Travis County Commssioners Court
February 3, 2004
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Item 8
8. Review general guidelines for the fy 05 budget entitled "framing the fy 05 budget process," and take appropriate action.
>> it's that time of the year when --
>> yes. [laughter]
>> -- when you all establish general guidelines for the upcoming budget process. The materials that you have include a one-page summary of the guideline, a five-page set of guidelines, that material has also been sent out to about 150 officials throughout the county so that they were aware of what was being presented to the court. In both summary and in detail. This material is -- is submitted to you for approval after any modifications that you believe are appropriate. Travis County is in reasonably good financial shape. Our finances are stable, our triple a bond rating has been reaffirmed by the national fed rating agencies and you all have managed resources along with all of the elected and pointed officials carefully.
>> say that loud, christian so folks can really hear that.
>> you all along with appointed and elected officials have managed resources carefully and have allowed us to navigate some tough economic waters. That doesn't mean the sailing is clear. But it does mean that -- that we have gotten ourselves through a time that had a lot of budgetary challenges for the -- for the '05 budget process we are suggesting that the departments will need to continue to look internally within existing resources, foster n-property tax revenue as opposed to property tax revenue and not rely on relief from increased property taxes. We have had substantial conversations with the chief appraiser for the Texas central appraisal district and he predicts that commercial properties will again decrease in the nature -- in the neighborhood of around 4%. And that homestead values would remain stable. What that means is again for a second year there will likely be a shift in the overall tax burden from commercial to homesteads. We are seeing a decline of the existing tax base by 2.3%. And it is that tax base of existing properties that the effected tax rate calculations are based. We are blessed with about $2 billion of new construction. So that we will have a slight overall increase, about one percent in the total tax base after new construction. The average homestead values estimated to remain about the same at around $191,000. You have -- you have material that has calculated, based on those assumptions, what the effective tax rate would be and that -- the current tax rate is 4918, effective tax rate under these assumptions would be 5041 resulting in a -- just less than a $19 annual increase in homestead -- average homestead. Now, I have received comments from growth Commissioner Davis and Commissioner Daugherty regarding apprehension about that fact. And one thought that I had to suggest in terms of these guidelines are -- is a note specifically that says that the effective tax rate represents the tax rate that will result in the same tax revenue from existing properties as the year before. And it is simply the starting point for budget discussions and that the final tax rate will be set in September 2004. So that there is no misunderstanding. This document does not say there's going to be a tax rate set at any one level. It is simply the planning assumption to start the discussion, you have to start someplace. It is also consistent with the guidelines that you had for -- for quite a number of years that says the preliminary budget discussions should be established at -- at or near the effective tax rate. We put together a little table regarding health care costs and pay increases. Clearly those are substantial drivers. In the past and are clearly going to be major issues for '05. In all candor, when we put together that little table, it was rather surprising. Because it shows that in both '03 and '05 there was over $10 million spent in health care costs for all employees. And that in terms of compensation increases, rank and file received zero, in both years, and the peace officer pay scale increases totaled a million-eight. That is a total of over $12 million. Most of which is in the health care cost to the degree that we can control the escalation of those costs and get them down to a manageable level will mean that clearly compensation increases will be able to be dealt with, my own sense is that we should not in any way go through third year without dealing with compensation increases for rank and file or we will -- or we will have troubles that are not worth the cost, in my judgment. There still be a lot of unnon-s. -- unknowns. Ahead of us there's unexpected growth in indigent health care programs or indiana get attorney's fees or in the corrections program to the degree that the corrections can have its inmate count restain stable. It will allow a greater avenue for flexibility in '05. We are still -- the appraisal district still has only estimates. Interest rates, tax collections, are also variables that can have substantial impact and a variety of other issues, including the international situation that may have bearing on what we do. But at this point we have the -- the data before you so that we can at least start planning. '05 really is an '04 look alike in many ways. I received an e-mail from our chief administrative judge on the civil side just commenting on it looks like deja vu. I wrote back saying, "would you expect any less?" He did not respond. We are asking departments to provide their budgets in early may. Collaborate with their planning budget analyst as well as the court on any proposals for additional resources or opportunities for savings. We are proposing that all compensation and benefits be excluded from departmental budget submission so that that can be handled centrally, both on health -- plea health care side as well as on the compensation side. Last year, departments submitted 5% opportunities for reductions. Some of those were taken, some of those were not. We would give up -- we proposed to give departments an opportunity to update those, but we would -- in essence, we would review those, record them and to the degree that budget reductions were necessary, we would use that prior data to -- to review. We -- we would encourage departments to submit plans for increased revenue, non-property tax revenue. We continue to believe that there are opportunities out there for the collection of -- and receipt of -- of revenue of -- beyond non-property -- beyond property tax. We are encouraging departments to come to you earlier than may with any proposals for increased resources. And are encouraging the