EXECUTIVE MESSAGE

Address to the Racine County Board of Supervisors
County Executive William L. McReynolds
October 12, 2004

Mr. Chairman and members of the County Board:

Tonight we renew a time-honored tradition. From its very beginnings, our nation has linked taxation and representation. That is why the people’s elected representatives hold the power of the purse—the power to decide how much our citizens should pay in taxes and how best to spend the taxes they pay.

But, as governments have grown more complex, it has become common for the chief executive to present a taxing and spending plan, in the form of an executive budget. Therefore, while much of the authority rests with you, the people’s elected representatives, we share the responsibility of this budget making process.

That joint effort is the annual tradition we begin tonight. In keeping with that tradition, my remarks are addressed to our citizens, as much as to you, their elected representatives.

When I spoke to you last year, we were in the midst of rolling layoffs caused by an inherited, unexpected deficit in the 2003 budget. That night, because county residents expected us to continue controlling taxes, I presented a budget for 2004 that kept expenditures as low as possible.

But even though we trimmed expenses wherever we could, we knew we had to invest where doing so would do the county good. Let me tell you how two of those investments have already paid off.

In Racine County, unemployment is down from what it was last year. Between July and August of this year, we regained 200 manufacturing jobs. But for this good news to continue, our manufacturers must stay competitive.

We knew that small local manufacturers had trouble in the global marketplace because they lacked modern technology or their employees needed more training. So we agreed to set aside $25,000 for small grants to small local businesses—no more than $2,500 to one firm.

So far, we’ve made grants for almost half of the total, to six businesses. These businesses have invested over $29,000 in new technology or training. I’ve talked to people in those firms. They appreciate the help, and they know the training will pay dividends—for them and for their employees. That’s a sound investment in our county. I’m asking you for another $25,000 this year.

The second investment was of human capital, not money. For 10 years, Andrea Bumpurs ably served the County Executive’s Office and the County Board as Executive-Legislative Liaison. As you know, the 2004 budget changed the title of that position to Chief of Staff. That change had two results:

Some questioned that move—but that investment of Andrea’s skills has really paid off. With her coordination, HSD and outside partners put together a grant application to the U.S. Department of Health and Human Services. The grant, which would support a re-entry program for youthful offenders with AODA issues, would provide $2 million over four years.

Mr. Chairman, I am pleased to announce that we have been awarded that grant. I want to express appreciation to the Bush Administration, especially HHS Secretary Tommy Thompson, and to Congressman Paul Ryan.

This grant won’t cover services we already provide. Rather, it will permit us offer a new program that will help youthful offenders get back on the right track. It will bring a comprehensive array of services to bear on an issue of concern to us all—the future of our young people.

That is great news for us all, and especially for those of us who understand how important it is to help a young person steer away from a life of crime. It will help stop the juvenile justice system serving as the farm system for the adult criminal justice system.

But let me turn from these quite spectacular results of the 2004 budget to its more day-to-day aspects.

As I have said, the 2004 budget focused on controlling expenditures. I want to publicly thank all the county employees for their efforts, throughout this year, to keep our costs down. At this point, our overall expenditures actually seem to be running slightly below projections. Unfortunately, our revenues are also running a little below projections.

So, for the rest of this year, we are doing everything we can to keep the budget in balance. Among other things, we are offering our non-essential employees voluntary leave without pay.

Now, I have to tell you—the 2005 budget will be as austere as that for 2004—maybe more so. There are two reasons why.

First, I believe that any tax freeze must include mandate relief, but I fully agree that taxes—state and local—must be kept under tight control. This budget stays within tax freeze limits.

Second, dipping into reserves in 2005 could damage our credit rating and cause us to pay more when we borrow for capital expenditures in future years.

The message is clear: we have to keep taxes in line, and we have to pay for current expenses with current revenues. The only way to do both is to keep our expenditures down.

This is not easy, given the continued, explosive growth in employee healthcare costs. We project another 23% rise for 2005—nearly as sharp as the spikes of 25% and 28% in ’03 and ’04. Regrettably, even at those rates of increase, we’re not building up a healthcare reserve. In fact, on January 1 of this year—when my first budget went into effect—we faced a healthcare fund deficit of $6.2 million.

At the rate we’ve been going, by 2010, healthcare will exceed salary as a share of our employee compensation costs. We cannot sustain such large increases indefinitely. And, for so long as we do struggle to sustain them, we have to cut other costs any way that we reasonably can.

But let’s start by reviewing some budget basics. To begin with—let’s remember that only a fraction of the county budget is paid for by the general countywide levy—the property taxes paid by all county landowners. The total proposed budget for 2005 is about $152.2 million. But of that total, only about $41.5 million will come from the general levy.

We should also remember that only a fraction of our property taxes go to the county government. Each county landowner pays property taxes to at least three local jurisdictions: the county; a town, village, or city; and at least one school district. Some may pay taxes to multiple school districts or to sanitary districts. All show up on a single bill in December.

