From Washoe County:
For a more detailed look at the budget numbers click here --
To all employees:
We are all relieved that the 76th Session of the Nevada Legislature has concluded, and we will look forward to final signing of all the remaining bills by the Governor to know for certain what the final outcomes are. As we have done throughout, we want to make sure you have all the information that we have to date regarding expected impacts on Washoe County. This email will be a bit long, so please bear with me.
First, the good news. The Legislature and Governor agreed not to take the entire proposed 9 cents of property tax rate from Washoe County that was built into the Governor's budget, and which would have meant a total of almost $11 million per year in local property taxes being taken from Washoe County and given to the State. This change was based in large part on the Supreme Court's ruling on the Clean Water Coalition's lawsuit against the State, which we wrote you about last week, and which found that the State's diversion of funds from that local government was unconstitutional. It's important to recognize that our District Attorney's Office, as well as legal authorities all over the State, have not determined conclusively that this ruling applies to Washoe County; but in spite of the inconclusiveness, the Legislature and Governor proceeded under the assumption that the ruling was substantial enough to stop them from diverting the proposed 9 cents more from Washoe and Clark counties.
In addition, an increase in forecasted revenues for the State also led the Governor to add back into the proposed budget several items that would have impacted Washoe County, which reduced the magnitude of the impacts that we identified from the original proposals.
Now the bad news. While the Legislature did not divert the entire 9 cents, they did continue to divert 3 cents of Capital Facilities tax rate (shared impact with Reno and Sparks) that had been taken in 2007 and given to the Nevada Department of Transportation to fund NDOT projects within Washoe County, and they did continue to take 2.5 cents that counties give to a statewide Indigent Accident Supplemental Fund. At least we had anticipated these two diversions, and we had not budgeted use of these funds, so these diversions do not make our shortfall worse.
But the Legislature also "pushed down" service responsibilities to Washoe County, such as developmental services for children in our system ($1.7 million a year), and in other cases will begin charging us all or a portion of the cost of their providing some services, such as Pre-Sentence Investigations ($700,000 a year).
The grand total of impacts for Washoe County amount to an estimated $11.2 million in 2011-2012 and $12.1 million in 2012-2013. When we adjust for the impacts that were either revenues that we had not anticipated anyway, or "push downs" that we can work with to neutralize their effect, the estimated General Fund impact that we will have to make up as an additional shortfall is about $4.5 to $5 million per year for each of the next two years (estimated impact summary attached)
The summary boils down to this:
2011-2012 Budget Deficit Plan (in millions of dollars)
$11.6 m wage and benefit concessions*
5.0 m permanent reductions through organization-wide Fundamental Review process*
5.0 m department operating budget reductions
9.75 m one-time use of fund balances
$31.3 m deficit in adopted budget
+ 5.0 m new 2011 Legislative impact
$36.3 total amended 2011-2012 deficit
* - still being negotiated/identified
As the above table shows, the County Commission approved a 2011-2012 Budget that addressed a $31.3 million deficit from four sources (see above). With $5 million in additional legislative impacts, our total deficit for 2011-12 increases to $36.3 million. It is important to note that at this time, $5.7 million in department operating budget reductions have been approved and adopted in the final 2011-2012 budget. We are in negotiations with employee associations for the $11.6 million in wage and benefit concessions; are awaiting recommendations from the Fundamental Review process to identify $5 million in permanent savings in 2011-2012; and now must achieve an additional $5 million in reductions to balance the budget given legislative impacts.
So here are answers to questions that I know many of you have regarding what this means to us:
Q. Will the labor concessions still be needed?
A. Yes. The $11.6 million in targeted labor cost savings from each association and group providing their proportionate share of reductions is still needed to address the $31.3 million shortfall for 2011-12 that we had due to decreased revenues and increased costs regardless of any legislative impacts.
Q. What about suing the State to get a refund for the two prior years from 2009-2011 when the State was taking our 9 cents of tax rate?
A. As mentioned, the District Attorney's Office and others are evaluating whether the ruling applies to Washoe County, and will advise the Board of County Commissioners as to what options there are based on that legal analysis. The analysis has not been completed, and the Commissioners have not had an opportunity to consider the options yet. We expect the Board to consider their options and the DA's initial findings as soon as Tuesday, June 14 or at their next meeting, June 28. It has been reported that the Clark County Commission voted to request a refund from the State. We'll wait for guidance from our DA's Office before determining whether Washoe County should take the same action.
