Presentation of Berks County FY2008 Proposed Budget by presmaster

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									                                   Presentation of

                    Berks County FY2008 Proposed Budget

The budget presented for consideration and adoption by the Board of Commissioners is a
culmination of not only an increasingly detailed budget process but a continuous effort to
accurately gather and analyze data, implement controls and plan strategies. These
strategies will impact not only FY 2008 but 2009, 2010 and beyond. The
Commissioners, who have provided direction, guidance and involvement as we have
dealt with numerous fiscal issues and planned for the future, have led this process.

The proposed budget assures that our service needs are met but at the same time that we
do not live beyond our means. As we work to meet those service needs, the biggest
challenge we face is to balancing expenditure growth with future projected revenues.

Current Fiscal Conditions

Significant budgetary challenges continue, exacerbated by such things as negligible
growth in assessed values and federal and state budget cuts.

In future years, we will not have enough revenue growth to pay for the services we
provide right now. We have identified efficiencies, made cuts from existing budgets, and
projected increases that we can avoid. While the entire organization made a good effort
in redirecting savings to cover most cost increases, it is simply not enough to cover
projected cost trends.

We have few options for generating additional revenue. We are largely dependent on the
property tax as our primary source of revenue; therefore, generating additional revenue
above what we receive through normal growth means a tax increase. This is not an option
and so we must look to other strategies.

The challenge is to strike the balance between what is responsible, sustainable and
affordable. Our goal is to reduce or eliminate service costs to the level needed to balance
the budget at the current tax rate. This has been done in recent years in large part by
redesign of departments and programs, a strategy that will continue to play a major role
in our balancing efforts.

Budget Summary

Important points regarding the proposed FY08 budget include:
       1. the budget utilizes the existing tax rate of 6.935mils,
       2. the budget is balanced, expenditures match revenues, so we are not deficit
           spending and as a result,
       3. no general fund balance is needed to balance the budget.

Revenues: The proposed revenues for FY 2008 budget total $ 459,906,943. Real estate
tax revenue increased $2M, or 1.7 percent, a continuation of marginal growth. Overall
revenue increased by 4.9 percent with much of the increase occurring in special revenue
funds and grant programs like subsidized child day care.

Expenditures: Expenditures proposed for FY 2008 total $459,906,943, an increase from
FY2007 of $28,188,529 or 6.5 percent which was curtailed as a result of continued cost
cutting efforts and containment of healthcare and pension expense.

Future Budgets: Forecasting expenditures and revenues for FY2009 and FY2010, based
upon current patterns and conditions, we are faced with a FY2009 deficit of $1.9M,
equivalent of 0.103mil, representing a 1.5 percent tax increase. Projections for FY2010
are direr with a deficit of $13.5M or 0.718mil, or 10.4 percent tax increase. In order to
eliminate a need for future tax increases it is imperative that we continue to maximize
non-tax revenue and streamline our service delivery.

Reserve

Because of the continuous marginal growth of tax revenues, the uncertainty of federal
and state funding, the unpredictable nature of crime on court and court related, Prison,
Juvenile and Adult probation, Youth Detention and Children services, and the lackluster
performance of the economy, the FY2008 Budget contains a reserve of $4.1M to offset a
downturn or spike in activity in any of these areas.

Fund Balance

Determination of an appropriate fund balance is a critical factor in county financial
planning and budgeting. Sufficient unreserved/undesignated fund balance must be
retained for working cash needs recognizing that this cash fund serves as the County’s



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contingency fund. Fund balance is also needed to fund expenditures in advance of
reimbursements from other agencies including primarily the State and the Federal
government. By maintaining the appropriate fund balance the County can avoid excessive
short term borrowing thereby avoiding associated interest costs, accumulate sufficient
assets to make designated purchases or cover unforeseen expenditures and, demonstrate
financial stability that preserves or enhances its bond rating thereby lowering debt
issuance costs.