members of the Commissioners court to also bring forth any proposals for either resources or reductions, so that in may we have a better bead on the specifics of the budget process as opposed to what sometimes happens is departments provide their budget and -- and new ideas are not dealt with until later in the process including ideas that members of the court may have. It is much more effective to deal with those ideas in April or may than it is in September. And as I mentioned, we're urging departmenting to reprioritize -- departments to reprioritize internally. If they can find a way to [indiscernible] f.t.e.s we say great. To the department they want new f.t.e. That are not cost neutral, then we would not put that in the preliminary budget unless the court has instructed otherwise. So that if someone is coming forward, seeing requirements for additional f.t.e. That are unable to be funded interp neal, what we are -- internally, what we are in essence saying is come before the Commissioners court. If the court says yes put that in, wonderful. We will put it in the preliminary budget and work aroundt. I would propose those for health care as well as compensation issues. That's a rough outline of the guidelines, you also have a little one-page bullet of issues that we believe are still on the radar screen. That inevitably will get dealt with during the budget process from issues you have heard about recently, such as star flight maintenance or law enforcement to our standard standbys like indiana get attorney's fees or the indigent health care program or inmate accounts, manners like that. Matters like that. So what you are being asked to do is approve these guidelines and I would suggest that the language that I -- that I read to you about -- a note about the effective tax rate is simply that rate which generates the same revenue as the year before from the existing tax base that it is simply the starting point for budget discussions and that the final tax rate is set through your process after budget hearings and during markup in September of '04.
>> I just have two wordsmithing things. On the first page, the last paragraph of that page, go to the third sentence from the end, starts out the total new scrungs is estimated to be 9.0 -- 2.0 billion, it says 60.808, we need to add a billion there to clarify what that is please. On the next steps, I think it read easier rather than saying .613 billion is to call that 613 million.
>> okay.
>> it's more conversational language, people can digest it easier. I'm afraid that the decimal point might actually get dropped then it looks really cool but not correct.
>> will do.
>> christian, where are you suggesting to put the footnote that you recommended a moment ago?
>> yes. What -- I suggest that that appear on the second page below the table. Because that's where the $18.82 appeared that caught your attention. And that right below that it says please note.
>> okay. You have given county managers an opportunity to respond to this already?
>> yes. And our county officials are not shy. Shy.
>> so assuming the court approves this today, what happens to the document?
>> this becomes the -- it establishes the architecture for the budget manual. The budget manual is usually distributed in March. Early March. This document will be -- will be reproduced as an appendix in that manual. We would inform departments what their specific budget targets are, because the targets are an at met tick calculation of the '04 budget plus any annualized costs that have been approved by the court less any one time costs. And we would advise departments to provide their budgets at that or less than that target and the budgets would be due in may. The budget manual has the forms and the details for them to follow. We would then distribute these guidelines and invite departments in mid March to a meeting, usually we have two meetings where we kind of do what we just did with you and then invite questions, there are sometimes very healthy discussions about the process, but my guess is since this is quite similar to '04, we are for the going to see any radical changes in approach.
>> any more discussion, questions, comments?
>> so this usually is due like may 7th.
>> first week of may.
>> that first week.
>> yes. The budgets would be due the first week of may.
>> okay.
>> I would move approval with the two things that we discussed, my little wordsmithing and then the footnote related to the effective tax rate.
>> second.
>> yes, sir?
>> well, I'm not happy at all with the direction that this thing takes us. I don't think that it's deja vu. I don't think that we are asking the departments to do what we asked them to do last year, which is find cuts. I think that we will witness, people of this community will witness another increase in their residential taxes. I continue to say unless we change the -- some of the dynamics as to what we do on this court, with finding legitimate ways to make cuts, I mean, I -- I think that I understand you to say, christian, that -- that you -- that you are -- that you or your department is saying that we may be in some trouble if we don't find a way to pay rank -- give rank and file a pay raise. Now my question is going to be is where do you find pay raise money with the direction that we are going here unless you are going to raise taxes? And I'm not going to vote for raising tabs. We didn't lower taxes as much as we needed to last year. I'm still confused about why we get the bonding houses confused or upset when we go below the effective tax rate. That doesn't make any sense to me when you are trying to sell somebody that you are trying to operate your entity with less money, with demanding less money out of people's pocket. I just don't understand that. Not to get into that, I mean, I guess, if you wouldn't mind come to my office, maybe I will -- maybe I will get that at some point in time. You know, I put out, as per your directive, I mean, Commissioner, I mean, give you some ideas on where you think that we need to head. I have consistently said that we have too many employees in the Travis County workforce. The only we that I think that we are going to find the dallas to give pay raises is -- I'm forgiving pay raises on performance based pay raises. But I don't think that we ought to just say, you know what, if you just exist, and you work for this entity, that you get a pay raise. Nobody runs an efficient and effective company by doing that. Now, I suggested and I don't know, maybe you did pass this around or maybe you got laughed out of the room when you passed my suggestion around, that I would like to see a survey done in this county that says if the way