Proposed budget requires no increase in countywide tax levy
Here is the transcript of the Racine County budget address delivered County Executive James Ladwig to the County Board Tuesday evening:
Address to the Racine County Board of Supervisors
James A. Ladwig
October 9, 2012
Mr. Chairman and members of the County Board:
A year ago, I stood before you and presented the 2012 budget, a budget that had no increase in the general countywide levy.
At that time, I said that holding the line on a levy increase would not be too difficult for 2012, but that it would be a real challenge to avoid an increase for the 2013 budget.
Tonight, I can tell you two things:
• Number one: the 2013 Racine County budget contains no increase in the general countywide levy.
• Number two: it was more than a challenge to hit that target; it took many hard decisions in almost every office and department of county government.
Last year, as you know, we were helped by our ability to take advantage of benefit and compensation changes permitted by Act 10—the most important of which was the elimination of the county paying the employee share of Wisconsin Retirement System contributions for all employees, except sworn officers of the Sheriff’s Office. Those savings, together with programmatic savings, helped us cope with some significant reductions in state funding.
Because the savings in WRS contributions have been in place for more than a year, in 2013, we will not experience a large reduction in our personnel costs. But we do expect that changes made possible by Act 10 will present us with the opportunity for additional savings in employee benefits. I’ll say a few words later about all the litigation over Act 10.
Even with Act 10’s changes, 2013 will bring higher costs for our share of the WRS contribution. In 2012, for general employees—not elected officials or protective occupation employees—our share is 5.9% of total wages. In 2013, our share will be 6.65%. That increase of three-fourths of a percentage point translates into an 8.5% increase in the amount we’ll have to pay for each employee. It has an impact on our total compensation cost.
But it’s not fair to control the budget simply with tight limits on our employees’ pay. We—the elected officials and department heads—have a duty to find better ways of delivering services. And I think we’re doing just that.
Here’s one illustration of the kinds of innovations that we believe will pay dividends in 2013 and for years to come. HSD is transitioning to a new approach in the delivery of mental health and substance abuse services. Instead of creating “silos” of services that are primarily rendered by outside vendors, HSD is moving to a service delivery model that maximizes integration of services and relies on county staff (direct and contract employees) for delivery of most of those services. The transition has already begun; and, with the shift of the Mental Health Assessment Center and the SAIL program at the end of this year, the transition will be well under way.
This change is radical—in the truest and best sense. It goes to the very root of the problem in order to figure out how to deliver services better and more efficiently. And from a budgeting perspective, it promises real benefits, because, over time, it will enable us to recoup more of our costs from external sources, especially Medicaid. Jonathan and his staff, especially Adult Services Manager Michelle Goggins, deserve our thanks.
This may be a good time to make one or two observations about the limitations on our ability to continue to find levy savings by reducing personnel costs or even scaling back on programs.
As you know, Human Services accounts for the largest single share of our budget. For 2013, we’re budgeting total HSD expenses—excluding Ridgewood—at about $39.8 million. But of that almost $40 million, we expect that only about $6.6 million will be on the levy. The rest comes from state funds, grants, and fees for HSD’s many programs. Our staff costs are spread over those funding sources. Thus, trimming back on programs may not produce the kinds of savings on the levy that one might expect.
An even more stunning example is the Office of Child Support Enforcement. We’re budgeting a bit more than $2.25 million in Child Support expenses. But, because that program is so heavily subsidized by the Federal government (through the State), it costs us only about $131,000 on the levy—less than six cents on the dollar!
In contrast, we’re budgeting $23.8 million for the Sheriff’s Office, including the jail. Of that amount, we expect that almost $20 million will be on the levy. While the property tax levy covers about one-sixth of HSD’s budget, it covers about five-sixths of the Sheriff’s Office budget. Thus, when we can find savings in the Sheriff’s Office, those savings generally translate into significant savings on the levy.
Let me now change the focus–from where we can or can’t save on the levy to where some of our major costs lie.
