How did the county offset its recession losses?

Before the Great Recession arrived and real estate values dipped dramatically, Manatee County Administrator Ed Hunzeker and Finance Director Jim Seuffert put a plan in place to avert financial disaster.

To prepare for the plummeting real estate values that have affected the county’s overall budget dramatically, beginning in fiscal year 2011 they accounted for a looming $16 million shortfall in property taxes by cutting $8 million in spending and using $8 million in reserves.

They also created a budget stabilization model that started with $50 million for the 2012 budget to prepare for the lean years they saw coming.

How does that work?

“We start with finding balances and trying to identify how much of the fund balances are uncommitted and that provides us what we can estimate for stabilization for an upcoming fiscal year,” Seuffert said.

“Reserves are reconstituted and analyzed every year in the budget.”

Bottom line: The county looks for money it doesn’t necessarily need to use for certain projects in that fiscal year so it can use it to help offset a deficit.

The fund, Seuffert said, was also needed to offset deficits that couldn’t be reduced any longer by big budget costs and staff layoffs.

“The initial year was simple,” Seuffert said. “But we had not even hit the worst of our revenue decline even after eliminating nearly 300 positions.”

County officials already saw their overall budget drop from $606 million to $484 million in 2012 for an approximately 22% decline in the overall budget in that first bad year.

“Things weren’t looking better,” Seuffert said. “The worst was yet to come.”

Enter the stabilization fund to the rescue.

The idea, Seuffert said, was to be as creative as possible with money in the county’s budget.

“We had reserves, which are nonrecurring,” Seuffert said. “But we just couldn’t keep eliminating more positions and eliminating more programs because cuts were starting to affect the viability of programs for our residents.”

Seuffert said the county “needed a new approach, and fast.”

“When we started this, the idea was we had a certain amount of money on hand and there would be a certain amount of additional money that would be available,” Seuffert said.

Seuffert said the county could have exhausted its reserves in the first year alone if county officials didn’t act quick.

“We had to look ahead to try and forecast when property values would stabilize and when we could bring in revenues closer to historical levels and reduce the amount of reserves we were using,” Seuffert said.
In 2012, the county used $15 million of the $50 million the county set aside in the general fund to offset the budget deficit.

“The goal was to make the $50 million last for four years,” Seuffert said.

The recession, however, got worse, and county officials knew finding stabilization dollars each fiscal year would be a balancing act.

For fiscal year 2013, the county allocated money from certain capital improvement projects that could be delayed to find $65 million for potential use to stabilize revenue losses. Later, the county found another $12 million for 2013 to create a $77 million stabilization fund.

“Each year, we completely redo the whole calculation. We build it from the ground up each year because of complexities and we look long range too.”

After fiscal year 2013, Seuffert said “things started looking up.”

“We thought we needed $21 million for fiscal year 2014, but it turns out we only needed $19 million,” Seuffert said.

As Manatee County commissioners prepare to approve its budget later this month, stabilization funds are still being used to offset deficits.

But not for much longer.

Recent county projections (see sidebar), show that the county doesn’t need the use of any reserves or stabilization after fiscal year 2018.

Seuffert estimates the county will have spent about $65 million to $70 million in reserves/stabilization funds since 2011 to help balance the budget.

How has it helped?

The county’s budget had $75.4 million in total reserves and set aside amounts in fiscal year 2013 and had $60.6 million in the current fiscal year to work with.

That’s attributed to the stabilization method and because the county has a policy stating the general fund and other large county funds must have reserves based on 20% of the county’s operating budget.

“We found creative ways to fund things, shift costs and make things work at a time when many counties are faced with big budget cuts and tax increases,” Seuffert said. ““It also requires a lot of discipline to look at some of our needs and say, ‘We just can’t afford that right now.’”

Manatee County Budget Deficits
Year  Deficit
2011 $16 million
2012 $15 million
2013 $26 million
2014 $19 million
2015 $13.5 million