For example, last year, the general countywide levy accounted for about 15% of the tax bill of a City of Racine resident and about 17% of the tax bill of a resident of the City of Burlington or the Village of Waterford. Even in the least taxed area—a part of the Town of Norway—the general countywide levy accounted for only 26% of local tax bills. And I’ll bet that this year’s percentages will be even lower.

We also need to understand what kinds of services county taxes bring us. Take the department with the largest budget—Human Services. Its 2005 budget totals about $53.6 million. But most of HSD’s budget is covered by state and federal funds. As a result, only about $8.1 million of that total must be covered by a combination of the general countywide levy and some other, non-tax revenues.

One of government’s first responsibilities is to protect its most vulnerable citizens. That $8.1 million—which leverages another $45.5 million to help our people—is a sound investment.

Or look at the Sheriff’s Department. Its 2005 operations, including the jail, are budgeted at about $26.2 million. Of this amount, about $21.1 million—over 85%—will come from the general countywide levy.

Another of government’s first responsibilities is to protect public safety. We all agree that the Sheriff’s Department’s portion of the general countywide levy is money well spent.

Together, the general countywide levy and nonallocated non-tax revenues total about $52.5 million. Of that total, about 40% goes for public safety, and another 15% or so helps us meet the needs of our neediest.

The rest of the general countywide levy and of the nonallocated revenues goes toward all the other things county government does: highways and parks, Ridgewood Care Center, and administration of justice—to name a few.

Let’s also talk about the taxing and spending limitations we keep hearing about from Madison.

Last year, we heard about the so-called property tax “freeze”. It would have limited our general countywide levy to an increase equal to the change in property values due to new construction. Our 2004 budget, which raised that levy by only 1.86%, easily met that limit.

This year, the topic has been the so-called Taxpayer Bill of Rights, or TABOR. Several different versions of TABOR were discussed. But you don’t have to understand every twist and turn in the TABOR debate. You just have to know that the general levy in our 2005 budget will beat TABOR.

So let’s talk about that 2005 budget, and let me begin by thanking all the constitutional officers, and commending all of my department heads, for their hard work as we put this budget together.

This is not a “business as usual” budget—let me show you why. When we started working on the budget, we figured that increased healthcare costs alone would equal a levy increase of about 8%. But the most generous of the TABOR limits would permit an increase of only 4.76%—and we knew county taxpayers wouldn’t accept even that.

In other words, if we’d done “business as usual,” just that one component of employee compensation would eat up the entire levy increase—let alone possible wage increases, higher fuel costs, or any other factor.

What has made this budget possible is the “can-do” attitude of the department heads, the constitutional officers, and the line employees—their willingness to get away from “business as usual” and find new, more efficient ways to serve our citizens.

The 2004 executive budget that I presented to you eliminated over 50 FTE positions. At the time, we thought we might need to eliminate as many as 40 more.

During this year, apart from the County Schools Office, we’ve had a net reduction of six more positions. Most were eliminated through attrition, as when we contracted out the Ridgewood dietary and laundry facilities. Next year, the first full year under those contracts, we should save a good $35,000—and we’ll save much more over time.

This year, Rob Richardson’s Information Systems Department invested in greater efficiency. We eliminated a total of eight FTE positions, six of which have already been vacated. The work performed by the employees who held those jobs is now being done by a contractor. In 2005, we expect this arrangement to save us over $200,000.

Despite these job reductions during the course of this year, we must eliminate still more positions in 2005. At this point, we expect to eliminate 38 FTE’s—most through attrition. We had to figure out how to get by without those positions, because budgetary pressures—especially employee healthcare costs—left us no choice.

But I don’t want to harp on the negative side of the budget. I’d rather talk about how our employees are doing the people’s business at less cost.

For example, next year, Glenn Lampark’s Public Works Department will save us money by replacing a contractor that had performed snow removal and basic grounds maintenance at Ridgewood.

Glenn’s people also have plans to help us smooth out natural gas price spikes by bringing us into a State of Wisconsin buying group.

With increased use of information technology, Julie Anderson’s Planning and Development staff is rendering better, faster customer service with fewer people.

And under Director Tom Riese, UW-Extension’s slightly smaller staff is becoming better integrated into the county “team.”

You’d expect the Workforce Development side of the Human Services Department to be business-oriented. The good news is that even the social services side is entrepreneurial—the $2 million grant proves that! But so do other innovations, like the ACE program in juvenile detention.

And the residential treatment facility now at Taylor Home is a public-private partnership we can all be proud of.

Debbie Jossart and the folks at HSD just keep finding ways to stretch our social service dollars so that we can serve our neediest people better.

At Ridgewood Care Center, Fran Petrick and her staff keep looking for ways to maximize their resources. Besides initiatives like the outpatient rehab program, next year Ridgewood will focus on encouraging more after-hours and weekend inpatient admissions.