In the case of sworn officers of the Sheriff’s Office, the mandated WRS contribution is an even bigger issue. To begin with, the employer’s share—our share—is much higher. Instead of the 6.65% that we pay for most county employees, the employer’s share for sworn officers is 16.35%. The employees’ share is 6.65%—but, except for those hired since July 1, 2011, our sworn officers don’t have to pay the employee’s share unless they agree to do so—and, unfortunately, they have not agreed. So the bottom line for 2013 is that we will pay WRS a total of 23% of the salary of most sworn officers, and 16.35% of the salaries of those hired since last July.
Here, I want to single out Sheriff Chris Schmaling, who has agreed to be treated like all other elected officials, even though many other Wisconsin sheriffs have chosen to claim protective occupation status to avoid making WRS contributions. To my mind, Sheriff Schmaling is setting an example for his staff—and for his counterparts around the state.
Another major cost item for us is healthcare, for both active employees and retirees. You’ll recall that, last year, there was great consternation about Act 10’s requirement that public employees in state-sponsored health plans contribute at least 12% of the plan costs. Just last month, the City of Racine garnered headlines for planning to set the premium shares of most of its employees at 7.5% and the shares of future hires at 10%. Of course, all this time our active employees have been paying 15% of their premiums, so we’ve been ahead of the curve. Nonetheless, we believe that, because of Act 10, we can achieve further savings by making some adjustments to the plan design, which we intend to implement next year.
We recognize that, between having to contribute to WRS and receiving little or nothing in the way of a general pay increase, many of our employees have seen a reduction in their take-home pay. By and large, they understand why this must be, and they have accepted it gracefully.
But it would be unfair to ask those employees to bear the same changes in health care plan design as employees who make no contribution to WRS. For this reason, we may be making health care plan design changes for many sworn officers of the Sheriff’s Office that are different from those for our other employees.
While we are working hard to control health care costs for our active employees—and we intend to do more—the biggest health care cost spikes involve retirees. Based on recent claims experience, our actuaries tell us that, for 2013, we should increase our budget for retiree health care by $2.4 million! That increase is equivalent to about 5% of the general countywide levy, and our total cost of retiree health care is equivalent to about 1/6 of the levy.
The irony is that the great majority of the covered retirees pay no more than 10% of the premium, and many pay only 5%. Although we may not have the flexibility to change plan design or premium shares for persons already retired that we have for active employees, we are carefully examining ways to control these costs to Racine County taxpayers, both now and in the future.
As you know, 2011 was a good year for us. We saw a net surplus for Ridgewood and also one for the rest of HSD, with a total for the county of about $3 million. As we are doing for 2012, we intend to use a portion of the surplus funds to help offset 2013 expenses. The fact is, we have to do so, if we want to keep the general countywide levy from increasing. For example, the 2013 budget includes $500,000 from the HSD surplus to help hold down HSD’s draw on the levy. And it includes $500,000 from Ridgewood’s surplus to help hold down the levy burden of healthcare increases for Ridgewood retirees
I said that putting this budget together was more than just a challenge. In fact, it took a lot of hard work. I want to thank the constitutional officers—DA Rich Chiapete, Sheriff Chris Schmaling, Clerk of Courts Rose Lee, County Clerk Wendy Christensen, County Treasurer Jane Nikolai, and Register of Deeds Tyson Fettes—for their unfailing spirit of cooperation as we all worked together to find savings without cutting services.
I cannot say enough about the department heads who work for me and the staffs that support them. Without their determination to keep finding better ways to do things, we’d never have been able to hammer out this budget.
Of course, special thanks go to Finance Director Dan Eastman and his staff, especially Kris Tapp, who is nothing short of indispensable. Though Kris never complains, Dan feels that the workload she bears is more than any one person should have. He thinks another analyst should share her duties, and I agree. You’ll see that item in the budget, because it will give us an even better distribution of responsibilities.
I want to say something about investments that we’re making to increase efficiency in county government and to foster economic growth in the county.
