Travis County Commissioners Court
August 21, 2007
Item 37
37 is receive and take appropriate action regarding proposed budget of the Travis County health care district for fiscal year 2008.
>> morning.
>> we have a presentation that -- a very brief presentation he'd like to make to you, but before I get started, we have our former board chair, mr. Clark heidrich with us, and our chair rosie mendoza. And I'm hoping carl richey will be joining us as well. We were here in June and gave you background on how we were developing our bungt for the fiscal year 2008. And we're now here to present to you the preliminary budget that was considered and approved by the board of managers last Thursday, August 16th. You should have received the backup materials from us on Friday. And in your packets you have summary schedules of our proposed budget as well as a proposed presentation I'd like to present right now. We're not putting this up on the screen, but would like to walk through it page by page with you. So what we'd like to review with you today, we have the fiscal year 2008 budget and its components, which include the base budget, increased service level considerations, and considerations regarding the transition of the clinic operations employees from the city of Austin to the district. This will be a large endeavor that we'll be undertaking in the next two fiscal years. We want to talk with you today about a revenue and tax rate consideration in this budget. And of course net step to get our budget to completion in September. This is -- the next slide on page 3 shows you a pyramid that you've seen before. We presented this to you in diswlawn shows you how we were building our budget. Of course we're going to go into more detail on each of the level. Our base budget is reflected in the purple and the green we're focusing on increased service levels in this next year. These are amounts that we're budgeting, although the items themselves may not be fully developed. As of today we expect them to develop during the coming fiscal year. And in the blue top we have costs and activities related to the creation of the district's infrastructure to be able too assume the objects of the community health centers and the staff to complete those functions. On page 4 you have the district's proposed budget, preliminary budget as approved by the board of managers on August 16th. For fiscal year 2008, we are proposing a tax rate of .0693, which is down from the rate that you approved last year, which was 0734, due to increases in appraisal values, we do expect to actually receive additional revenue above the budget for 2007. So the proposed property tax revenues at that rate of .0693 are projected at 58,452,000. In addition to that revenue, we also received federal -- what we refer to as disproportionate snare upper payment limit dollars, interest as well as tobacco settlement funds and other funs from leases such as the lease for the Austin women's hospital to utmb galveston as well as the lease at brackenridge hospital to seton. Those amounts we are projecting to be 25,902,000 for fiscal year 2008. And we are showing a transfer in from our allocated reserve of 5,355,000, which will primarily fund one-time service expansion and transition costs that we are projecting in the next year. Our expense budget is projected at a total of 89,710,000. And this consists of expenses in the district operation related to district operations of 616,000. And the bulk of our expenditures are in the health care service delivery line and that is budgeted at 83,091,000 I do want to bring your attention to one item. If you looked at this summary page and compared it to what you received last year, it may look different to you in that you'll recall that we have several accounts that are called pass through accounts where we actually receive cash that gets paid to other entities such as seton related to dish and upl, tobacco settlement monies which we receive, but we in turn pay a portion to Travis County and to seton. Those accounts in the past have been reflected in both revenue and expense and therefore made each amount larger. Those accounts are still budgeted; however, they're in the detailed line item expenditure control that's in your package. We are trying to make our budget presentation match our financial statement presentation, so it's easier to the readtory make those connections. So again you have the detail, it's not just presented on the face page. Our reserves for next year are projected to be 58,203,000, which consists of a capital reserve at 6,662,000. Am indicated reserves at 3,540,000. And unallocated reserve at 43 million and that we have a schedule further back that will go into some detail about that. We are proposing a capital budget for the upcoming fiscal year of 900,000, which will basically go for the creation of systems and infrastructure for the district.
>> do you want to real quickly tell us why it is the oddity -- when you look be at this from 2007 to 2008, tell me why the allocated and the unallocated kind of flipped, just real briefly. It kind of jumps off the page ought.
>> we can talk about this more later as well. But essentially the board has a reserve policy that they established initially in 2006, I believe be it was. That policy directed the district to build up their cash on hand to a goal of 180 days of cash on hand. We started out at 90 days cash on hand and this year the board made the decision in April to increase that to 120 days cash on hand and then subsequently in July to increase that again to 150. So essentially what you see, you see a decrease in allocated anna nicole smith increase in unallocated, so it's shifting between those two categories.
>> so 120 days cash on hand is how much?
