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Budget Squeeze Coming

County Prepares For The Worst
By Rick Ouzten

Escambia County Government has run out of quick fixes for its ever-shrinking budget.  Property Appraiser Chris Jones is projecting property taxes for the 2011-12 fiscal year to drop $3-$5 million. There’s no windfall of Pensacola Beach property taxes or federal stimulus dollars this time to bail out the Board of County Commissioners (BCC), Escambia County Sheriff’s Office (ECSO) and the other constitutional officers.

And the budget fireworks have already begun. On Feb. 10, County Administrator Randy Oliver wanted to make a PowerPoint presentation, titled “Escambia County Budget Preparation,” to commissioners at their Committee of the Whole meeting. The report was pulled from the agenda after the Escambia County Sheriff’s Office objected to the tone of the presentation, claiming it was an unfair representation of the ECSO’s budget history.

The smoke still hasn’t cleared. Sheriff David Morgan and his senior staff believe that they were blindsided. Oliver says he was trying to take a proactive approach to what will be a difficult budget year. The county commissioners hope to avoid any finger-pointing during the budget workshops, but few believe it can be avoided. The funds simply aren’t available to make everyone happy with next year’s budget.

Escambia County budget deliberations between the commissioners and the Sheriff are often contentious. Because the county has no charter and consolidation efforts failed, the BCC only truly controls about half of the overall budget. Sheriff David Morgan, Clerk of Court Ernie Lee Magaha, Property Appraiser Chris Jones, Tax Collector Janet Holley and Supervisor of Elections David Stafford prepare their own budgets that the commissioners can only approve or disapprove. The commissioners can’t change line items in those budgets.

If the BCC rejects a constitutional officer’s budget, that officer can appeal the decision to the Florida Cabinet. Sheriff Morgan hasn’t had to do that…yet. However, his two previous budgets have been a struggle to get BCC approval.

Part of the problem is Morgan’s stubbornness and his unwillingness to do anything that he believes will compromise public safety. Remember he’s from Missouri and that he doesn’t bend his principles, an admirable trait as long as you’re on his side of the argument.

The other parts of the budget crisis are a depressed economy that has been hit hard by the collapse of the real estate market, the statewide push to force local governments to rollback their property tax rates and the impact of the BP oil disaster on property values.

BUDGET HISTORY: FAT MAN IN TINY SPORTS COAT

These issues have made the Escambia County budget look like Chris Farley doing his Matt Foley-Motivational Speaker skit for “Saturday Night Live.” County government has become that huge, 350-pound man trying to fit into a tiny, plaid sports coat made for someone who weighs only 140 pounds. The coat can’t be buttoned and the seams are screaming as they’re stretched to their limits.

Escambia County’s property tax revenues peaked at $137.4 million in 2007. That year marked an unprecedented period of revenue growth, fueled by a booming real estate market. Despite ad valorem rates staying the same, the annual tax revenue jumped 65 percent from 2002 to 2007. County government, led by George Touart as the county administrator, absorbed the nearly $54 million increase into its operations.

The budget world changed dramatically in 2007 when the Florida Legislature and Gov. Charlie Crist began to address the failure of county governments across the state to reduce their ad valorem rates as property values skyrocketed. House Bill 1B was passed that required local governments to reduce their property tax rates to 2006 levels by 2009.

Touart and his newly-elected county commission, which had added Grover Robinson and Gene Valentino in the 2006 elections, dropped the property tax rate from 8.756 to 8.017. That would be Touart’s last budget. He was ousted from office for not disclosing his personal business relationships and replaced by Bob McLaughlin.

In preparing the 2008-09 budget, McLaughlin was faced with more legislative mandates that forced further reductions in millage rates and caps on ad valorem values. The county reduced the ad valorem 13 percent, from 8.017 to 6.976 mills, which cut $20 million from the budget.

To help deal with the revenue shortfall, McLaughlin led a massive county reorganization. Eighteen departments were merged into six bureaus. Some department heads were forced to take pay cuts, and the county offered early retirement buyouts to others. Thirty-seven supervisors and department heads took advantage of the generous plan. The net savings in personnel costs to the county was $5.6 million.

The next year, the county maintained the same ad valorem rate, but the reduced property values decreased property tax revenues by $6.5 million. Sheriff Morgan proposed his first budget that year, in which he had about $4 million in cuts. The commissioners combined that reduction with nearly $2 million in savings on insurance premiums and other one-time revenues to balance the budget.

Though the revenue losses were covered, there still were a few heated moments over the budget in the summer of 2009. Sheriff Morgan had requested an extra $2 million to provide a 3 percent pay raise for his officers, as he was required to seek under the terms of the collective bargaining agreement with their union. The BCC turned down the increase.

