WASHOE COUNTY COMMISSIONERS PLAN FOR $25 MILLION DEFICIT FOR 2010-11 FISCAL YEAR; HEAR NEED FOR SUSTAINABLE CHANGES

Reno, Nevada.  January 26, 2010

Washoe County Commissioners were told today that the 2010-11 fiscal year budget which begins on July 1st will need to be reduced by $25 million, representing an overall 9% cut. 

In their presentation, finance staff reported that the County has made more than $100 million in spending cuts over the last three and a half years in response to declining revenues.   Specifically, property tax and sales tax revenues which the County relies upon for about 80% of its total operating funds have seen unprecedented, double-digit declines over the past couple years.  While budget reductions began four years ago when the County began to prepare for the economic downturn, spending cuts made for the current fiscal year have been the most severe resulting in an overall budget reduction of 11%--the most taken by any state or local government in Nevada.  Staffing levels are currently where they were 10 years ago with 500 positions defunded through vacancy freezes, layoffs and separation incentives.  Washoe County now has fewer than 6 employees for every one thousand citizens we serve—one of the lowest staffing rates in the United States for a county our size.  Additionally, action taken by the Nevada State Legislature in 2009 redirected $25 million of County revenues to the state over the biennium. 

Staff reported to the Board today that revenue growth will continue to decline next year with property taxes down nearly 7% and sales (consolidated) taxes down 2%.  It was noted that the economy has rebased and past growth trends are not likely to be repeated, therefore, rebasing the County’s cost structure is necessary.   While further cuts to the current 2009-10 fiscal budget are not anticipated due to the deep cuts already experienced, it is necessary to further reduce the county’s budget by $25 million (or 9%) for the coming fiscal year.  And while today’s recommendations focused on meeting the 2010-11 budget deficit, data presented showed the deficit is structural meaning that on-going expenditures will exceed on-going revenues for the long-term unless sustainable changes are made.

The Board had previously directed staff to eliminate deficits and make County government financially sustainable over the long term, utilizing three prioritized goals: 1) maintain service levels, 2) maximize employment, and 3) achieve sustainable labor costs.   The Board had asked for a balanced approach to achieving financial sustainability, and today staff presented a 3-point strategy for their consideration.

3-Point Balanced Plan Recommendation to meet $25 million deficit for 2010-11:

1. Achieve Sustainable Labor Costs.  While employees have foregone contracted cost of living increases over the past two years, and the majority of County employees took a 2.5% wage reduction from February through December 2009 with many others voluntarily extending those reductions, it was noted that current wage and benefit costs cannot be sustained given the new level of revenues projected over the next five years.  It is recommended that $11.4 million of long-term changes to wages and benefits be sought since labor comprises about 75% of the County’s total expenses (common for service oriented organizations).
2. Continue Prioritized Budget Reductions.  Once again, departments are being asked to reduce their annual operating budgets.  For this fiscal year, they are asked to reduce budgets by an average of 3% to be achieved through efficiencies, consolidations, outsourcing and the like to reach $7.8 million worth of cuts.  Proposed reductions by categories are:  Public Safety – 2%; Judicial/Health/Social Services – 3%; General Government – 4%; Culture and Recreation – 5%.
3. Redirect Revenues and Reserves.  Staff recommends that $5.75 million worth of reserves (savings) and re-allocating Board-restricted revenues be used to help meet the $25 million deficit, noting that use of these funds needs to be measured and methodical.

The Board directed staff to develop a budget for next fiscal year based on the recommendations presented and to bring back future projections based on assuming no growth in revenues for at least the next five years.  As the budget develops, the Board will hear updates as well as presentations by department and elected officials with their reduction strategies.  The public is invited to participate in this process, with opportunities to do so available on our website at www.washoecounty.us.  A final, balanced budget must be submitted to the State of Nevada by June 1st.

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