The purpose, then, of an adequate fund balance is to maintain a prudent level of financial
resources to mitigate current and future risks due to revenue shortfalls, one-time
unpredicted expenditures, fluctuations in service levels, emergencies and economic
downturns, and to maintain an adequate level of working capital.

Across the country government jurisdictions maintain varying fund balances many times
dependent on their fiscal condition. A rule of thumb in terms of what percent of total
budget a government should maintain is 10 percent. The Government Finance Officers
Association (GFOA) recommends a general fund balance of 5 to 15 percent of operating
expenditures. A Pennsylvania county, because of the significant amount of up-front
expenditures it is required to make on behalf of state reimbursements, should be 15 to 20
percent. The 2008 budget projects an unreserved/undesignated general fund balance of
$83.4M at December 31, 2008 which is approximately 18% of budgeted operating
expenditures excluding capital project funds. If nothing is done to reverse the current
trends in service demands and delivery this balance will be at the 10 percent level by the
end of 2010 and drop below this threshold in 2011.

We continue to recommend designations of fund balance at December 31, 2008 for:
Capital Projects of $1.34M, Environmental Litigation of $2.02M, Catastrophic Health of
$4M, and Solid Waste/Recycling of $6.26M.

The following are highlights of the Proposed FY2008 Budget.

Personnel/Staffing

The FY2008 personnel budget is $135M, an increase of $4.2M or 3.2 percent. This
includes wages, payroll tax and fringe benefit costs.

The FY2008 budget includes a 3 percent increase for management confidential merit pay,
recognizing the increasing importance of remaining positions and the need for retention,
and 3.5 percent increase for union labor pay pursuant to existing collective bargain labor
agreements

       Additional Positions: The proposed FY2008 Budget includes 21 new positions
       representing $628K of new personnel costs. These are:

       District Justice                2      Office Support
       Court Reporters                 1      Reporter



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       Community Corrections         16      Correction Officers, Teacher, Counselor

       This budget impact is partially offset by the proposed elimination of 18 positions
       representing $343K of personnel costs.

       Pension Obligation: The FY2008 budget reflects an annual ARC payment of
       $6.325M, a decrease of $577K over 2007 resulting from improved asset value
       management and investment performance and a decrease in total employees since
       2004

       Health Insurance: In 2006 the County embarked on a self-insured health
       insurance program with Capital Blue Cross as the third party administrator.
       Doing so allowed the County to maintain its FY2005 funding level and will again
       allow us to keep an increase to a minimum, for FY08 of approximately 10%. An
       important part of the program is “wellness” support for employees, which helps
       manage our claims history. Provided in the budget is a reserve for catastrophic
       loss of $4M represented by a designation of general fund balance. Savings
       realized in any given year will be used to maintain this reserve, when necessary.

       Short Term/Long Term Disability: Also beginning in 2006, the County offered
       short term and long-term disability for management/confidential and union
       employees. All eligible management confidential employees participate in this
       plan. It is anticipated that more union employees will opt into this plan in 2008.
       By restructuring our sick leave policy and including this disability benefit, we
       believe we have developed a win/win benefit for both employees and employer in
       terms of cost containment and meeting employee health needs.

Berks Heim

As in 2007, the Berks Heim is presenting a balanced budget for FY08. This is due to a
number of positive factors which include the efficiencies realized through the relocation
to the new facility, an aggressive revenue maximization strategy and the work of staff to
identify and enhance efficiencies.

Agricultural Land Preservation & Open Space

The FY2008 budget allocates $8M and $6M, of the $36M 2006 borrowing, for Ag land
and open space preservation, respectively. This will maximize state matching funds for
Ag land preservation. This second borrowing continues the successes realized in
preserving the farming economy, farmland and open space. The FY08 use of funds will
leave an uncommitted balance of approximately $13.4M at the end of 2008. The FY2008
budget includes related debt service of $830K.

Communications/EMA




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Included in the operating budget is the relocation and consolidation of the
Communications Department and Emergency Management Agency. The FY2008 budget
includes $276K of prorated office rent and $2.25M of equipment costs, the latter of
which has been accelerated into 2008 from 2009.

