The way County Administrator Phillip Smith-Hanes explains it, creating a cushion in the Ellis County budget for a rainy day is like leaving a little extra money in the family checkbook over and above normal expenses.
Without one, there’s no safety net.
If all goes well, no problem, Smith-Hanes explained Monday to The Hays Daily News.
If it doesn’t?
“Then we could be in a really difficult position, because we’re not carrying enough cash year to year to be at a comfort level,” he said.
That will change in 2019.
The Ellis County Commission on Monday evening at its regular meeting at the Ellis County Administrative Center, 718 Main, approved a recommendation by Smith-Hanes to build up a reserve of at least $2.925 million starting the coming year.
That figure represents 15 percent of the county’s estimated expenditures in a year.
“We have a long-term imbalance between what we’re taking in and what we’re budgeting to spend,” Smith-Hanes explained. “Departments do a really good job of not spending everything. But you can’t count on that, because what if you have the year where jail numbers are up and the sheriff has to spend not only everything you budgeted for him, but another $200,000 on top of what you budgeted, and then you have a disaster that takes out a bridge, the Smoky rises, and it snows, and the price of diesel goes up to $3.50 a gallon. There are a hundred different contingencies.”
So just in case everything that can go wrong does in 2019, Monday’s action means Ellis County will have a little bigger financial cushion on which to fall back.
In previous years, the percentage has been much smaller.
Is 15 percent enough?
“I’d love it to be higher honestly, 25 percent would be better,” Smith-Hanes said. “But 15 percent is what the government finance office recommends as a floor.”
This year, by the time Dec. 31 rolls around, county departments are expected to have saved a total of $832,120 in unspent money in their 2018 budgets.
That’s thanks to some unforeseen advantages such as fewer inmates being transferred to out-of-county jails, lower fuel prices for road and bridge and Emergency Medical Services, savings from staff positions not filled until later in the year, and other lucky breaks, for example.
County policy allows departments to annually transfer up to 50 percent of the money they don’t spend in their year’s budget to a capital equipment reserve fund.
That excess, or savings, is then tagged for the department that saved it for use in the future when they have a large capital equipment expense.
On Monday, though, Smith-Hanes recommended to the County Commission that they create the $2.925 million cushion, before transferring any savings for capital equipment.
“This year I’ve discussed with departments and am recommending to the commission that we establish a floor for our unencumbered cash balance, and only transfer funds to the extent we have funds available above that floor,” Smith-Hanes told the commission.
If funds come in above $2.925 million, the county can then transfer that excess to the departments in proportion to their percentage savings.
“I think that’s the safest course of action for us to pursue to conserve cash for the 2020 budget,” he told the commissioners.
Based on where revenue stands now, Smith-Hanes said it’s likely the department’s will get their full 50 percent. Revenues such as ad valorem taxes and department fees have been coming in strong, and higher than anticipated.
“Based on where we are right now, I think they’ll get their full percentage,” he said. “I think we’ll have a cushion closer to $4 million.”
That doesn’t get the county out of the woods long-term, however. It has a projected budget deficit of nearly $10 million by 2024 if spending and revenue remain at current levels.
“We’re trying to avoid that,” Smith-Hanes said, while trying to come up with the least painful solution, creating a cushion by not transferring as much to capital equipment.
“It’s a double-edged sword,” he said. “Eventually that piece of equipment is going to wear out, and if there’s not money in capital equipment, then it becomes an operating expense.”
With oil a staple of the Ellis County budget, dips in the price of oil over recent years have reduced oil valuation, while at the same time the tax rate didn’t increase. A mil of property tax generates slightly less than it did seven years ago, Smith-Hanes said. At the same time, county services and employees have stayed about the same.
“It’s no different than life as a human being,” he said. “If you get laid off, you start eating ramen noodles every year, or you live off your savings.”
The county’s biggest reserve has been the oil and gas depletion trust, set up by state law several decades ago for all counties with oil and gas. At one point Ellis County had $3.5 million in the fund. In 2015, the county made a large transfer of more than $3 million that was sunk into the general fund to avoid a tax increase. The money was spent over several years.
“It’s $425,000 now,” Smith-Hanes said of the fund. “Next year we’re budgeted to transfer another $200,000.”
At the same time, the state has changed the law so counties no longer get the money, even if oil prices go up in the future.
“They’ve had their own fiscal problems in Topeka,” he said.
In other business, the commissioners:
• Approved taking $5,000 from the general fund to give to the Heartland Community Foundation, Hays, which provides grants for projects in Ellis, Rooks and Trego counties.
• Set 2019 salaries for county officials as the same for 2018: County Commissioner $18,791.76 ($722.76 biweekly); County Attorney $82,393.48 ($3,168.98 biweekly); County Clerk $61,511.32 ($2,365.82 biweekly); County Clerk – Election Stipend $8,000.00; County Treasurer $58,171.10 ($2,237.35 biweekly); Register of Deeds $53,591.46 ($2,061.21 biweekly); and Sheriff $82,393.48 ($3,168.98 biweekly).
Raises, if any, for 2019 will be discussed at a meeting in the future, commissioner Dean Haselhorst said.
• Approved the release of a Request For Proposals for the purchase of two ambulances for Ellis County EMS. The first ambulance to be replaced is a 2003 Ford E450/MedTech ambulance that currently has 142,372 miles. The second is a 2010 Chevy G4500 MedTech ambulance that currently has 140,837 miles.