As you know, Racine County has instituted a Lean Government process. Modeled on the Lean production principles that have proven so positive nationally and for local firms such as In-Sink-Erator and Pioneer Products, Lean Government has the same focus on finding and eliminating the wasteful steps in a process—whether that process is building widgets or delivering services to our citizens.
A good example of stripping waste out of a process is our ongoing roll-out of the Kronos personnel management system. Kronos is a consolidated on-line system for reporting and managing time keeping, vacation and shift schedules, and other aspects of personnel and payroll management. Instead of having designated staff members in every department who do weekly payroll entries literally by hand, with Kronos, employees make their own entries on line, which are reviewed and approved on line by their supervisors. Once it’s approved, the data then goes right into the payroll system. We are convinced that Kronos will pay dividends both by saving staff time and by reducing the need to rectify data entry errors.
And as long as we’re talking about investments, let me say a few words about a recent initiative. Last year, we agreed that, in a highly competitive business relocation market, Racine County needed to be able to help RCEDC attract new businesses and retain existing ones. The involvement of Racine County and RCEDC helped persuade Cree, Inc. to create a new production facility in Sturtevant and helped Regal Beloit expand its Unico facility in Caledonia. The Cree expansion is projected to result in 469 new jobs, and Regal Beloit expects to hire 175 new employees. In each case, we require that Racine County residents will land a heavy majority of those new jobs.
This year, we borrowed $1 million for that purpose, and we’ve made it available to RCEDC to help it continue to make smart loans like these. I’m persuaded that continuing to do this will serve the long-term interests of everyone in Racine County by creating new jobs and putting people back to work. For that reason, the capital portion of this year’s budget will include another $1 million for the same purpose.
This budget also includes a couple of important new ideas. First, given the enormous success of the Karen Nelson Dog Park at Quarry Lake, we’re budgeting for a dog park on the west end, probably in Waterford. Second, the Racine County Sheriff’s Office has long been an active member of the Wisconsin Internet Crimes Against Children Task Force, but we think it’s time that we have an investigator assigned specifically to that work. Therefore, this budget includes a new position for an investigator whose job will be to protect our children from internet predators.
I have told you that it took a lot of effort to find the necessary savings to bring this budget in with no levy increase. Based on what we know now, we are confident that we can make this work.
That said, perhaps we should remind ourselves of some uncertainties that could adversely affect our ability to adhere to this budget:
• Although we are fairly confident of what funding we’ll get from the State for the rest of 2012 and into 2013, the State will have a new budget as of July 1, 2013. If the State tightens its belt, we might have to do more of the same.
• All of our employee compensation projections assume that the collective bargaining changes made last year by Acts 10 and 32 will remain in force. While we do not believe that the recent Dane County Circuit Court decision will ultimately prevail, litigation is inherently uncertain. Even if an adverse result were not to apply retroactively, it could impair our ability to control future wage increases and/or to reduce the costs of health care and other benefits.
Should either of these possibilities occur and pose a significant fiscal problem for us, rest assured that we will be working with you to find the best way to continue to provide our residents with the services they need at a price they can afford.
Now, let me give you the figurative—and literal—bottom line, the levies called for in this budget.
As you know, for the County Schools levy, library levy, and bridge aids levy, we have no control over the expense side. Fortunately, we will be able to keep the County Schools levy flat.
The library levy will be up by 3.15% this year. The good news is that this increase is a direct consequence of the increased use of the county’s municipal libraries by residents of the municipalities that don’t have libraries. Finally, the bridge aids levy, which is a way for the towns to share the costs of bridges and culverts, will increase by $42,750.
The general countywide levy is of greatest importance to all of us. As I said earlier, we are very pleased that we have been able to avoid any increase in that levy.
These are some highlights of what we’re doing. During the departmental budget hearings next week, you’ll have ample opportunity, to explore specifics of the budget and to learn from the constitutional officers and department heads how they have managed to control costs. I look forward to working with you in that process.
Mr. Chairman and members of the County Board, I am confident that, together, we will produce a budget that we can all be proud of. Thank you for your time and attention.