Poor planning led to budget woes

Thurston should have cut earlier, commissioner says

By Keri Brenner | The Olympian • Published June 15, 2008

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Reduced sales-tax revenue, depleted reserves and inflation exceeding property-tax growth have had a corrosive effect on Thurston County's 2009 budget, leaving a $4 million hole.

In fall 2007, the county commission approved a $3.2 million transfer out of the county's reserves to balance the 2008 budget. County staff members warned that such a transfer couldn't be repeated the following year.

What they didn't anticipate was the economy's pending decline. The estimated sales-tax revenue for 2008 has dropped by more than $3 million between December and now, from $14.3 million to $11.27 million now, according to a year-end forecast.

Commissioner Diane Oberquell said that when she and the other two commissioners approved "unmet needs" expenses and "budget extensions" between November 2006 and December 2007, she thought there was enough slack in the budget to cover it. At the time, the county had built up reserves after rapid growth from 2004 to 2006, when new-home construction and extra consumer spending were keeping sales-tax revenues up.

Oberquell says it might have been better for the county to start cutting expenses earlier, rather than spend from reserves last fall.

"We probably should have known then, but I can only go with the information I've been given," she said. "Had I known that taking the $3 million out of reserves would really make problems in the following year, I probably wouldn't have done it."

The county's other main source of revenue, property taxes, is capped by state law at a 1 percent annual increase -- lagging far behind inflation, said Cynthia Stewart, assistant county administrative officer.

"The fact that the property tax can't grow at the same rate of inflation was going to lead to problems at some point; everyone knew that," she said. "But no one anticipated the huge decline in the sales-tax revenue."

Stewart, who started her job a year ago, is filling in as interim budget director in the absence of longtime finance chief John Bartz, who left at the start of the year to take a job with the state. Stewart said she will ask commissioners to fill Bartz's post.

"I know that John Bartz was explaining that this (downturn) forecast was coming," Stewart said. "I wasn't here then, but it seems that whatever he was saying wasn't fully understood."

New revenue source

Later this year, the county will receive extra revenue as sales-tax collections for purchases made in unincorporated areas are switched to counties instead of cities. However, much of that revenue -- about $4 million a year starting in 2009 -- will be consumed by staffing and operations costs for the county's new jail in Tumwater, the Accountability and Restitution Center.

Starting in 2010, transition costs for the new jail will top $3 million a year. In 2011, the projected opening date, the operations will cost the county another $3 million annually.

"We're basically going to have to keep our expenses flat," Stewart said. "This is happening in every county in the state: costs are going up, and revenues aren't."

Keri Brenner covers Thurston County for The Olympian. She can be reached at 360-754-5435 or kbrenner@theolympian.com.