>> we are currently at 150 and it would be 43 million. And we discussed in June that we will probably be facing borrowing needs in the next year to two years, actually in the next fiscal year and therefore it's important for to us build our unallocated reserve to the appropriate borrowing levels that our lenders would expect from us currently so that we are prepared to obtain as safe a financing situation as we can. The direction is 180 days, but we feel like 150 is sufficient for our needs and what our leaders will look to us for.
>> the reason 25 million goes to three halves is transfer from allocated reserve to unallocated?
>> yes. A combination of transfer from allocated to unallocated as well as the use of 5.3 million in the budget for next year. So it's both expenditure and transfer.
>> and also there's some transfer from the allocated reserve into the capital. We fund our depreciation on an annual basis, so it's about $1.8 million that's going from allocated reserve into the capital reserve.
>> so if we could talk just a moment on page 5 regarding the tax impact to the average homeowner in our community, the average homestead value is $195,040. So the effect of our proposed tax rate for fiscal year 2008 on the average homeowner is an increase of $3.03 over the 2007 average tax payment. In fy 2007, the total tax payment for the average household was $132.13, and at this tax rate the average would be $135.13. Property values vary among households. Some may be below that average, some may be above and so their taxing would be dependent upon their individual household value. On page 6 we have provided you some additional detail about our base budget. Our 2008 base budget totals 79.2 million and represents a 4.9-million-dollar increase over the 2007 adopted budget. And that is the 6.7% increase. Those increases are comprised of several large items. One, we are increasing our funding for the medical assistance program by an additional 2.1 million. We are increasing expenditures for mental health services by 1.34 million. We have staffing and other operational growth requirements related to the implementation of our strategic plan as well as the development of the infrastructure of the district for the district to take over the operations of the clinic system. And that's bijted at an increase of 573,000. We have increases that we budgeted for payments for charity and physician services, be and also expansions and existing specialty care contracts of another 259,000. The base budget is funded by the property taxes at the proposed rate as well as the other revenue sources we enumerated for you in the beginning, relates to the seton lease issue, the upl payments, interest and tobacco settlement. We are also budgeting -- I wanted to highlight for you that -- and you saw this on the budget summary that health care delivery services represent the largest portion of our budget, which is 93 percent. The other expenses represent seven percent, basically related to operations in the execution of our strategic plan. The district 2008 budget does include expansion: the stoalghts represents an increase of 9,060,000. It focuses on area of health beyond base budget, expansions of specialty care beyond base budget and primary care beyond the base budget. And those total four and a half million with another four million that we've targeted for what we refer to as pass through expansion. Those tend to be more one time -- these increased service levels are funded boat by revenue generated at the proposed tax rate as well as the allocated reserve transfer of $4.5 million. We mentioned to you when we were visiting in June that we are undertaking a substantial infrastructure development for the transition of the clinic operations, which I think at this point has about 18 different locations. And the employees that go with that, which number over 400. We are in the process of developing telecommunications, human resources facilities and information systems structure for our entity. We have budgeted for this year $1.4 million in transition costs and we are proposing that we use some of our reserves to fund one-time costs of about 60% of that total. And then recognizing that a portion of those costs will be ongoing in the future, we've built in the other 40% into our base budget and proposed to cover that through our ongoing tax rate. We will have a similar expense for the fiscal year 2009 to give you a head's up since this is a two-year development for the transition. Our capital budget of 900,000 includes funding for business information systems, which just to be clear, are not only information systems for the transfer and clinic operations in the medical assistance program, but for the district as well. Up to this point we have outsourced all of our support services, our financial systems, and there's a certain amount of system development that we need to build for the district for itself for its own internal operations. So we are taking a leveraged approach to this in terms of whatever systems that we might have to buy for the clinic operations for financial accounting, will also serve the district. So we're trying to be very firkt in terms of how we're developing systems and sharing the costs among those entities. I want to also point out to you that this district budget does not include any capital or clinic replacement. I mentioned to you in June that we are facing the need to replace the northeast clinic and we are in process of development of a solution for that. Should -- it is quite likely that that will involve the acquisition of real estate and construction related to that. And we will bring that to you during the next fiscal year as an amendment to this budget and specifically address that with you at that time. That solution is not fully developed enough to include in the budget proposed to you.
>> does the law authorize such an amendment?
