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Feb. 19, 2002
Budget update
Dear King County Employees:
As part of my ongoing commitment to keep you informed with the most current news regarding the budget situation, I want to share with you a letter that I sent to the Metropolitan King County Council today.
I appreciate your hard work and professionalism as we continue to work to find solutions. I will continue to keep you informed as steps are taken.
Sincerely,
Ron Sims
King County Executive
February 19, 2002
The Honorable Cynthia Sullivan
Chair, King County Council
Room 1200
C O U R T H O U S E
Dear Councilmember Sullivan:
Early last year, I wrote the Council and asked for your assistance in addressing what I identified as the most serious Current Expense (CX) Fund financial problem in memory. We were facing a $36 million shortfall in 2002 and an estimated $22 million shortfall in 2003. Later in the year, it became obvious that we had entered an economic recession. By late November the shortfall had grown to $41 million.
As a government we responded. We cut services and drew down reserves. We have maintained a departmental hiring freeze since November of 2000 except for critical personnel. We became more efficient: six departments were consolidated into two, which reduced our workforce by more than 140 employees and saved taxpayers $4 million annually in the CX fund and $13 million overall. We reduced spending for public health, human services, the arts, and went so far as to close some of our parks for the first time in our history. We made unprecedented reductions to criminal justice agencies. Together, with the Council, we did what was necessary to balance the 2002 budget.
This year we will have to do more. Today we are facing an estimated $50 million shortfall in 2003 and at least another $30 million in 2004. Additional $25 to $30 million cuts will be necessary in each of the succeeding years. Our revenues continue to decline as a result of the recession, the passage of Initiative 747, and the very real prospect of the loss of MVET backfill funding from the state. Our revenues are growing at less than 2.5% - less than the rate of inflation. The crisis is not solely the result of the recession or passage of I-747, but that measure did make the existing situation worse. We are facing a growing financial crisis. Over the next three years, core county CX services 68% of which are criminal justice functions will be cut by almost 25%.
Because it is so important, I will continue to repeat the message: the fundamental CX fund structure for the traditional county government services, largely the justice system, is broken, and not just in our county but in counties across the state. The structural problem has four fundamental elements:
- Growing Regional Justice System Obligations. As the population of King County grows, so does the justice system that is required by state, federal and legal mandates to prosecute, defend, adjudicate and jail criminal offenders and that handles marriage dissolutions and contract disputes. As the County loses tax base through city annexations and incorporations, it retains its obligation to pay for justice system that serves city residents and unincorporated county residents alike.
- Obligation to Provide Local Services to Large Urbanized Unincorporated Residential Populations. As cities have annexed territory over the years, they have very deliberately taken the shopping malls and other areas with a commercial tax base and left behind large pockets of residential population that don’t generate sufficient revenues to pay for urban services like local policing and parks they demand. The cities have simply acted in their self-interest, but they have left behind a large urban population that the County will not be able to adequately serve much longer.
- Rising Wage and Health Insurance Costs. Wages and health benefit costs are rising at a rate of almost 7%. A recent news media editorial opinion focused on this component of the CX fund structure problem as the primary source of our problems. However, we must remember that the majority of our CX funded work force are judges, prosecutors, police officers, corrections officers, and civilians who provide support to these agents of the justice system.
Most of these employees of the justice system are represented by unions and have collective bargaining agreements that set wage rates consistent with the labor market. The Council has consistently approved their labor contracts because you, like I, believe the wages are fair, reasonable and necessary to attract and retain good employees. The rising costs of health care benefits are a national problem in the health care and insurance industries.
Should we bargain hard at the negotiating table to protect the interests of the public and the taxpayers? Of course. And we have. You recently approved an agreement with the majority of our unions to shift some of the rising health insurance costs to our employees in the form of higher co-pays. We look forward to continuing to work with the Council and Labor to consider opportunities to further control rising wage and benefit costs.
- Property Tax Dependency. Unlike cities, which have utility and business and occupation taxing authorities that keep pace with inflationary growth in expenditures, the primary revenue source for county CX funds is property taxes as established more than 100 years ago. Property tax growth has been constrained by law and by the public will for many years. I-747 constrained growth even further.
Fixing the structural problem, I believe requires some fundamental changes in how current County services are financed.
- Structural Changes for Local Services. First, we need either a new local unincorporated revenue source to pay for basic police, parks and other services to the urbanized populations of unincorporated King County or those populations need to be annexed to cities who have the revenue authority to pay for urban services.
