Questions and Responses

(PBO=Planning and Budget Office; CAO=County Auditor's Office)

Commissioner Huber: Where did the money for the economic downturn fund come from?

PBO: Travis County has attempted in recent years to be more proactive in our planning processes for not only the upcoming fiscal year but future years as well. As a result, the $4,950,000 Economic Downturn Reserve in the FY2010 Preliminary Budget was funded from the fund balance in the General Fund which is generated from expenditure savings in departmental budgets and reserves.

Commissioner Huber: What’s the chance the economic downturn reserves will be exhausted?

PBO: It is not anticipated that the economic downturn reserve will be utilized in FY2010.  It is anticipated that it may need to be utilized in FY2011.

Commissioner Huber: How much does the County spend on its employees’ healthcare and how much has it increased in recent years?

PBO: Travis County budgeted $30.8 million for current employee health insurance in FY10 Preliminary Budget, $30.6 in FY09, and $29.9 million in FY08.  The rate per current employee budgeted for health insurance has remained the same since FY08.  The ability to hold the cost of health insurance for our current employees for the past 3 years is the result of Travis County establishing a self-insured hospitalization plan in FY02 and the establishment of a wellness clinic available to all employees, dependents, and retirees covered by the self-insured health plan.

The wellness programs have enabled Travis County to keep costs down while enhancing the overall health of the organization.

CAO: The County has an annually determined employee benefit plan.  As part of the plan design, each year the Commissioners Court decides whether the County will subsidize any of the healthcare costs for employees and retirees for that year’s plan.  The following schedule shows the County’s contribution for healthcare costs beginning with the year that it decided to become self-funded.  This decision allowed the County access to better financial information and control over plan costs.  The amounts below are net of contributions from grantors, employees, and retirees and include actual claim costs as well as the administration costs and stop-loss insurance included in the County’s healthcare contract. 

While healthcare costs have increased in the past several years, the following schedule illustrates that the percentage of expenditures for healthcare benefits compared to the County’s total appropriation for its two main funds that incur employee costs has not increased greatly over the years since the County became self-insured for healthcare costs.  Increases in costs from year to year can be attributable to an increase in plan participants as well as an increase in the volume and/or cost of actual claims paid.  Travis County has been able to keep the growth of expenditures manageable by implementing programs that encourage healthy living and help minimize health provider costs.  For example, the County has approved and put into practice an onsite medical clinic program for County employees and their dependents. 

Commissioner Huber: What were the major one-time unexpected expenses?

PBO: We didn’t have any large unexpected one-time expenses.  The largest decline in revenue which was not totally expected was the significant drop in fines and fees and investment earnings which declined $10.4 million from FY09.

Commissioner Huber: In what areas do you think Travis County could save more money? 

PBO: More automation of manual procedures could definitely realize efficiencies.  More efficient air conditioning systems in older buildings could substantially reduce future utility costs. In addition, Travis County is looking at alternative fuel sources for out vehicle fleet and exploring ways to reduce idle emissions in our patrol fleet.

Commissioner Huber: Why is 2011 anticipated to be more challenging than 2010?

PBO: The FY10 Preliminary Budget includes $5.9 million in one-time funds from the Health Insurance Fund and the Risk Management Fund.  These funds may not be available in FY2011.  Additionally, it is estimated that new construction in Travis County for next year’s budget may be as much as $1.0 billion less than for FY2010.  New construction is the only appraised value that increases revenue to Travis County.  The effective tax rate (required by law) generally produces the same amount of maintenance and operation funds as the previous year regardless of the appraised values of commercial and residential properties.  A drop in appraised values does not decrease tax revenue, since the effective tax increases. 

CAO: Both years bring revenue challenges: We anticipate in fiscal year 2011 that there will be fewer new properties added to the tax base than there were for the 2010 budget. The main source of revenue for Travis County is property tax.  The tax rate that is set each year by the County is affected by the value of all properties on the County’s tax roll.  To simplify a complex calculation, the Effective Tax Rate is the tax rate that will produce the same total revenue for the current tax year that was generated for the previous tax year from the same properties on the tax roll.  Therefore, if the 2011 tax rate is set at the Effective Tax Rate, then any additional revenue for 2011 must come from new properties added to the tax roll. 