Under Jon Lehman, the Child Support Department will restructure its operations, resulting in a net reduction of six positions. This will make it even more efficient in ensuring that Racine County’s youngsters receive the support they deserve.

Though I don’t usually comment on the operations of the constitutional officers, I do want to thank all of them for their spirit of cooperation during the preparation of the 2005 budget and in our continuing efforts to stay within the limits of this year’s budget.

I also want to thank the Clerk of Court, Tari Wheary, for undertaking a reorganization of her office. Although her staff numbers will decrease, the new structure will be more flexible and should help to generate more revenue for the county. We invested about $25,000 in a management study that suggested these changes. That’s another investment that will pay quick dividends.

Let me “put a face on” staff efforts to keep costs down. Marta Kultgen, a manager in Human Resources, has led our growing effort to cut costs by encouraging employee safety and wellness. Besides being HR’s “point person” on the safety committee, Marta updates our employees on wellness and prevention and ways to lead healthier lifestyles. Her enthusiasm is contagious. Her work already pays dividends, and in the future, it will only be more important. Thank you, Marta.

Those are a few of the “success stories” that permit us to present you a budget that increases the general countywide levy by only 2.66%. We believe that these restructurings and staff reductions will save money without reducing services.

Unfortunately, not every cost-saving measure is so cost-free. Over time, the more we reduce our staff the more likely that we’ll also reduce services.

But enough of the words; let’s get down to the numbers.

Tonight I present to you an executive budget for 2005 that projects total expenditures of about $152.2 million. This includes almost $13.9 million for the County Schools Office.

This budget projects a general countywide levy of about $41.5 million. This is an increase of only 2.66% over last year’s levy—the same as the amount by which new construction increased our total property values. Thus, it meets the limit of the property tax freeze. It also drops the mill rate by 6.67%—from 3.810 to 3.554. And last year we’d reduced the mill rate too.

Why is it important to limit the levy increase percentage to the new construction growth? Simply this: It helps to protect people from paying higher taxes just because their homes keep rising in value. If new construction has increased total county property values by 2.66%, and if we only ask for 2.66% more from the entire county—then, on average, an existing property owner should see little or no change in his or her general countywide levy.

Does this mean that some existing property owners won’t see an increase? No; this is not a precise science. There will be differences, but—on the average, across the county—general countywide levy increases should be covered by taxes on new construction.

As you know, we continue to have a separate levy for the County Schools Office. Local school districts must comply with strict special education mandates. But Madison hasn’t kept its promise to give local districts—including ours—the funds they need to fulfill those mandates.

Besides being underfunded, the County Schools Office is in a period of transition, and it faces the same employee compensation pressures as other county agencies. Therefore, though we have held the line on the mill rate, we have no choice but to ask for a County Schools levy increase of about 9.8%. This is still less than the overall increase in county property values. I can assure you, however, that there will be no increase for 2006.

I should also note that the bridge aids levy, over which we have virtually no control, will be $250,000—an increase of 17%. As you know, that levy applies only to property in towns, not in cities or villages. Finally, we propose a Lakeshores Library levy of just a bit under $2 million. This 2.5% increase will keep us under the new construction cap.

Let me also mention one matter that does not involve a tax levy. Chief Judge Ptacek’s Criminal Justice Coordinating Committee asked that the county fund development of a risk assessment tool that would permit more objective decisions on pre-trial release. The budget does so, but it will have no effect on the levy. I kept my promise; we funded this program.

Mr. Chairman and members of the board, this is a budget Racine County can live with. We have kept the growth of the general countywide levy within the rate of property value increase due to new construction, and we have done so fair and square.

We have done it without a sales tax, like some of our neighbors. We have it done it without drawing $5 million out of reserves, like the City of Milwaukee. We have done it without gimmicks, like Milwaukee County’s plan to issue bonds to pay pension obligations.

On the other hand, some uncertainties remain. The main uncertainty is the outcome of the collective bargaining process that begins soon. Karen Galbraith, the HR Department, and our negotiators know what is at stake. We hope that our employees understand the constraints on our ability to raise revenue and that they will be realistic in their bargaining. But if that is not the case, we may have to tighten our belts even more.

Each of you has a copy of the budget. Both its painstaking detail and its handsome presentation represent enormous effort by the Finance Department, especially Kris Tapp. She deserves our thanks.

I leave those details to you and to further discussion

Mr. Chairman and members of the County Board, thank you for your patience and your attention. Most of all, thank you for the work you will put in over the next few weeks. The executive branch stands ready to assist in any way it can.

I began by noting that we carry on a tradition rooted in the belief that taxation demands representation. You have been elected by the people; so have I. For the decisions that we make, each of us is responsible to those who elected us. I am confident that, together, we will craft a budget that will meet the needs of the citizens we have been elected to serve.

And for that reason, I am confident of something else—that, when we have finished this work, we will have served the people well. I look forward to these next few weeks. Thank you.