- Structural Changes for Regional Services. Second, we need either a new countywide revenue authority that keeps pace with inflationary costs to pay for regional justice services or we need to be relieved of the statutory duty to provide those services.
Until the structural problem is fixed, we will be faced with making unprecedented reductions to core county services. I know that every member of the Council shares my concern over the prospect of making very difficult decisions to reduce or outright eliminate certain services over the next few years.
Let me share with you the actions we have initiated to address county government’s financial crisis.
- Hiring Freeze. We have maintained a countywide departmental hiring freeze since November of 2000, both to save money and to reserve vacancies for employees whose jobs must be cut.
- Restrictions on Purchases of Services and Capital Goods. I have directed the Executive Budget Office and Department of Executive Services to prepare internal administrative policies and procedures to restrict capital purchases, the use of consultants and other non-essential purchases.
- Mid-Year 2002 Reductions to Avoid More Abrupt Cuts in 2003. The Executive Budget Office is developing a proposal to reduce 2002 spending in an effort to mitigate the impact of even more dramatic reductions on January 1, 2003. This is likely to involve further closures of park facilities and lay-offs in 2002.
- Preparation of 2003 Budget Reduction Strategy. The Executive Budget Office is completing the preparation of policies to guide 2003 budget reductions and agency by agency target reductions. As in recent years, our departments will be directed to first cut administrative and other non-direct service areas. However, we cannot balance next year’s budget without cutting deeply into direct services.
- Soliciting Cooperation of the County Assessor. I will meet with the Assessor to seek his help in reducing CX costs.
- Soliciting Cooperation of Separately Elected Justice Officials. I will meet in the next few weeks with the Sheriff, the Prosecuting Attorney, and the Presiding Judges of the Superior and District Courts to discuss the magnitude of the financial problem and to request that they share in the necessary reductions. Basic law enforcement and judicial processing are core missions of county government and must be protected, but they cannot be exempt from further reductions in 2003 and beyond. Even if we were to entirely eliminate all parks and human services spending, there would be tens of millions of dollars of additional cuts necessary in the next two years, and most those will have to come from our justice programs.
- Revenue Relief. Along with many of you, I have been working hard with members of the Washington State Legislature to secure authority for a utility tax, revenue used by cities for decades to pay for their basic services but denied to counties. I need to make clear that a utility tax even in an amount of 3% county-wide will not completely solve the structural problem of our CX financed operations. It would, however, provide stability for most of our regional criminal justice programs, and that is our paramount duty.
- Working Toward Annexation of Urban Unincorporated Areas. In an effort to hasten the pace of annexation, County staff is actively working with various cities to assist them with their analysis of the remaining urban unincorporated areas by conducting feasibility studies, and by providing technical assistance and expertise on the transition of services, county facilities and assets. Staff is also working with unincorporated areas residents and unincorporated area councils to educate them about the need for annexation, the services they receive, and why cities are the preferred provider of local urban services as envisioned by the Countywide Planning Policies. We must act quickly to reduce the cost of providing services to unincorporated areas.
In the coming weeks, I look forward to discussing these issues with you further. Last year, we worked in a collaborative manner to address our budget crisis early in the year and together made the necessary decisions to prepare for substantial cuts in the 2002 budget. We sought to minimize the human impacts to our employees and the community by alerting both employees and impacted service providers well before my proposed budget was transmitted to the Council. Again, we hope to consider what revenue and expenditure decisions can be made as early as possible in the year to lessen the impact in 2003. I also hope that we can continue an open dialogue and collaboration as we address the challenges we face in preparing next year’s budget.
Please feel free to contact Budget Director Steve Call or me if you have any questions or concerns you would like to discuss. We look forward to our ongoing communication on this matter.
Sincerely,
Ron Sims
King County Executive
cc: King County Councilmembers
ATTN: Ellen Petre, Council Administrator
Shelley Sutton, Policy Staff Director
Rebecha Cusack, Lead Analyst, BFM Committee
Anne Noris, Clerk of the Council
Honorable Richard Eadie, Presiding Judge, King County Superior Court
Honorable Norm Maleng, King County Prosecutor
Honorable Scott Noble, King County Assessor
Honorable Dave Reichert. King County Sheriff
Honorable J. Wesley St. Clair, Presiding Judge, King County District Court
Steve Call, Director, Budget Office
Cal Hoggard, Chief of Staff, King County Executive Office
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Updated: Feb. 20, 2002
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