>> it does. We can bring a budget amendment to you any time during the year. And you are also as part of your authority, required to approve real estate transactions.
>>
>> [ inaudible ].
>> tell me what -- literally what human resources 300 k. What is that?
>> that's a combination of actual information systems that support the hr function. Signing up employees, evaluations and performance. It's all of the nuts and bolts about having people in your system and taking care of them. Employee benefits, retirement systems plan. So it's the infrastructure that you already have in place for Travis County for taking care of your employees. We do not have any of that infrastructure right now. We basically outsource and sort of hobble together through excel spreadsheets and thing. But it's not going to work for 450 employees.
>> usually when you see hr and d, and you think of f.t.e.'s and personnel, that this is really support for taking care of all of those needs. So it's not f.t.e.'s.
>> that's correct. This is -- these are the one-time expenditures and then over time you typically have to replace systems and technologies improve. But this will be the district's first investment in these key infrastructure requirements to the operations and take care of its employees.
>> so the city employees who have been staffing the clinic are not reimbursed by the district?
>> they are. By the statutes that either the city nor the county --
>> no problem. So when you transfer those that the health care district, though, you're really looking at the same amount of money that you've been spending already.
>> yes and no. There are infrastructure -- there's a certain amount of overhead support that the city provides through its centralized functions that have to be replicated.
>> so you pick it up with the employees.
>> yes.
>> the employees at like brackenridge are seton employees.
>> that's correct.
>> your job is not easy.
>> we try not to think about that.
>> a little bit about our reserve policy, we mentioned at the beginning, we do have three levels of reserve that are set by the board's policy and the board does review that reserve policy each year prior to development of the bijt. And we have an allocated reserve that for the current year represents 52%. Unallocated of 32%. The graph that predicts the summary page, how we shift from unallocated,, of course to her point, our capital reserves be as policy is currently constructed, that will continue to grow as we have a little bit less than three million dollars here. And that's a non-cash expenditure and therefore plugged into our reserve. The board has in its annual reserve policy will consider whether that will continue sort of -- continue on in terms of building each year or possibly said a cap for that reserve and therefore make the funds available. I think that our policy follows travis counties in that we try to focus on the use of one-time reserves for one-time costs and not use that for ongoing expenditures. To the extent possible, so that we don't get in the situation where we basically are committed to for an ongoing basis. So I think our policies are in line. Our budget calendar, which is on page 11, which is in front of you today presenting our preliminary budget, we do have two public hearing on our budget scheduled, one for August 30th and the second for September 6th. Our board is set to consider and approve a final budget on September 13th and we will come back to you hopefully on September 18th.
>> anyone with questions on this can contact you or any member of the Travis County dmirtionz court?
>> yes. It should be posted by the end of this week or early next week or proposed budget.
>> thank you. Questions? Comments from the court?
>> yes. Trish, I think there's the 2008 budget, those next couple of lines I think are the things that people most often hone in on. One of the things that I remember back in the creation of the health care district, it was the fear, and I was one of them, as you know, that you needed to watch taxing jurisdictions because you could real easily get creep. And it's a real easy explanation as to have you have creep in health care. If you know anything about it, we certainly see it in our budget. But the one thing that I want to be careful of when I get out on the street and somebody says, Gerald, you all basically, the Commissioners court signs off on the health care district's budget or at least ratifies it. And why are you signing off on something that is a 6.7% increase from the preceding year? This court voted in January to have no greater than a four percent increase in our budget over last year, and I think that that is something that -- because quite frankly, I think that we can all defend three and a half to four percent, just from cpi and from population growth. It's real obvious to see -- to follow y'all's budget, and when you've got 93% of your budget that is given towards delivering needed health care and everybody knows that the line for health care keeps getting longer, I not getting shorter, so unless you tell people this is all we take care of and the growing number is not something we're going to deal with, which is not something y'all can do, I don't think we can do it as a community. But I know that you all grapple with this just like we do. You bring it to us, you go okay, we've got to go, we've got to show what kind of growth we're going to have over last year. I mean, I want us to always be mindful of the fact that we always have to defend that to folks. And I wish that people on the street -- and I didn't have the notion that, do you know what, government cannot stay within any sort of acceptable measures with regards to its expenses. And that's hard to defend. I made that comment before I was elected, and now I find myself trying to defend why in the heck we watch government