Later, commissioners got upset with Morgan when they learned his officers would continue to get longevity pay that builds from 2 percent after five years of service to a cumulative 10 percent after 25 years, and which would add an additional $100,000 to future budgets.

Morgan defended the longevity pay as necessary to retain deputies, who often leave for more pay or benefits after a few years of experience. The commissioners approved his budget, but the stage was set for future budget battles.

When the dust cleared, the 2009-10 General Fund budget was reduced by $17 million, 8.85 percent. The county had cut its total personnel costs to $59.7 million, which was within 3.4 percent of the 2006 levels.

However, that was not enough for Bob McLaughlin to keep his job. In December 2009, the BCC voted 4-1 to not renew his contract as county administrator.

Eventually Larry Newsom, who headed the Transportation Bureau, was named the interim administrator. The 2010-2011 revenue projections weren’t good for his first budget. Property values continued to decline. Even though the commissioners maintained the same ad valorem rate, they had $5.5 million less in revenue from property taxes.

Every constitutional officer, except Sheriff Morgan, made cuts to help the BCC handle the shortfall. The ECSO asked for a $2.6 million increase to cover state-mandated increases to its contributions to the Florida Retirement System and higher health insurance costs.

Though Commissioner Grover Robinson argued that the county had the same issues and managed to reduce other areas to cover them, the BCC overruled him and voted 4-1 to approve Morgan’s $77.2 million budget.

Still, the 2010-11 county budget, which is the one under which the county is currently operating, is significantly lower than the budget five years ago. It has been reduced $81 million, a whopping 18 percent reduction, over that period.

NEXT BUDGET: WHAT TO CUT AFTER FAT IS GONE

Unfortunately, Escambia County hasn’t seen the last of its budget cuts. Escambia County Property Appraiser Chris Jones predicts that valuations will continue to decline.

“We’re just starting to look at our assessments,” Jones told the IN. “I told the Budget Office that we are looking at a 3-5 percent reduction in overall values.” Each percentage point equates to about $1 million in ad valorem revenue.

“We told the county 5 percent ($5 million shortfall) for planning purposes,” he said. “Everything will hinge on the commercial market, where unfortunately there’s not a lot of sales data.”

County Administrator Randy Oliver hopes the actual shortfall will only be about $3 million, and he wants the Sheriff’s Office to share half the burden, which led to the dispute over the Feb. 10 presentation.

“There is no doubt this is going to be a tough year for the budget,” said Oliver. “The budget is about half public safety and the Sheriff, and half BCC. What happens is going to depend on what happens with the Sheriff’s side of the budget. I’m pretty comfortable that I can get $1.5 million (of the $3 million reduction) from my side. It’s going to be painful, but if I have to take the whole $3 million from my side of the budget, it’s going to be very painful.”

Oliver believes he can save money by retooling the bureau structure that McLaughlin instituted in 2008.

“We are going to the board in two weeks with a flat reorganization that will save a couple hundred thousand dollars,” he told the IN. He will eliminate two bureau chief positions, Community & Environment and Transportation.

“What they created two years ago were super department heads. I think there is a better way to do that,” said the county administrator, who was hired in late October 2010. “When somebody brings me this kind of structure (pointing to the McLaughlin organization chart), I shoot them because the question is always ‘what does this person do.’”

Oliver wants to place Development Services, Environmental, Community Services, Public Works and Parks and Recreation under the Assistant County Administrator Larry Newsom. The remaining departments—Budget, Corrections, Economic Development, Government Relations, Human Resources, Information Resources, Public Safety and Solid Waste Management—will report to Oliver.

BALANCING BUDGET ON BACK OF EMPLOYEES

There was a panic in county government when Gov. Rick Scott initially announced his pension plan reforms. On the surface, it sounded like a good deal for the counties. Employees would be required to contribute five percent of their pay towards the Florida Retirement System, which could have saved Escambia County nearly $6 million. However, Scott initially intended for the savings to be passed on to the state, not the counties.

“I don’t think asking the employees to contribute is a bad thing,” said Commissioner Grover Robinson. “It has been happening in the private sector for years. However, the cost savings needs to be directly realized by the counties, but Scott has been saying for every dollar saved in FRS he is going to reduce in sales taxes and other distributions back to the counties.”

Robinson and other commissioners from around the state must have gotten their message across to Gov. Scott. By Feb. 17, Gov. Scott had dropped that notion of using the employee contributions to balance the state’s budget.

“It was terrible what Gov. Scott was trying to do,” said Oliver. “Essentially it was taking $6 million out of the employees’ paychecks and giving it to the state.”

However, the county being allowed to use its employee contributions to reduce its FRS payments doesn’t mean that those funds will cover the county’s budget shortfall.

