County headed toward financial crisis

4/21/2009

By Jim Poole and David Avitabile

County headed toward financial crisis

Schoharie County supervisors took action Friday to slash spending after hearing Treasurer Bill Cherry describe the county’s financial crisis.
The stalled economy is responsible for unpaid taxes being double their usual amount and sales tax revenue plunging below expected levels, Mr. Cherry told the Board of Supervisors.
As a result, supervisors agreed to freezes on hiring and buying equipment and may reopen talks with unions to defer contracted raises.
But only hours after agreeing to the hiring freeze, supervisors filled five vacant positions on the county payroll.
Giving the dire financial news, Mr. Cherry said the county expected $13.8 million in sales tax but received $550,000 less than that. Those figures didn’t become clear till March, he said.
“October to December, sales tax revenue just dove off a cliff,” he said.
Because supervisors finished their 2009 budget in December, they planned for $13.8 million in sales tax revenue for this year.
“We didn’t know we’d be $550,000 short last year until this March,” Mr. Cherry said. “That caused me to re-evaluate the ’09 numbers. We’re clearly not going to get $13.8 million.”
At the same time, unpaid ’08 taxes are $7 million. Usually the figure is $3.5 to $3.8 million, Mr. Cherry said.
“Delinquent taxes are a great barometer of the economic stress people are under,” Mr. Cherry said.
The county could dip into its fund balance––money the county uses when revenue is low––but much of the $5.4 million fund balance is only on paper because of the unpaid taxes.
Also, the county used some of the fund balance to make up for the sales tax shortfall.
To put the brakes on the financial skid, Mr. Cherry recommended not filling vacant positions and freezing equipment purchases for the rest of the year.
“We simply have to make do with what we have,” Mr. Cherry said. “If the copier breaks, walk across the hall and use another one.”
The hiring and purchase freezes will help this year, Mr. Cherry said. For 2010, he recommended asking unions to delay or defer contracted raises to help save next year.
Typically, the county needs an additional $2 million each year because of rising costs, Mr. Cherry said. Deferring the raises would save about $800,000.
“All the non-union employees will be the first to step up to the plate, he said, adding that he wouldn’t take a raise next year.
Responding to a question from Carlisle Supervisor Larry Bradt, Mr. Cherry said revenue from interest is also down, from a typical $1.4 million to $200,000 to $300,000 in the past few years.
With declining property values and sales tax revenue, the county must find other ways to prepare for 2010––other than raising taxes, Mr. Cherry said.
“What good is raising property taxes higher if people can’t pay now?” he asked.
Mr. Cherry had already given his presentation to the Finance Committee, and Chairman Bob Mann recommended the hiring freeze on vacant positions and the freeze on equipment purchases unless approved by the full board.
Mr. Mann also recommended that trips to out-of-county seminars and conferences be approved by the Finance Committee.
Supervisors approved the hiring freeze and travel limitation but decided only purchases over $1,000 need board approval.
Later in the same meeting, however, supervisors approved four vacant summer jobs in the Department of Public Works and a dispatcher in the Sheriff’s Office. Both were in split votes.
Afterwards, Mr. Cherry said he was disappointed in the supervisors’ hirings.
“I think Bob Mann is on the right track. He took a very strong stance. But I think those arguments fell on deaf ears.”
Worried about next year, Mr. Cherry said further cuts may be necessary, especially if the economy continues to deteriorate.
“This is not a threat,” he said. “It’s meant to be cautionary. This is our situation, and we need to take a proactive step. We all need to work together.”