considered the related impact on taxpayers by offering the maximum homestead exemption of 20%, along with increasing the operational 65-and-older/disabled homestead exemptions to $80,000. Over the past three years, home values have steadily risen but both the County tax rate and tax bill have gone down. The tax rate has decreased by more than 11 cents and the County s portion of the property tax bill for the average taxable homestead is approximately $6 less for FY 2017 than it was for FY Should the County be constrained in how best to set a tax rate balanced against constituent needs, a re-evaluation of current practices may be required to ensure adequate resource availability for future expected and unexpected requirements. Legislative interest in revenue caps necessitates that the Commissioners Court plan for the possibility that tax-setting flexibility will be usurped by State government. PBO recommends that the Commissioners Court begin to discuss and formulate plans to ensure budgetary strength and safeguard local services in future years, including how best to meet adequate service levels. Otherwise, County services could be negatively impacted. It is important to emphasize the County sustains its core services to residents through its main source of revenue, property taxes. In fact, property taxes represent more than 85% of the County s ongoing General Fund revenue. These items and any other legislative changes will be monitored closely. PBO and the Intergovernmental Relations Office (IGR) will work to ensure the Court is properly briefed on the consequences of any changes. Property Taxes PBO received direction to prepare the Preliminary Budget at a tax rate that is sufficient to cover the priorities discussed during adoption of the guidelines and as generally represented in the table above. To this end, we are working diligently to make recommendations which keep in mind the issues of efficiency, effectiveness, affordability, and fairness, as we have done in recent years. As you recall, FY 2017 was the third consecutive year in which there was no County property tax increase for the average taxable homestead, even as appraised values in Travis County had increased 35% since FY

5 Revenue Estimates The First Revenue Estimate, which only includes the General Fund, was made available on May 24 th, and the Second Revenue Estimate is expected later in June. A total of $720.4 million in General Fund resources is available in the First Revenue Estimate. The estimate includes one-time funds of $127.3 million and ongoing resources estimated at $593.1 million. In comparison, the FY 2017 Adopted Budget included $701.0 million in total General Fund resources, including one-time resources of $135.1 million. Total available resources in the First Revenue Estimate are 2.8% greater than the FY 2017 Adopted Budget and will continue to be revised with the remaining revenue estimates. The Preliminary Budget will be balanced to the County Auditor s Third Revenue Estimate. Compensation and Health Benefits Travis County considers it a high priority to recruit, motivate, and retain employees capable of providing exemplary service for the residents of Travis County by using a total compensation system that is fair, flexible, and market competitive. Depending on annual funding and priorities, the Commissioners Court may approve increases to base pay during each year's budget process. Due to uncertainty regarding state and federal funds received by Travis County and other requirements for FY 2018, additional resources for workforce development are limited at this time to $5.2 million, which covers increased County contributions for employee and retiree healthcare and $1.8 million for employee retirement plans. Final plans for employee compensation continue to be evaluated. Recommendations for employee compensation will need to take into account market conditions, availability of funds, employee input, and the impact of the 85th Texas Legislative Session and Special Session. These recommendations will be made in partnership with HRMD and the Compensation Committee and will be presented to Commissioner s Court during the August September 2017 timeframe. Benefit changes were discussed with Commissioners Court on May 11 and May 16. During those discussions, HRMD provided the Commissioners Court with an update on changes and associated cost estimates for FY These estimates are in line with the cost driver information presented by PBO in February. An employee public hearing is scheduled for Thursday, June 22 at 4:30 p.m. and is expected to last until 6:30 to allow County employees time to arrive. This annual employee public hearing provides employees and employee groups an opportunity to comment specifically on compensation and benefits at Travis County. The Commissioners Court is scheduled to take action on the proposed rate and plan design changes on June 27. 4

6 Budget Reduction Proposals from Offices and Departments Offices and departments were asked to supplement their budget submissions with a list of proposed budget cuts in the event that up to 5% of their Target Budget was unable to be funded. PBO also requested an explanation of the implications of any reduction proposals. This approach was aimed at avoiding across-the-board cuts and providing the County with a more strategic approach for potential reductions. All offices and departments complied with this request, and while PBO is optimistic that reductions will likely not be needed in the FY 2018 Preliminary Budget; however, these proposals will be considered if further reductions from the state or federal government are implemented. Additionally, these proposals will be discussed with departments if there are common sense initiatives which should be explored within the departments base budgets, and will be re-evaluated for next year s budget process should economic or political conditions worsen. Budget Requests from Offices and Departments FY 2018 budget submissions were received on May 1. Offices and departments were asked to maximize the flexibility granted within their Target Budgets, using current resources to maintain service levels and pursue their highest-priority goals. This year s budget submissions include approximately 370 individual requests and total over $80 million in operating funds, over $95 million in capital requests, and more than 418 new full-time equivalent (FTE) employee requests. This includes requests of more than $14.5 million related to actual or potential reductions to County funding from the State. As we work through verification of these requests, these totals may need to be adjusted to correct for duplication or other errors, or simply to refine the estimates as more information becomes available. Given our continued population growth and increased demand for services, there may be programmatic enhancements or service level requests which the Commissioners Court may wish to discuss and evaluate during budget hearings in August. PBO recommends the Commissioners Court hold limited budget hearings in August for critical items which may require additional resources above what PBO can recommend in the Preliminary Budget. PBO proposes these hearings be limited in nature and reserved only for the most critical, unfunded budget requests. If it is the Commissioners Court s desire, PBO would reach out to departments in early July and schedule hearings on three days in August. It is important to highlight that offices and departments should be prepared at the hearings to 1) prioritize their requests, 2) discuss how funding PBO recommended in the Preliminary Budget could be re-prioritized towards any remaining unfunded budget requests, and 3) 5

7 discuss any impact on the office s or department s core performance measures and the County s mission and goals. A proposed budget hearing schedule is included below. Thursday 8/10 Friday 8/11 Monday 8/14 9:00 12:00 9:00 12:00 9:00 12:00 1:00 5:00 1:00 5:00 1:00 5:00 (if needed) Budget Calendar PBO will be posting updates to the calendar on the Planning and Budget Office webpage, alendar_3_28_17.pdf. The following are the key budget adoption dates: July 24 August August 24, 25 and 28 September 19, 22, 26 September 26 FY 2018 Preliminary Budget published Proposed Budget Hearings Budget Mark-Up Public hearings and tax rate and proposed budget Adoption of budget and tax rate We look forward to finalizing the FY 2018 budget later this summer. Please let us know if you have questions or need additional information. CC: County Elected and Appointed Officials County Financial Staff PBO Analysts Vanessa Robles Dan Wilson 6