Taxes and Budget Forecasts

One of the larger controversies and disputes in the County government right now is on the budget and a possible 1/4 cent tax increase. There is a special study session of the County Board tomorrow April 23rd to discuss both (agenda). The County Board would have to vote to put a referendum question on the ballot for voters to approve a tax increase first. They would have to do that sooner rather than later if they want to meet the deadline to put the question on the November general election ballot.

County officials and board members who believe a tax would bring some stability to the county budget face a couple big hurdles: 

• First and more generally, practically nobody likes having their taxes raised, even if you can convince them it's necessary. 
  
  
• Second and more specifically, the county budget funds are atypically in the green and plush beyond the recommended fund reserves at the moment. It's hard enough to convince people to dish out more tax money when the situation looks dire, let alone when there's an annual surplus. That's where the dispute over financial forecasts come in to play.

For folks who have been following the County's budget woes over the years, the idea of a budget surplus might sound far-fetched. The county has faced dire budget scenarios for years and years, with the threat of a structural deficit almost always looming over the horizon. Prior to the pandemic we've seen desperate attempts to increase revenue, failed tax proposals, skeleton crews in county offices, facilities and IT systems desperately needing maintenance, replacement and repair, etc.

The federal American Rescue Plan Act (ARPA) pandemic relief funding played a role in giving the county budget woes a lifeline, of course. Other positive economic factors have helped keep tax revenue strong. More negative factors like staffing shortages have provided a mixed bag of problems and savings. Personnel costs are some of the biggest chunks of the budget, after all.

So it all comes down to the future and budget forecasts and when, not if, the next recession comes into play. Recessions are notoriously difficult to predict, but you'll find a lot of economists arguing we're overdue and pointing to the various indicators that have preceded recessions in the past. Only time will tell, however.

For the official budget forecast presentation from the April County Board Committee of the Whole meeting you can jump to this video link (presentations slides here) or read the financial forecast report itself.

The County Auditor has very publicly disputed the county budget director's financial forecast at the regular County Board meeting this month. A video link to his presentation and some heated Q&A with board members is available here. 

The auditor is facing a possible censure from the board on his treatment of county staff in his office and some more salacious accusations. An early draft of the censure was discussed at the County Board's Labor Committee meeting this month (page 19 and 20 of the agenda packet PDF). He and his supporters believe that this is a coordinated smear effort over his budget and tax positions. There is a separate Cheat Sheet post on the Auditor controversies.

2025 Budget Process and Forecast:

It's very early in next year's FY2025 budget process for the County Board. The county government's Fiscal Year (FY) matches its calendar year, so we can talk about the 2024 or 2025 budget without much confusion. Some other local government budgets have a fiscal year offset from the calendar year, and that can take some adjustment. The process is laid out each year and generally takes most of the year to complete and pass with a final vote by the County Board itself. From the financial forecast presentation this month:

The County Auditor and his supporters have pointed out that past financial forecasts were not predictive, which is generally true. If one looks at financial forecasts by government bodies, including the county government, they tend to be conservative estimates of how current policies might play out over time (holding for certain economic factors like a steady economy or a possible recession).

Their role as a budget planning tool is typically explained up front. It was the second informational slide of the budget director's financial forecast presentation, for example. They generally don't claim to be predictive and they aren't typically judged on how close they end up coming to future outcomes. They can include "what if" scenarios requested by board members and others curious how an additional tax, spending cut, or economic change may impact long term planning. That's typically just for getting an idea of how that may impact long term budget numbers, not a prediction of the future.

Board members who have defended the county budget directors numbers don't appear to dispute the non-predictive nature of financial forecasts, but also point to the context of why the recent budget surplus exists. One argument raised in the Q&A of the last County Board meeting was that they can't model a budget based on staffing shortages and other costs savings that may be undesirable or temporary at best.

I encourage people who are interested in this debate to watch both the county budget director's presentation and the auditor's presentation to decide for themselves. One might have different opinions on the necessity or political plausibility of passing a sales tax increase at this time, regardless of where one falls on the financial forecast dispute, however. The County Board meeting on that tax issue tomorrow will probably get into the nitty gritty of arguments for and against such a measure.