BOC, BOE face difficult budget choices in coming months

For the Barrow County Board of Commissioners, this isn’t a new topic. For the last two years, the BOC has wrestled with financial problems, some of which were created by previous county leaders, some of this administration’s own making. The county already made cuts in most areas of government, except for public safety.

This year, the BOC faces a $1 million shortfall, requiring a cut of that amount between now and Sept. 30. That’s an almost impossible task.

Next year in FY2012, the gap could be $3 million. Where will the county find that kind of money to cut, especially since some large debt payments are coming due?

Perhaps an even bigger problem, however, sits on the desk of business director Ken Cato at the Barrow County Board of Education office. Without changes, preliminary numbers given to the BOE last week show that the school system would have to use over $9 million of its $10.7 million reserves to balance its FY2012 budget. That would leave the system with virtually no reserves for FY2013 and beyond.

Both the BOC and the BOE are caught in a storm of declining tax income and rising costs. The county tax digest is one factor as the real estate bust continues to lower local property values. School officials are planning now based on an anticipated six percent drop in the digest later this year. That’s on top of digest declines over the past two years — a drop that was over nine percent last year. This affects both the BOC and BOE.

In addition to a shrinking tax digest, the BOE also faces two other revenue issues. First, the federal stimulus money that has been given to local schools for the past two years is now gone. That’s over $1 million the BOE had this year it won’t have next year. (One could argue that the stimulus money was a mistake; it just delayed tough decisions by propping up local schools, but it didn’t fix the problem.)

In addition to the end of stimulus money, local school systems also face declining state funds. How much is unknown, both for the rest of this fiscal year and for next year. State funding has become a crapshoot; nobody seems to know what to expect, making local school budgeting a guessing game.
But the problem here isn’t just declining revenues. Increasing cost is also a factor.
Some of that neither the school system nor the county government can control. Fuel costs, for example, hits both governments hard, yet neither the BOC nor the BOE can set gas prices. But buses and sheriff’s cars have to run. While fuel use can perhaps be tweaked, that really won’t amount to much money in the big picture.

For the school system, an increasing student population is also an uncontrollable factor. More students mean more costs no matter how you slice the data.

What’s not clear in the BOE budget, however, is why the preliminary numbers given to the BOE last week included a pay raise for school personnel of two percent. That’s a hit of an additional $3 million in costs next year.

The system is talking about all kinds of ways to cut expenses, including perhaps modifying to a shorter school year. Given the seriousness of the school systems’ fiscal problems, why would any kind of pay increase be considered in the budget? If anything, the system should be looking at cutting its local supplements, not increasing payroll costs with raises.

The real issue in both the BOC and BOE budgets is the question of whether or not officials will hike the property tax rates this year. For the BOC, that appears more and more likely. But BOE leaders are cool to the idea of a tax hike, especially since the system is already at 18.5 mills.

Before either the county or schools seriously consider tax hikes, they should first fix some problems in how they’re managing the tax digest.

For one thing, the county’s practice of granting tax incentives to industries even when no jobs are being created should be stopped. There is no legitimate reason to give away tax breaks to developers unless that developer is creating new jobs. Barrow has the most inane business tax break system in North Georgia, a system that doesn’t work, but gives away thousands of dollars in tax breaks. It’s time to stop that practice.

Second, the county should review its slew of local tax exemptions to make sure they are balanced and fair. More than most counties, Barrow has adopted a lot of tax exemptions over the years, but nobody seems to know what impact that’s had on the bottom line.

During the real estate boom here, local governments got used to double-digit increases in revenue year after year. The tax digest was exploding and everyone in government thought the good times would never end.

But they have. Barrow County has taken a hard hit economically and local governments are going to have to adapt to that. That means doing things differently. That means making difficult and painful decisions to cut costs.

Unemployment and underemployment rates are high. The local economy is struggling.

Governments are no longer exempt from that reality.

Tough decisions lie ahead over the next six months — the public will be watching.

Mike Buffington is co-publisher of the Barrow Journal. He can be reached at mike@mainstreetnews.com.