When applying the formula to calculate the Effective Tax rate, if the total value of all properties on the tax roll rises, the tax rate must fall to keep the total revenue for the current year equal to the total revenue for the previous year.

New properties on the tax roll bring in additional revenue.  If fewer new properties are added, there will be less new money to cover new expenses such as legislatively mandated services or a growth in demand for services like more criminal cases.  If more revenue is needed than is provided by the Effective Tax Rate plus any new property, the challenge will be to balance service demands within that revenue calculation or set a suitable tax rate that is higher than the Effective Tax Rate to meet citizen needs for roads, law enforcement, and court systems, as examples.

In the 2010 budget process, we have had to deal with an uncertain economy—a reality that has translated into many appeals of property appraisals, property foreclosures, and hard choices on how much of the tax levy (the sum of all the tax bills sent out, thus the total theoretical revenue) to actually budget.  As one of the most fiscally conservative forms of government, Travis County cannot budget more than it reasonably expects to collect in the budget year, making accurate revenue estimation and related budgeting in uncertain economic times the challenge in 2010. 

While we do not, of course, know yet the circumstances that we will be facing in 2011, it is not unlikely that the same uncertainties will be there, perhaps at an even more troublesome level.

Commissioner Huber: Why is revenue down if home prices in the area are relatively stable?

PBO: The reduction in revenue is not a result of a decline in the existing property tax revenue for FY 10 or 11. The revenue reductions are from investment income, fines and fees, auto registrations and other revenue sources.

CAO: While we do spend a great deal of our time thinking about property taxes—and property taxes do constitute approximately 83% of the General Fund’s revenue in the 2010 Preliminary Budget—not all County revenues come from taxes, and we estimate that some non-tax revenues (e.g. interest income and many fees) will not rebound in 2010.  As an example, in 2008 our budget for interest income in the General Fund was $11.34 million; in 2009 it was $7.56 million; and for 2010, the number now stands at $3.86 million.  The lower budget next fiscal year for these non-tax revenues, to a large extent, mirrors our actual experience in 2009.

Commissioner Huber: Were there any savings from decreased CPI?

PBO: We had substantial savings in projected fuel and utility costs due to the drop in the cost of oil.  FY09 reserves for these items assisted in funding the economic downturn reserve for FY2010.

 OTHER COMMENTS FROM YOUR TRAVIS COUNTY AUDITOR:

Counties’ primary revenue source - Property taxes
Funding public priorities and requirements while meeting the needs of the taxpayer is difficult and challenging at all levels of government.  Counties find the demands of providing services particularly challenging because of our dependence on property taxes.
Fundamentally, the State caps the ability of the County to receive revenues while there are no parallel caps to control the demand.  For example, when there is jail over-population, the County cannot say “there is no room at the inn”.
At the same time counties are dependent on property taxes, they must provide services at the standards set by the State and Federal Government. 

Services provided by counties are very basic services predominately focused on:

Courts
Jails
Roads
Public Safety

Three characteristics of these services are:

Mandated by State Law
Cannot control the demand
Demand for services increases in an economic decline

Counties, unlike cities, do not have a variety of sources of revenue that could compensate for shortfalls in the property tax revenues.  A typical Texas, large urban city has millions of dollars in revenue from sales tax, franchise fees, and some type of utility either water/wastewater or electric.  In addition, cities have more flexibility to charge user fees to generate revenue for general government purposes because they are home rule cities.  As a rule of thumb, unless counties are legislatively empowered to charge fees for services, that flexibility is not open to counties.

The members of the County Commissioners Court in Travis County have tried to be good stewards of public funds.  They have provided tax relief to homeowners -- a 20% homestead exemption and a larger exemption for homeowners over the age of 65.  They have been responsive to the needs expressed by the local constituents and they have maintained triple A bond ratings with both Moody’s and Standard and Poor’s, which is the highest rating offered by these bond rating agencies.