Q. Will additional cuts be necessary?
A. Yes, but they are not nearly as bad as we expected when we first saw the Governor's budget. We will have to make up the $4.5 to $5 million of new impacts I mentioned above, and we still have to specifically identify the $5 million in savings from our Fundamental Review, for a total of $10 million in yet-to-be-identifed operating savings for 2011-2012. As a result, Departments were asked again at Wednesday's Department Head meeting to finalize the 10% reduction plans that the Board requested of them last month.
Q. Are the 10% reduction plans new targets that departments have to meet?
A. No. They are plans, not targets. The 10% reduction plans, if adopted in total, would provide more savings than are needed in 2011-2012, so asking for 10% plans will give the Board options and the ability to be selective and to make strategic decisions, rather than doing across-the-board kinds of cuts. It's also important to note that since we are using $9.75 million in one-time fund balances to close our shortfall for 2011-2012, we won't have those funds available in 2012-2013, so we'll have to produce roughly $20 million in savings in 2012-2013 ($10 million in on-going operating savings plus $9.75 million that won't be available from fund balances and will have to come from savings).
Q. Do departments that are not funded by the General Fund have to do the 10% reduction plans?
A. Yes. Per Board direction, we are one County, and tax-supported revenues fund virtually everything we do, so every department will participate and provide a 10% plan.
Q. When are the 10% plans due?
A. They are due to be submitted by the departments by July 1. They will be reviewed in concert with the Fundamental Review which is currently underway with the help of Management Partners and our OEC, the Organizational Effectiveness Committee, which is made up of private sector CEO's and an employee representative. The OEC has been directed by the County Commission to oversee the Fundamental Review process and develop recommendations, in noticed public meetings, and forward those to the County Commission for review by the Board at their meeting on August 9.
Q. What if the economy improves?
A. That would be great! But all the major economists tell us not to count on that. You may have seen that the State's numbers have rebounded a little…but Washoe County's haven't. If the economy improves, the Board will review and act on plans for restoring expenditures where it makes the most sense.
Q. Will there be separation incentives again? We see that the School District is offering them.
A. At this point in time, we don't have direction from the Board to offer the separation incentives that we did before, but the Board will be considering all options, and we will let employees know as soon as possible. One incentive that we DO have authorization to offer is that any employees that separate during the month of July 2011 will be paid their accrued benefits (qualified accrued vacation and sick leave payments) at the restored wage rate, before the cuts that were taken for this year, and before any cuts that have to be taken for the year that starts on July 1.
Q. What about new revenues? Is the Board considering that?
A. The Board has not authorized the implementation of new revenues, such as the 1% additional Governmental Services Tax, because they remain concerned about the impacts of increased fees on our community, with continuing high unemployment and high rates of foreclosures. We researched putting the GST increase on the Special Election Ballot in response to the many employees that suggested that the Board consider seeking a public vote to support the imposition of that tax, but were advised by legal counsel that there is no provision in law to implement the GST through a ballot question.
Q. When do the labor concessions kick in?
A. No concessions have been agreed to as yet. The targets for each employee group were calculated effective July 1, so for each pay period that we go past that, the amount that we have to get from each remaining pay period will get larger. The associations are all aware of that, and I know they have been waiting for the outcome of the Legislature, and they are working hard on solutions. Your association will be in contact with you.
Q. What happens if there are no labor concessions?
A. We will have to get the savings some other way, and the options are very limited, given everything else we have to do. Close to 70% of our costs are labor-related, so it will be difficult to avoid reductions in force if there are not concessions.
Q. Do all associations have to participate?
A. That is the Board's direction--all associations, all groups, all levels, all departments will contribute their proportionate share based on current wage and benefit costs. The Management Group is going first, with action proposed to the Board for their June 14 meeting to reduce Management wages by 5% on an ongoing basis, freeze longevity at what it is now, reduce any eligible step increases to 2.5%, and pay $44.60 per pay period for health insurance. These reductions meet the Management group's target, and equate to roughly a 7% pay cut. The Board is also scheduled to take action on reducing their own compensation, as well as that of elected department heads, consistent with the proportionate targets for their group.
Once again, thank you for your patience and your continued commitment during this difficult time. You have all done an amazing job of staying focused on providing excellent public service in spite of the uncertainties, and I am deeply grateful. We'll get through this, too!