“We still don’t know what the FRS contribution for next year will be,” said Oliver. “We don’t know what our overall percentage payment will be to FRS. Every percentage point costs us about $1.2 million, $600,000 for the county and $600,000 for the sheriff.”

Sheriff Morgan doesn’t believe it’s fair to ask law enforcement officers, who haven’t had a pay increase since 2007, to take a hit on their paychecks.

“The problem we’ve got is our guys have gone four years without a pay raise,” said Sheriff Morgan. “If we hit them with anything and say, ‘Oh by the way, you’re now going to have to contribute to your retirement’ that is patently unfair.”

ANOTHER BUDGET BATTLE BREWING

And that is a perfect example of how differently the BCC and the ECSO see the budget process and how revenue shortfalls should be handled.

“There is no way the BCC can absorb all this,” said Robinson, who is clearly frustrated by Morgan’s inflexible approach to budgeting. “I think we made a mistake last year. I think he is a very good sheriff, I don’t think he is a very good political boss. I wish he would stick to being the sheriff.”

While Escambia County has reduced its budget by $81 million since the 2006-2007 fiscal year, the Escambia County Sheriff’s Office has only reduced its budget by 3 percent, $2.5 million.

The ECSO budget consists of three components: Sheriff’s Office, Escambia County Jail and Court Security. The Sheriff’s Office has cut its budget $4.4 million over the past four years, but the jail and court security have seen their budgets jump up $1.9 million over the same period.

“We are all teammates in this together, and last year we really needed him to hold the line on his budget, and when he didn’t, it put us in a bad position,” said Robinson. “We’ve decreased every single year. If you look at the BCC expenses as a percentage of the total budget, every year that I’ve been in office we’ve gone down as a percentage. The Sheriff’s Office has not. They are actually becoming a larger and larger percentage of the budget.”

One idea being kicked around by Oliver is to breakout that portion of the ad valorem necessary to cover the ECSO budget. That, too, was part of the aborted Feb. 10 presentation.

The county already has a Law Enforcement MSTU, Municipal Service Taxing Unit, to pay for law enforcement patrols in the unincorporated areas of the county. The rate is 0.685 mils, which generates about $6.74 million annually.

“In places where I’ve worked, we’ve broken up the General Fund so the Sheriff is separate from the rest of the ad valorem rate,” said Oliver. “That way the consumer has the right to know. Whether they do that or not, that will be up to the Board.”

Chief Deputy Larry Aiken disagreed. “Oliver wants to present his budget and show the millage rate needed to support it,” said Aiken. “Then he wants to take our certified budget and show a millage increase to fund it. That’s a sheriff’s tax, and we don’t support that.”

“What he is not seeing is that we believe we have been cut to the bone,” said Aiken. “The only reasons our budget increased for this current year are fuel costs and mandatory increases in FRS and health insurance.”

“Randy Oliver I have no doubt is a brilliant numbers person, but where Oliver sees numbers, I see people,” said Sheriff Morgan. “He is practicing bureaucratic equivalency, meaning a government worker is a government worker is a government worker. Well, there is a significant difference between an administrative worker working for the Board of County Commissioners and a deputy. We don’t have the luxury of working 9-to-5 weekdays with weekends and holidays off.”

Morgan believes that the first critical step in budgeting is identifying wants and needs.

“You need public safety,” said Morgan. “You want bureaucrats.”

Commissioner Robinson doesn’t believe more dollars necessarily translate to safer neighborhoods.

“We increased what we gave the sheriff last year,” said Robinson. “Has it stopped crime? No. Just because you pay more money in doesn’t mean you’re going to have less crime. People’s propensity to commit crimes isn’t dependent on how much money we spend on law enforcement one way or the other or jails.”

While he agreed that the ECSO had made budget cuts, Robinson doesn’t believe the sheriff is absorbing his fair share of the revenue shortfalls. “Yes, two years ago Sheriff Morgan had a substantially big decrease ($4.1 million),” said Robinson. “Last year, he increased it ($2.6 million increase) and almost negated his decrease from the prior year. Does he have unfunded mandates related to the pension? Absolutely. Did the county have those? Absolutely. Did the county still find a way to decrease its budget? Yes.”

Morgan didn’t budge when asked about dividing the ad valorem rate in to sheriff and non-sheriff rates.

“The glaring thing for me with Budgeting for Outcomes is that government will provide the services for which you’re willing to pay for,” said Morgan. “If you want street lights, we’ll give you street lights. If you want roads, we’ll give you roads. However, they will be applicable tax increases if you want that.”