grow each year. And knowing that the needs s continue to be greater and greater, which is all the more reason why process improvement, all the thing that are the buzz phrases that you have today in the marketplace, whether you're in the private or whether you're in the public, I'm sure that the law firm, clark, is kind of like how do we do more with the same? How do we keep those numbers in check? I know how difficult this is, y'all, because you're trying to deliver something to mostly people that don't have the means by which to take care of themselves whenever it comes to health care. And I think that as a nation we are very sympathetic and empathetic in a lot of degrees as to what we're trying to accomplish and get done. But I do want us to kind of all be on the same page whenever somebody asks us, Commissioner, are you supportive of that growing 6.7 versus you all even before your court said that you were going to grow no more than four percent? So at the end of the day I want us to all be on the same page. And quite frankly, I might like to go, call trish and get her to run that by you. But we are going to be asked, and I understand it, but I would be be remiss in not at least getting something off my chest whenever it comes to looking at the numbers and recognizing. And I would go back to the line item health care district budget sheet. And I would ask. I know that we probably think that this thing is about over, but like, for example, on the expense part, we're going from 2007 budget and personnel expenses from 998,000 to a million eight. So we're doubling personnel. That would be one of those things that I'd go, is everybody getting a big raise? Are we loading up with f.t.e.'s? Because f.t.e.'s are a big deal know because f.t.e.'s ratchet your numbers from year to year to year. Can you quickly tell me what that personnel -- from a million to wurn 1.8 million is?
>> it's staff and also one-time costs related to the transition. Our approach to f.t.e.'s, you'll recall that we started as a very smaw staff. I think we're up to maybe 10 now to run the district. And we have to anticipate taking over another 450 individuals. So we have to add to the staffing structure of the organization, but our approach has been to keep our permanent staffing very, very lean and to add staff in on a temporary -- temporary may be a year or two years to get us through the transition so that we can build what we need, but then also incorporate all the resources that are transferring to frus the city. So we're trying to take a very lean approach to running the district and building a management structure and infrastructure that will continue to be lean. And to your very point, the board is very focused on the staffing structure and has been instructed to us over several years to keep the staff small, to use temporary and consulting where possible so that we do not in fact build a growing f.t.e. Base. And in particular because we're taking over 450 individuals, we don't know what all that brings in terms of infrastructure and we have to have the opportunity to design it and then figure out where those individuals go and what they do. So it does seem, because we are so small, a start-up organization, any change that we make is going to look very large from year to year, but there is -- it's not possible to run a 450 size organization on eight people. It's just not practical.
>> Commissioner, just a couple of points in response to your earlier comments. I think it's important to grasp a couple of statistics. One is that the effective rate increase year to year is four percent in this budget in terms of the tax rate. The difference between the foyer and the 6.7 comes from expansion of federal revenues and other revenues that we get that enable us to expand service delivery based on the volume of increase and volume of patients that we're treating. And I'd also call to your attention at 3 poin .03-dollar smoirs hold is less than three percent. I think those are two good statistics. If you couple that with the fact that our tax rate relative to the takts rate tax rate in comparison to every other major metropolitan area is substantially less. And I would take the position that our district person by person, pound for pound, delivers better value to this community than any in the state. And I think this is a responsible budget.
>> clark, I do too. It needs to be articulated just like that because everybody just sees a bigger number. And you know how easy it is for most people to do math. Oh, there's a bigger number than it was last year, versus being able to put you all in a position to say I agree with that. Without those explanations, you kind of get lopped in along with everybody be else about there's another governmental entity that's growing its budget.
>> we appreciate your sensitivity to it.
>> and another thing is you have the homestead dmemtion exception in place and some entities don't around here.
>> Commissioner, I think you bring up a good point that we have to keep in mind, and we do keep in mind each year is that we are a growing organization. As a start-up, we started up very small and trying to fit into our shoes and responsibilities now. And I think the goal is to execute that strategic plan that the board adopt understand 2007, which had some fairly ambitious goals in it to not only expand service, but to improve the effectiveness and the efficiency of the delivery system. So there is a lot of work underway and we hope that you'll be seeing the results of our work in the coming years as well.
>> we'll see you in September. It would help us to get an executive summary of comments given during the public hearing, if any.
>> we'll do it. Thank you.
>> thank you very much.
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Last Modified:
Wednesday, August 22, 2007, 18:30 AM