County department directors to be asked for reductions, as needed, too, in recurring expenses
In March, when they conducted their mid-fiscal year budget workshop, the Sarasota County commissioners saw a staff model that projected no shortfalls in finances for the General Fund through the 2027 fiscal year.
That fund is made up mostly of the annual property tax revenue that the county receives, though other revenue sources are added into the mix.
However, in advance of the commission’s annual, intensive budget discussions — conducted on June 20 and 21 — the county’s constitutional officers, including Sheriff Kurt A. Hoffman and Karen Rushing, clerk of the Circuit Court and county comptroller — provided to county administrative staff their proposed budgets for the 2024 fiscal year, which will begin on Oct. 1. As a result, the five-year budget model for the General Fund was projected to have a shortfall of $1,218,508 for the 2024 fiscal year. The gap between revenue and expenses was expected to climb to $7,004,044 by the 2027 fiscal year.
That led County Administrator Jonathan Lewis to propose reducing recurring expenses by $3.3 million, beginning in the next fiscal year. With that factored into the model, no shortfalls were projected through the 2028 fiscal year.
During the June 20 budget workshop, Commissioners Michael Moran and Mark Smith did broach with the sheriff the potential of cutting that agency’s budget for 2024, as it is the largest that any of the constitutional officers submits each year, and the money comes out of the General Fund. (See the related article in this issue.)
Hoffman made the point a couple of times on June 20 that he and his senior staff had held between 35 and 40 discussions, trying to whittle his spending plan to a lower amount than the $181,806,610 that he had submitted to County Administrator Lewis.
Like the other constitutional officers that day, and county department directors, Hoffman stressed increasing expenses, including the effects of inflation. He did not offer to try to pare his budget.
At the end of the budget presentations on June 21, Lewis again broached his recommendation of cutting recurring expenses by $3.3 million.
After almost 40 minutes of discussion, Commissioner Moran made a motion, directing Lewis to work with the constitutional officers on their proportionate share of cuts to lower recurring expenses by $4.5 million for the 2024 fiscal year.
Even though Chief Deputy County Property Appraiser Brian Loughrey told the board members on June 20 that the latest data indicated that the county’s overall property value would rise more than the estimate of 13.1% that the Property Appraiser’s Office released in late May, Moran and the other commissioners talked of their desire to add to the county’s Economic Uncertainty Reserve fund, instead of relying on the extra money the higher property values will yield for the county’s 2024 fiscal year budget.
During the June 21 discussion, Commissioner Joe Neunder noted the potential of the final uptick in value being 15%.
(Loughrey told the board members that the latest data showed the county’s property tax value had gone up 14.27%. “That was as of this morning. He noted, “We continue to refine the tax roll.” The Property Appraiser’s Office will release its final value before July 1, to enable all of the local government boards in the county to set their not-to-exceed millage rates for the next fiscal year. The Truth in Millage (TRIM) notices go out each August.)
The Economic Uncertainty Reserve contains money set aside in addition to the county’s 75-day Disaster Reserve. During the Great Recession, commissioners drew upon the Economic Uncertainty Reserve to fill gaps in the county budget over several years. Their predecessors had contributed to the fund during the “boom” period before that downturn began.
Moran called his June 21 proposal a “healthy exercise” to determine what could be adjusted in the constitutional officers’ budgets to eliminate the $4.5 million.
However, he told Lewis, if the constitutional officers would not agree to any cuts, then Lewis should work with the directors of the departments under the commission’s control to see how they could come up with the $4.5 million.
“This is not about cutting existing services,” Lewis acknowledged during the discussion.
And while Lewis noted that, for the past two years, the commissioners had not needed to conduct an August budget workshop prior to their two formal public hearings in September on their upcoming fiscal year budget, it appeared likely they would need to hold an Aug. 25 workshop that he tentatively had scheduled.
Still, Lewis said, after he talks with the constitutional officers and then, if necessary, with the department directors, that late August session might not be necessary. He added that he will deliver his final proposed county budget to the commissioners after the state-mandated, final property tax values have been released.
