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Cuyahoga County:A government of action, accountability, opportunity, and innovation

July 14, 2010

Cuyahoga County2010 Budget Highlights

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Summary of 2010 Budget

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Maintaining Stability of County Finances The 2010 Budget is balanced and remains at current service

levels.

Financial health has been reaffirmed by rating agencies (December 2009) W have the 2nd highest bond ratings of all Ohio counties (Aa1, AA+).

5th largest employer in the County.

Major force for economic development in the region.

Continuation of Budget Incentive Plan in 2010.

Provide quality services with a comparatively low millage rate to help support operations.

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Comparison – Effective Voted Millage Rates

Based on 2009 (TY) residential rates. Effective rates do not include Metroparks, Port Authority, Library

or Community College levies.

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.18

12

.33

14

.67

14

.90

12

.68

12

.56

Total Effective Millage for Operations 2010

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How We Compare With our Peers

Also have second lowest per capita spending than other urban county peers.

Based on approved 2010 budgets.

Per Capita Spending by Urban Counties

County2010 County

Budget ($ millions)

Est. 2010 Population

Budget Per Resident

Summit $537.1 542,562 $990Cuyahoga $1,404.9 1,283,925 $1,094Hamilton $1,169.7 851,494 $1,374Lucas $649.8 440,281 $1,476Franklin $1,742.9 1,118,107 $1,559Montgomery $959.7 534,626 $1,795

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2010 Budget Guidelines – Reflect Our Mission Encourage opportunity and strengthen our economy; Be excellent stewards of county assets; Improve operations and promote innovation Citizens, especially seniors, unable to help themselves will

receive help; Citizens will have access to resources needed to be skilled and

productive; Our citizens will be healthy; Our children will be well cared for and safe; Our County will be a safe place to live and raise a family; We will sustain our natural resources; and Enforcement of laws will be fair and timely. Provide total administrative support to the Government

Reform Transition Team;

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A Summary of 2010 Budget Parameters The 2010 budget was based on the 2nd quarter expenditure projection for

fiscal year 2009.

Personnel allocations were adjusted to reflect the actual Early Retirement Incentive Program participation ($39 million in savings).

County agencies with self supporting revenues were to limit their budgets to their available resources.

The 2010 budget does not provide for any cost of living increases or other salary adjustments for either bargaining or non-bargaining unit employees unless the existing bargaining unit agreement called for a salary adjustment.

The budget does incorporate the savings from five 2010 furlough days during the first half of the year.

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A Summary of 2010 Budget Parameters (continued)

The 2010 budget incorporated a 5% increase in hospitalization costs.

The 2010 budget provides a 2% inflationary increase in commodities, contractual services (operating only) and other operating expenditures.

Additional funding requests were not included in the recommended budget unless agencies were able to reallocate existing allocations to meet the additional funding requests.

The 2010 budget provides for a Budget Savings Incentive Plan, where county agencies funded by the General Fund or Health and Human Services Funds will be recognized for their efforts to come in under their 2009 original budget.

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2010 Budget Summary

The Exhibition Hall reserve represents the increase in sales tax revenue that is specifically set aside to support the Medical Mart project, which is anticipated to spur economic development in the region.

The All Funds deficit is due to utilizing cash balances for debt service and for Board of Developmental Disabilities’ needs.

2010 Recommended BudgetGeneral Fund and All Funds Summary

Revenue Estimate 357.5$ million 232.8$ million 590.3$ million 1,441.1$ million

Operating Expenditures 317.9$ million 232.8$ million 550.7$ million 1,404.9$ million

Exhibition Hall Reserve 39.1$ million -$ million 39.1$ million 39.1$ million

Operating Surplus 0.5$ million -$ million 0.5$ million (2.9)$ million

Ending Balance 93.6$ million 33.1$ million 126.6$ million 303.8$ million

Balance to Expenditure % 29.4% 14.2% 23.0% 21.6%

Health & Human

Service Fund

General Fund

Operating

Total All

General Fund Funds

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Where County $’s Come From – All Funds $1.44Bn

All Funds includes General Fund, Levy Funds and other special revenue funds of the County budget.

