MAYVILLE - Mismatch-ing revenues and expenses in the Chautauqua County budget are the cause of a $7 million structural deficit county legislators will focus on in the coming months.
While the topic has been discussed more and more since the sale of the County Home in February, Vince Horrigan, county executive, expressed concern in May and June about preparing for budget season and the steps to take to close that deficit.
On Thursday, he approached the Audit and Control Committee about the importance of matching and accepting more Intergovernmental Transfer funding to repair the gap.
IGT funds are federally provided to make up for losses in government-owned nursing homes, as a large percentage of resident stays are paid for by Medicaid. They are not recurring and are typically announced well before they are released.
For fiscal year 2012-13, the county is set to receive $3 million, reported in May. To access those payments, the county has historically provided a 50 percent match from the county's general fund, and the funds are returned after the sale of the County Home closes.
"We obviously are in the process of finalizing the County Home transfer to VestraCare, and I'm optimistic we will have it closed by this calendar year," Horrigan said. "There was a resolution authorizing the IGT payments we did a couple of months ago, and we have been informed that the second part is available again to take advantage of for a different fiscal year."
Horrigan said he learned this week additional IGT funds are available in the amount of $2.6 million for fiscal year 2013-14 and expressed to legislators the importance of a 50 percent match to receive them.
In recent years, the county budget has been balanced with the use of reserve funds.
"We are getting to a position where we can no longer do that," Horrigan said. "My goal is to close the $7 million structural deficit by continuing to use some of the reserves that result from the IGT payments."
Closing a $7 million deficit over the course of one year would require a 15 percent hike in property taxes, Horrigan said in May.
IGT funding helps, he said, but it is not recurring. The county will most likely be eligible for more funding for fiscal year 2014-15, but since funds are often delayed, there have been some years where no payments have flowed. These delays make fiscal planning challenging.
"It's a matter of timing," said Kitty Crow, budget director. "We won't take receipt of the proceeds of the sale until after it closes. We might not have those IGT funds in our account by the time we adopt the 2015 budget, but we would have the knowledge that by next year, our fund balance would be somewhat replenished."
CLOSING THE GAP
Eventually, the county will have to increase revenues or cut expenses, or both, in order to avoid a tax hike, Horrigan said.
While the County Home has been sold, there are still costs accompanying the sale.
In the 2014 county budget, the nursing home's projected expenses were an estimated $20 million, compared with the projected revenue amount of $17.4 million. The difference of $2.6 million broke down to more than $7,000 in daily losses, meaning the County Home would have to draw from its fund balance in order to pay for operating expenses.
After the nursing facility was sold, Legislator Chuck Nazzaro, D-Jamestown, said it would be necessary for the county to be frugal with the revenue.
"We're not going to realize anywhere near the proceeds from the sale that people think we are," he said. "Out of the $16 million, we'll be lucky if we get $1.3 million."
In Horrigan's opinion, another reason for the deficit is a reduction in sales tax revenues over time.
"Sales tax used to be 8.25 percent, and we are down to 7.25 percent," he said. "We have lost those revenues and it created a structural deficit."
The statewide sales tax average is 8 percent, while Chautauqua County experienced a drop in sales tax from 2006 to 2010.
For each quarter of a percent on sales tax, the county sees $3.25 million in revenue.
However, he added that expenses at the county level have been reduced in the last several years.
"We continue to cut different things. We cut the appropriation for IGT and took it out of reserves instead of the tax levy," he said.
Moving forward into budget season, Horrigan said he would continue to work to reduce spending wherever possible.
"We are left with an overall property tax rate that I will do everything I can to keep under the 2 percent tax cap and keep as close as possible to zero as I can," he said, adding that he wasn't yet prepared to make a statement about an actual budget projection.