that you think that you could get a pay raise would you be supportive of decreasing the number of employees in this county so that we would find the dollars to give the people that perform in this -- in this workforce a pay raise. I mean, I don't -- I would love to see that -- that questionnaire go out to the 35 -- 4,000 employees that we have. You know, if you just let people say do you want a pay raise, most people are going to say yeah I want a pay raise. If you say the way that you get a pay raise is performance based, you know what, there are going to be some people that may lose their job. No department wants to take and slash their departments, I understand that. But I think that managers, I think that people that are making the dollars that some of our managers are making ought to have the responsibility of finding out I mean how to run their department more efficiently. Now, maybe I'm -- maybe I won't find two other people to at least question that. But I'm not supportive of continuing along the lines of you know what, we don't have a problem, this community is fortunate that it has $60 billion worth of value. I mean, I'm amazed that Austin has $60 billion worth of appraised value when we probably got, I don't know, what's the figure? I mean, you hear all sorts of figures, you have 30%, you have 40% of the appraisals or of the property in Travis County that's not even on the -- on the appraisal district's books. Because they are tax exempt. I mean, all the government buildings. So I'm -- I guess that I should be -- it's always a double-edged sword as we all know. We live in a community, we are blessed with having enough money to run services, but it is on the backs of the taxpayers. And I mean in today's paper, I mean, I don't think that this economy is clicking better. I think that -- I mean what -- when you are reading places about -- about places that are laying off, you know, 20 and 30% of their employees, losing some of these service areas, we know that the tech industry is not back, it probably will never be back where it is, I'm just not comfortable with -- this is an easy deal to do. It's easy to say you know if you are happy, we will click along, happy knowing we are going to be swrarnd the effective tax rate, let's go forward with it. I don't think that we are asking the tough questions, if you take your sheets that you gave us on unfunded mandates, if those just scare you a little bit, we are talking about millions -- I mean potentially millions of dollars that could be added to what we are going to need to operate this business. So I -- I would be remiss in not saying that, no, I'm not happy with this being the starting spot. But if -- if that's what we are going to do, if we are going to click along and go through the budget like we did last year, say okay where we really found the most savings last year were out of some of our reserve and kind of, you know, giving the left hand what the right hand had or this and that, maybe -- maybe the majority of the court is willing to do that. But I still hear -- I can't afford my taxes. I still hear, there are people running races this year, I will guarantee you that that is still the thing that people are hammering. I mean, my taxes are too high, I'm always the first to defend the county as saying well we are only about 16 or 17% of your tax bill. But it frightens me for us just to -- to okay this thing today and to click along, which I think would be a nice, easy way to click along, and have a -- probably a pretty easy budget.
>> I might --
>> I don't want the impression to be left that we are going along with everything. When they talk about this is a starting point. It is just a starting point. Then we work on it throughout the -- between now and the time we turn in our budgets. To see how we can find efficiencies as it says in the memorandum. So I -- I would agree with you that -- that I still hear from people that their taxes are high. Some folks can't afford, some have even suggested that they be frozen for a year until we get out of this problem with the economy. But -- I don't want you to have the impression that it's a done deal. I certainly don't see it that way. I think that we have to -- we have some time left to kind of think about what we are doing and listen to our taxpayers as well.
>> I have a little bit of perspective as well, I remember when mat tee malden taylor, our h.r. Director, I want to say it was in '96, I so remember her telling us, when we switch to -- from across the board pay increases to performance based pay, she said the days of breathing and getting a pay raise at Travis County are over. We switched to performance based pay and there is nothing that says that any salary changes that we are looking at would be anything but performance based. The only part of our system that is not performance based is pops, that's a big chunk there. I commend constable bob van for pulling his department off pops. Because he wanted to have a performance based system. And that wasather interesting timing, he pulled his folks off pops, we haven't given any kind of performance based raises, so he got the flexibility without extra money. I wish that we could because of posting requirements have all five of us be sitting with the bond houses, believe me. We spent a great deal of time related to the issue of what the effective tax rate what that means. They spent equal quality time with the city of Austin and with aisd. That is a big deal because that's what we have got. It's tax and spend. That's all that we have got are taxes. With when you go below the effective tax rate, there are huge impacts for your organization, financially, not for just that one year, but for five or six years. Once it is gone, it is gone. All it is is it's saying that we are having the same amount of money, shifting between residential versus commercial. Nowhere have I seen anybody talking about how much less the -- the business is paying for county government. How much less business is paying for city government. How much less business is paying for aisd. No one has talked about that. When it goes up on the residential side there's a decrease on the business side. Nobody has talked about what -- you know what the tax rate, the tax bill of say the Austin american-stesman, sorry kate I see you right there, what's their bill this year versus last year and the year before? It's always going to be that way. Always going to be that way. But I wish, I would love to spend some more quality time to share with you what the bond houses said. I'm sure jue Biscoe would also share with you the discussion that's we did have in new york related to the effective tax rate.
