The La Paz County Supervisors approved a tentative budget for fiscal year 2021-22 at their July 19 meeting with a $2.1 million shortfall in the general fund. However, they made it very clear the final budget will look very different when it comes up for adoption in August. They are looking at options for hiring freezes and cutting spending for materials and other expenses that, they hope, will lead to a surplus.
“We won’t have the ‘be all, end all’ today,” the Board Chairman, District 2 Supervisor Duce Minor, said at the meeting.
By state law, ARS 42-17101, the Supervisors had to approve a tentative budget on or before July 19. While the numbers in individual departments and items can be changed, and the overall budget can be reduced, the total final budget cannot exceed the amount of the tentative budget.
County Administrator Megan Spielman and financial consultant Vanessa Burke of the Pun Group said that, as it stands now, general fund revenues are projected at $15.1 million with expenditures projected at $17.2 million for a shortfall of $2.1 million.
The general fund currently does not include any new grants for the health department or any funds from the American Rescue Plan, President Joe Biden’s plan to send funds to communities to help them recover from the coronavirus pandemic. Burke said these are federal funds, and such funds almost always come with conditions. She said they would likely not be considered in the general fund anyway.
During the meeting, the Supervisors also approved a tentative budget for the jail district. Burke said one of the major reasons for the shortfall in the general fund is because the general fund is being used to cover the shortfall in the jail district. With revenues of $2.25 million and expenditures of $3.56 million, the jail district is looking at a shortfall of $1.3 million.
The major reason for the jail district producing such a shortfall is the removal of federal inmates. In FY 2018-19, Burke said housing federal inmates contributed $2 million to the jail district’s revenues. In FY 2020-21, that figure was $300,000. She added the county is legally required to fund the jail district from the general fund if there is a shortfall in the district’s revenue.
District 1 Supervisor David Plunkett said the county needed to rethink the jail district.
“We need to figure out how to fund the jail district without federal prisoners,” he said. “We don’t know if we’re going to get them or not.”
Burke noted some jail costs, like utilities, are fixed and won’t change no matter how many inmates they have. She added the county needs to look at other sources of funding, including more inmates from other locations.
The county already has a half-cent excise tax for the jail district. Minor and Plunkett asked about a special sales tax for the jail district.
Deputy County Attorney Ryan Dooley said such a tax would need to be approved by the voters at an election.
One of the steps the county will be taking to cut the general fund shortfall is borrowing $1.2 million in revenues from proposed solar projects. Burke noted this is a one-time fix.
In work sessions the previous week, the Supervisors stated they did not want to furlough or lay off any county employees. With that in mind, Burke offered three options for employee costs. She said all three were projected to create surpluses for the FY 2021-22 general fund.
The first option would be to freeze unfilled positions on a case-by-case basis. This would produce a surplus of $43,990.
The second option would be to fill unfilled positions and retain vacancy savings during the year plus cut professional fees and spending for materials and supplies by 10 percent. The surplus would be $68,425.
The third option, and the one Burke recommended and the Supervisors said they liked the best, would be to freeze unfilled positions, retain the vacancy savings during the year, and cut professional fees and spending for materials and supplies by 10 percent. This would create a surplus of almost $700,000.
Burke said the third option would allow the county to keep its current property tax rate and they would not have to go through the Truth in Taxation process.
Minor and Plunkett said, if there had to be a tax increase, they would prefer a sales tax increase as there is so little land in the county that is taxable.
The Supervisors approved the tentative budget, while directing Spielman and Burke to rework the final budget and figure in the third option Burke presented.
Plunkett said there is much more regarding the county’s finances than just the current shortfall in the general fund. In particular, he mentioned employee pensions and other long-term debt.
“We need someone professional to look at the pension shortfalls and other long-term debt,” he said. “We can’t dump those on the taxpayers.”
Burke said the county also needed to consider future expenses, like capital projects.
Spielman said the budget process started May 24, and they had to do six months of work in barely six weeks. The budget was built from the ground up. She added they had enough for a tentative budget with some wriggle room on the final budget.
“We’ve been working for hours and hours to get this right,” she said. “It’s nothing short of a miracle.”
Spielman and Burke both stated the county still needs to address the $4.1 million shortfall in the general fund from previous years.