Commissioner Neunder seconded Moran’s motion, which passed unanimously.
Peering into the future
New Commissioner Neil Rainford was the first of the board members on June 21 to cite discomfort with the projected shortfall in the Economic Uncertainty Reserve, even if Lewis’ original proposal of cutting $3.3 million were to be pursued.
“We don’t know what the next day of uncertainty looks like,” Rainford said.
Noting that the county is an “amazing place to live,” and more people keep moving to the area, Moran acknowledged that it is no surprise that property values have risen over the past several years. Yet, he continued, “I’m nervous that this is creating a false sense of security, this budget that’s put before us.”
“Memories get super short,” he pointed out. During the Great Recession, he said, people lost homes through foreclosure and grass was growing taller by the day in yards of those homes that no longer were occupied.
The county’s property value for the 2008 fiscal year was $175.7 billion, a county document shows. Just a year later, it fell to $149.5 billion, and thin it fell to a low of $108.8 billion in the 2013 fiscal year before it finally began rising again.
That morning, Moran continued, he asked Deputy County Administrator and Chief Financial Officer Steve Botelho how much the county’s budget gap would be if the property tax value were to climb only 3% this year. Botelho’s reply, Moran said, was “about $22 million.”
Commissioner Neunder talked about the fact that, even if the board members plugged the $3.3-million gap, the Office of Financial Management’s General Fund budget model showed the Economic Uncertainty Reserve falling about 80% in the 2024 fiscal year, to $7 million. It is $34 million in this fiscal year’s budget.
Further, Moran pointed out that, in 2018, to try to fill a budget gap, the commissioners ended up having to cut about $5.4 million in recurring expenses.
“That was 100% out of your departments,” County Administrator Lewis noted.
Although he does not believe the county will experience a major economic problem in the coming years, Moran said, he also does not believe that property value increases will keep trending in the 13% range.
“In this boom cycle for us,” he added, “we should be putting money aside for that Economic Uncertainty Fund, piling the money in there …”
Then Moran pointed out that that the county could be hit by a major hurricane, and the economy could come to a halt “while we’re rebuilding.”
“We just dodged a huge bullet last hurricane,” Commissioner Smith said, referring to Ian in September 2022. “We were in the crosshairs there for a couple of days.”
Yet another big concern, Moran emphasized, is the “looming $100-million jail facility,” if programs designed to divert offenders from incarceration cannot keep the jail population at a level that is manageable.
Lewis estimated that the annual expense of operating a new jail would be $10 million for the Sheriff’s Office, though he acknowledged, that that figure is “probably on the low side.” That money also would come out of the county’s General Fund.
Chair Ron Cutsinger broached the idea of adding $7 million to $10 million to the Economic Uncertainty Reserve, noting a number of indications that a slowdown in the economy is ahead, given rising interest rates and property insurance expenses, as well as inflation.
Smith agreed with the need to plug at least the $3.3-million gap, with perhaps more money set aside. He also concurred with Moran that the constitutional officers need to look at their proposed budgets.
Referring to the constitutional officers’ requests, Moran said, “I didn’t think any of this seemed outrageous.” However, he reminded his colleagues, “We haven’t went granular into their expenses.”
Nothing submitted during the budget process “seemed egregious or superfluous,” Lewis said. “These are all needs based on the economic climate.”
Moran also pointed out that if the constitutional officers were not willing to cut their budgets, County Administrator Lewis would have no choice but to come back to the commissioners to ask them to decide on cuts for the departments under their control. The only other option, he said, would be to raise the county’s millage rate, which has been steady since the 2008 fiscal year, except for the voter-approved debt service on the bonds issued to extend The Legacy Trail to downtown Sarasota and North Port.
“In no way shape or form would I ever be comfortable with raising the millage rate,” Neunder stressed. Otherwise, he added, “I would be very much in favor of looking at all options” to boost the amount of money going into the Economic Uncertainty Reserve.