>> let me do say about the businesses.
>> judge Biscoe is not getting into this by the way [laughter]
>> I mean, busesses, most of the time, I mean if you take in your balance sheet of a business I mean I don't feel bad at all about businesses getting decreases in their appraisals. The businesses are actually getting murdered. You need to work twice as hard to cover your nut back when times were flush. I mean that's the reason that you have the -- the ups and downs. I mean with the business. And that's the way that it should be. But -- but you know getting back to one of the things that you said, christian. Let's find ways to find non-profit tax revenue. I mean that really is a year out kind of a thing because it's not -- I'm all for it. And I wasn't very productive with that last year because I really didn't know how to go about helping find those dollars, but I think that I'm going to understand better this year, I think there are places that all of us know to go and find some dollars. But the auditor's office is not going to come in and -- and okay and verify whatever, if some department says, (whistle) you know what I think that I can generate 3 or $4 million, we are not going to put that on a deal and get anything signed off on. Here we are again where we it mated last year what we wanted you to help us find were non-property tax additional revenues. We are saying it again this year. I bet you we'll say it again next year that won't affect us until 2007. We have got to find a way -- maybe it's an incentive program where you say you know what, really bring us something to shows us where you generate some dollars next year when we start the budget we can go to suzanne, susan, we want to verify this. This is not on the come. I want us to -- to -- I'm not unhappy with the efforts that the county has made with regards to -- to, you know, how we have gotten through, you know, our tough times. I do think that we have gotten through our tough times based on -- based on getting the good portion of this community and the values when you compare our cities to the other cities. I mean the difference is, the real differences are our appraisals. That is what we are again double edged blessed with in Travis County. I mean our great appraisal for the tax -- the taxing entities, but boy if you are -- all of us, hey, I mean, we are all taxpayers as well, so I understand that. I'm just -- I just hope that we have an eye towards how do you really take and cut spending of government? That is something that I don't think it makes any difference whether you are a democratic, whether you are a republican, whether you are a libertarian, I mean the common thing on the street if you asked the common every day guy they say why does it cost government so much money to operate? And, you know, i've got questions in washington you know what it's my party that's running washington. I've got just as big of questions. And so I don't -- I mean I would like to start here with county government since I'm a Commissioner. [one moment please for change in captioners]
>> i'd like to say a couple of things and get an opportunity to squeeze in.
>> now is a good time.
>> thank you, junk. I have a lot of -- thank you, judge. I have a lot of agreement with what Commissioner Daugherty is saying down there. I was on the end of the .498 coming in at below the effective tax rate last year, and I think probably Travis County was probably the only local government entity that came in below the effective tax rate. And again, here we are with another challenge this year to look at ways to in my mind come below the effective tax rate, but still be in a position to still balance some of these things that we have before us now. And it is going to be a major challenge, no doubt about it, as we look at this, but I still think there are some available resources that we can look at. I feel pretty confident that we can find some additional funding that we must attain to achieve this end. Again, I'm really looking at an opportunity to move forward; however, not at the point where we look at the effective tax rate of .5041, which we're looking at right now as opposed to the current tax rate of .058. So that's an imbalance to me, and of course I would like to have the opportunity to continue to investigate those other sources of funding. And if I can bring some good non-property tax resources in, i'd like for everyone maybe consider and welcome those things because because there's still some money that's available to us. And it's the same story or maybe just a different verse of the same story. And that is how we can be efficient and work as a government, but also do it where it's not really banging the taxpayers in the pocket too severely. So that's the direction I'm going to be looking at. Right now I'm trying to. I think it's a real good point. The voter out there, they basically look at the bottom line. They really don't -- they see their tax bills. I don't think too many people go through it and see that you have all the other taxing jurisdictions, aisd, a.c.c., The county, the city. So when you tow that bottom line, that's what the voters look at. If everyone does the same thing, even at the effective tax rate, you end up going above the current tax rate, then that is a major hit to the residents. And so it is a problem. It is a big problem. And I just think everybody need to address it the best they can. And of course, I'm going to do that here from the Commissioner's court dais. So thank y'all very much.
>> move profl of the fy -- approval of the fy '05 budget guidelines entitles framing the fy '05 budget process.
>> second.
>> any more discussion? There will be more opportunities to discuss these guidelines and others, I take it. All in favor? Show Commissioners Gomez, Sonleitner and yours truly voting in favor. Voting against, Commissioner Davis and Commissioner Daugherty. Thank y'all very much.
Last Modified: Wednesday, February 4, 2004 6:25 AM