Is Whatcom County Government ‘Frugal’?

We have heard for years about how our county has been prudent in its expenditures and exhibited only the best in financial stewardship. The only proof - as far as I can tell - that has been offered to back up this claim is the absence of any increase in the property tax levy rate.

The Problem
Let us briefly look into this claim of financial responsibility. The figure above, which is based on information presented to the council on June 9¹, certainly calls into question the financial wisdom exercised by our county government. For purposes of this discussion consider the following timeline:
April 28, 2009: County staff brief the county council regarding current budget shortfalls.
May 26, 2009: County Executive Pete Kremen gives his “State of the County” address to the council. In it he indicates that despite our “history of fiscal discipline”, the county has “fiscal challenges to face”, and indicates a few of the proposals that the administration will put forward to help deal with them (the “budget stabilization” plan).
•June 9, 2009: County Administrator Dewey Desler presents the administrations “budget stabilization plan” to the council finance and administrative services committee. Most aspects of this plan have yet to be passed by the council, and some of those are discussed below. I attended this meeting, and my interest in the issue stems from what I was somewhat disturbed to see presented there, as well as the continuing lack of coverage of this issue by our local newspaper.

As shown in the Figure above, county property tax revenues going into the general fund have increased steadily over the time period 2003 to the present, after which they are projected to decrease. It isn’t difficult to see how this has occurred: Whatcom County has undergone rampant real estate development over the past decade. This development has fattened the total county property tax assessments, and allowed spending to increase without a property tax levy rate increase.

Spending from the general fund has also increased, but, unfortunately, at a faster rate than that for revenues. This has drained the balance of the general fund, and is the driver for the “fiscal challenges” we currently face. The figure at the bottom, which shows the general fund balance relative to spending, gives a clearer picture of our predicament. If nothing were done, the county general fund is projected to have less than one months spending saved up by the end of this year. In Whatcom County’s 4th quarter 2007 financial report, the following statement appears: “Whatcom County’s General Fund policy is to maintain an ending fund balance of at least 15% of the Fund’s annual revenue of the most recently closed fiscal year, which is approximately $11 million. Given the status of the fund balance, the County has limited ability to increase its ongoing costs.”

Significantly, even though the county general fund has been draining for at least 2.5 years, the county administration did not brief the council on this until the end of April of this year. I have yet to see any explanation of why this situation was not communicated, and dealt with earlier. It should be noted that the council itself is not entirely off the hook here - they passed budgets with significant deficits for 2009 and 2010 that compound an already bad situation.

The County “Budget Stabilization Plan”
Let’s look at what the county administration has proposed to deal with the current situation. This is presented in council agenda bill AB2009-268. I list a few of the most significant items in the following table, along with what I can only describe as the comments of a lay person (myself):



The county administration has proposed some cost saving measures, but they are unlikely to meet projections (shown by the blue lines in the figures). Therefore the projected general fund deficit will likely be larger than shown in the figures above, and will indeed require more drastic measures.

Conclusion
So, has Whatcom County government been frugal? It certainly doesn’t look like it to me based on the information presented here. However, it is possible that extraordinary expenditures have been needed over the past few years, and these have driven our current financial situation. If this is true, why has this not been transparently presented to the public? I feel that this is what is sorely missing in our current county administration - transparency.

It really looks to me like the council may need an outside consultant to go over the entire budget and advise them on policy. While the administration should be performing this service, they clearly have fallen well short of an adequate job.


¹The figure is reconstructed based on two Powerpoint slides shown at the council meeting - I don’t have access to the data contained therein, but am fairly confident of my figures based on what I saw, and noted, at the meeting.