Not for Profit Grants

       The County is proposing grants to the following organizations (* new recipient):

                                   2008
                               Recommended
Humane Society                 $    33,000
Animal Rescue League           $     8,000
Berks County Museum
Council                         $     10,000
Visitors Bureau                 $     69,000
Historical Society              $     10,000
East PA EMS Council             $      8,625
Visiting Nurses                 $     54,499
Crime Alert                     $      8,000
Berks Art Council               $     22,500
BCTV                            $     35,000
Berks County Conservancy        $     35,000
Economic Dev. Partnership       $   600,000
Reading DID                     $     10,000
Literacy Council*               $     10,000
RACC                            $   3,200,000
    TOTAL                       $   4,113,624



        The County, with its increase to the Humane Society for facility renovation, is
calling on the Humane Society and the Animal Rescue League to begin discussions on
possible consolidation options, which the Commissioners believe to be in the best interest
of taxpayers and to citizens of the County.
        The Commissioners are requesting that these two agencies advise the County on
possible strategies during 2008 and before funding requests are made for the FY2009
budget.

Capital Program

The proposed FY2008 plan includes the consumption of 2008 tax revenue of $4,375,946
and $2,450,000 of the 12/31/07 general fund balance capital reservation of $4M. Capital
projects of note are:

       Prison Expansion: Although the proposed prison expansion is not part of the
       FY2008 operational budget, the project has begun utilizing existing bond
       proceeds. The project is estimated at $30M. Completion is expected in 2009 and
       staff will develop and plan for additional operational costs in the FY2009 budget.


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       Community Corrections: As with the prison expansion, capital funding for this
       project is provided by existing bond proceeds. Operational costs of $5.1M have
       been incorporated into the FY08 budget.

       Information Services: The County continues its efforts to changeover our data
       lines to voice over IP which has and will continue to realize phone services
       savings.

       Controller: A new financial/procurement software package is being evaluated by
       fiscal staff from throughout the organization. This package is intended to vastly
       improve all aspects of the County’s fiscal business and reporting needs most
       notably accuracy of interim financial results and timeliness of internal and
       external financial reporting. The budget for software acquisition and
       implementation is $2.47M. This project is expected to start in Q1 2008.

       Parks and Recreation: FY2008 capital projects include:

       Funding Source:                               GF           Grant

       Haycreek Trail Acquisition                  $0             $900K
       Adaptive Recreation Area                    $102K          $102K
       Antietam Dam Repair                         $0             $ 3M
       Restoration of Gruber Wagon Works           $0             $200K

       Antietam Lake: Funding for this land acquisition and repair of the dam will be
       provided by County Growing Greener funds, State Growing Greener II funds and
       Lower Alsace Township.

       Facilities: Ongoing upgrades and improvements are and will be a continuous
       need for the County. For the first time our FY 2008 capital budget includes
       $632K for bridge maintenance which is funded by a Liquid Fuels allocation from
       PennDot.

       Communications: Included is the countywide radio system upgrade at an
       estimated cost of $50M. This will be funded by a line of credit and converted to
       GOB debt upon completion. This includes $24.4M for new end user radio costs.
       FY2008 debt service includes interest only of $687K.

Budget Process

The results achieved regarding the FY2008 Budget are due to the collaborative effort of
staff, department heads and elected officials all led by the Board of County
Commissioners. The Commissioners’ investment in not only the budget process but in
the fiscal management of the County was and is the determining factor in the successes
we have realized.



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The budget is presented today as the first step in the public review process. The proposed
budget will be available for public inspection from this day until the final adoption of the
budget, which is scheduled for Tuesday, December 18, 2007. The proposed budget is
available at the County Commissioners Office, Budget Office and is also available on our
County web site.


Respectfully Submitted,


William E. Dennis
County Administrator

Robert J. Patrizio, CPA
Director of Budget & Finance

Date: November 15, 2007




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