Sheriff Morgan believes that such budgeting methods work in a strictly business environment, but not in local government. “How do I provide services to Districts 3 and 5?” asked Morgan. “District 3 has the some of the highest crime areas, but the lowest return on taxes. Using Budgeting for Outcomes, I would pull out of that area because they aren’t paying their fair share. I would load up on Districts 2 and 4, our wealthiest areas.”

He adds, “When you’re coming out of a recession like this economy is, Budgeting for Outcomes is the proverbial recipe for disaster.”

OTHER SOLUTIONS: FUNCTIONAL CONSOLIDATION

A year ago, the county commissioners refused to support a consolidation referendum that would have let the voters decide whether to combine city and county governments. Without the support of the BCC, Pensacola City Council and the Century Town Council, the local legislative delegation refused to take the referendum to the state legislature for approval to place it on the 2010 ballot.

Instead, the commissioners agreed to work on functional consolidation between the BCC, constitutional officers and the City of Pensacola. The IN wanted to know if any progress had been made in that effort. The answer was…not really.

“I’ve had discussions both with the Sheriff and the new Mayor of Pensacola,” said Oliver. “There are some very tangible things on the table with the new mayor.”

The county administrator said that he had identified 15 areas ripe for consolidation and has ranked them based on their technical and political aspects. He cautions against being too aggressive with functional consolidation.

“We need to take one or two and get successes under our belt and not roll out all 15 areas at one time and get all 15 of those areas up in arms,” said Oliver. He believes that Building Inspections and Permitting may be the easy areas to consolidate with the City.

Commissioner Robinson is less optimistic. “Yeah, we’ll do functional consolidation if I’m the one we functionally consolidate into,” said Robinson with sarcasm in his voice.

“The Sheriff talked about putting his payroll over to the Clerk, but I’ve never heard any more on it. We’ve talked about the need to consolidate 9-1-1 with the city and the county. We have a state-of-the-art dispatch system that is all part of the EOC. There is no reason why we shouldn’t all be together, but no one steps forward on that.”

Robinson believes the budget crisis will force functional consolidation on the city and county.

“You have to say the budget is only going to be X, then people get serious about finding ways to solve it,” said Robinson. “As long as they think they get whatever they want, there is no real incentive to consolidate.”

Oliver will propose to the BCC other ways to save money. He plans to cross-train building inspectors so that he can approve more aspects of a project. “We have to find ways to streamline and do things more efficiently and effectively, not just faster,” said Oliver.

He also plans to reduce the amount of paperwork in county offices. “The paperwork here is amazing,” he said. “We need to get to electronic invoicing and bill paying. We’re going to paperless paychecks for everybody on April 1. Most entities moved to that 15 years ago.”

Oliver also believes placing more inmates at the county’s road camp can save money, and he has the support of Commissioner Robinson.

“What Randy is pushing is we’ve got to find a better way to deal with the prisons,” said Robinson. “We need to be sending more of these people, who don’t need to be at Leonard Street (county jail), to the road prison. We need to find a way to make that happen, because they almost pay for themselves at the road prison.”

Sheriff Morgan smiled when he was told about the effort to move prisoners from the county jail to the road camp.

“That’s another one of those smoke and mirrors things,” said Morgan. “I’d have given them a thousand people today, if we could. Why would I want to load my jail up? I save them money when I give them inmates. They don’t meet the legal criteria.”

WHAT’S NEXT

Oliver plans to kick-off the budget process at the next Committee of the Whole meeting, scheduled for March 10. Before then, he and BCC chairman Kevin White will meet with Sheriff Morgan and Chief Aiken. The Feb. 10 presentation will most definitely be reworked.

“At the budget kick-off, we will outline where we are at,” said Oliver. “Hopefully we will know more about FRS, and then we can set up a process by which we will evaluate services.” Oliver plans to ask the commissioners to rank county services and make budget cuts based on the priorities that they set.

Sheriff Morgan expects the decisions to be difficult. “This county has pared back and pared back the past several years. We’re down to essential services and what do you do?” said Morgan. “Public safety is an essential service.”

Robinson still believes this budget pain could have been avoided if the BCC insisted that ECSO hold its budget to its 2009-10 level.

“We messed up last year. We absolutely messed up,” said Robinson. “We decreased last year and we had to absorb his increase with the retirement system. I think we’re getting to the point where we’re going to be as tight as we can be. We can’t keep giving, and at some point, all of us are going to have to give.”

rick@inweekly.net

ESCAMBIA COUNTY OVERALL BUDGET
2006/07: $458,839,188
2007/08: $417,127,265
2008/09: $391,665,064
2009/10: $367,489,211
2010/11: $377,217,198

ESCAMBIA COUNTY SHERIFF’S BUDGET

2006/07: $79,754,796
2007/08: $79,700,000
2008/09: $78,717,845
2009/10: $74,681,845
2010/11: $77,234,263