Gila County will likely close its projected $2.3 million deficit next year without layoffs, and possibly without increasing property taxes, Deputy County Manager John Nelson told supervisors Tuesday.
In fact, after proposed measures like an extended hiring freeze, among other things, the deficit could shrink to $1.3 million.
“The economy is hitting us, and it’s hitting us hard,” Nelson said. This year’s projected deficit is $900,000. However, federal funds already received will cover the shortfall.
The projections are fluid.
“Every (number) will change. I guarantee it,” Nelson said. “Our financial management process is ongoing. We forecast and we continually refine the forecast.”
The “broad brush” figures released Tuesday paint a picture of expenses outpacing revenue, but also of reserves large enough to last for three years of continued recession.
Total revenues are expected to rise just $38,000 to this year’s $38.2 million while expenses are projected to grow by $1.6 million, to $40.5 million. That equals a net loss of $2.3 million.
The projected increase includes $90,000 in increased medical insurance costs for employees, $500,000 for capital expenditures, and $325,000 to account for salary increases resulting from decreased turnover.
The county currently places new employees on a six-month probation period. When that period ends, the employee’s salary rises. With lower turnover, more employees are staying beyond their probation period, Nelson said.
An existing 60-day hiring freeze could extend to a total of 120 days. The measure is one way of cutting costs, Nelson said.
Department heads have also demonstrated thrift, whether it’s not going to a conference or sending one person instead of two. “Every time they make a decision, they’re looking at the economic impact,” Nelson said.
Supervisors also mentioned the possibility of paying the extra health insurance costs for employees who participated in a wellness program.
Despite rising demand on government services, Nelson said taxpayers don’t need the burden of higher property taxes to fund them.
“We’re trying to maintain services while not increasing the tax burden,” he said.
Each year, the county is allowed to collect 2 percent more than it collected from last year’s total property taxes, plus new construction. If the total tax collected stayed stagnant, a property owner’s tax rate would drop from this year’s $392 on a $100,000 home to $386. The maximum tax rate is $394 on a $100,000 home.
Supervisor Shirley Dawson called not raising property taxes “extremely optimistic.”
Supervisor Tommie Martin said, “I like starting with the assumption that we won’t go up.” However, reality may dictate otherwise.
Next year’s projected general budget of $40.5 million is 4 percent larger than last year’s $38.9 million.
The county’s reserves — projected at around $11.4 million by the end of this fiscal year — offer some flexibility, Nelson said. Of that money, $1.4 million came from an influx of $2.3 million for Payments in Lieu of Taxes (PILT), a federal program that compensates rural counties for lost property taxes from national forests.
The remaining PILT money will cover this year’s projected $900,000 deficit.
After spending an estimated $1.3 million in reserves to solve the deficit, that leaves $10.1 million to last through 2013, which is when Nelson thinks the economy will recover.
A troubled economy means more people will rely on public services, which government should maintain despite declining sales tax revenue, Nelson said.
“We start cutting back on services, some people may say, ‘Yea,’ but when they see what happens, it starts raising eyebrows.”
For instance, Yavapai County recently closed its jail. Cuts in Gila County would likewise be necessary if reserves evaporated before the economy improved, Nelson said.
In January, the county collected $694,000 in state and local sales taxes, behind earlier projections by nearly $34,000. Earlier budgets hoped for $734,000 in sales taxes for June. That number has since been cut 6.8 percent, to $670,000.
Supervisors will likely adopt a tentative budget in late June. Federal stimulus dollars could make this year’s adoption a guessing game since the county cannot spend more money than proposed in the tentative budget.
Because of that variable, there will likely be a “significant” line item devoted to potential stimulus funds, Nelson said.