2010 Budget - All Funds Revenue(millions)

Property Tax23.5%

Charges for Services

19.1%Investment Earnings

1.4%

Miscellaneous2.3%

Sales & Use Tax13.6%

Other Tax2.0%

Licenses & Permits

0.1%

Fines & Forfeitures

0.9%

Intergovernmental37.1%

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How County $’s Are Spent – All Funds $1.40Bn

All County funds consolidated. Does not include multi-year budgets for grants and capital projects.

2010 Budget - All Funds Expenditures(millions)

Social Services45.7%

Health & Safety5.9%

Public Works3.8%Debt Service

3.3%

Miscellaneous7.6%

General Government

10.9%

Judicial21.6%

Development1.2%

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Where County $’s Come From – General Fund /Levy $590.3M

General Fund includes the main operating fund as well as HHS Levy funds. Total pool of funds considered to be part of the general operating budget. Includes $39.1M of sales tax collected for Med Mart Project

2010 Budget - General Fund Revenue(millions)

Sales & Use Tax33.1%

Property Tax35.7%

Fines & Forfeitures1.5%

Licenses & Permits0.1%

Intergovernmental15.6%

Charges for Services

8.4%

Investment Earnings

3.1%

Miscellaneous2.5%

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Where County $’s Come From – GF Operating $357.4M

General Fund Operating excluding HHS levy dollars. Most flexibility on how funds are spent.

A shared pool of resources, representative of the County’s financial condition.

2010 Budget - General Fund Operating Revenue(millions) Sales & Use Tax

54.7%

Property Tax6.3% Fines &

Forfeitures2.5%

Licenses & Permits

0.1%

Intergovt Transfer Pmts13.4%

Charges for Services

13.8%

Investment Earnings

5.2%

Miscellaneous4.1%

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How County $’s Are Spent – General Fund $550.7

Includes Operating fund of $317.9M and HHS Levy expenditures of $232.8M.

2010 Budget - General Fund Expenditures(millions)

2008 2009 2010 '09 - '10 '09 - '10

Expenditures Actual Actual Budget Change % Change

Public Works0.3%

Development1.2%

Social Services25.2%

Health & Safety14.1%

Debt Service1.4%

Miscellaneous1.8%

General Government

10.1%

Judicial45.9%

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County Has Continued to Reduce the Budget.

A variety of programs were cut in 2009 along with institution of a three day furlough program. A five day furlough was instituted in 2010.

An early retirement program was instituted in 2009 and has provided additional savings of $39 million County wide.

Most cuts made in 2009 were carried into the 2010 budget.

General Fund Expenditures 2008 -2010Change from Prior Year

$ millions

Program Budget Area2008

Actual2009

Actual% Chg 08 - 09

2010 Budget

% Chg 09 - 10

General Government $69.0 $59.7 -13.4% $55.8 -6.6%Judicial $267.4 $238.9 -10.7% $228.2 -4.5%Development $7.8 $8.0 2.3% $6.7 -15.9%Social Services $6.4 $6.5 1.6% $7.2 10.9%Health & Safety $1.7 $1.4 -15.8% $1.1 -24.7%Public Works $1.6 $1.6 3.8% $1.4 -17.1%Debt Service $4.3 $4.5 4.2% $7.5 65.5%Miscellaneous $2.6 $2.8 7.0% $3.1 10.6%

Total $360.8 $323.5 -10.3% $310.9 -3.9%

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Reductions of County Programs In 2009 - 2010 Continuation of hiring freeze for all BOCC agencies. ERIP - personnel costs $10.5 million in 2009 and $39 million in 2010. Reducing children residential placement contracts by 2.75% cut costs by

$1.6 million. Reducing overtime for the Kids Hotline saved $1.0 million in 2009 and 2010. Reducing Help Me Grow core services will cut costs $629,500. Reducing Early Start’s literacy program and prenatal services will cut costs

$722,780. Eliminating the Work Release Program will save $250,000. Reducing Ohio Works First contracts will cut costs $800,000. Reducing voting precincts will save $3.0 million by 2010. Energy efficiency measures will reduce costs $4.5 million starting in 2010. Court procedure notifications via mail to e-mail will save $500,000. Eliminating Coroner’s grief counseling program will save $107,500. 5% cut to ADAMHS Board Subsidy in 2010.

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Summary of 2010 HHS Levy Expenditures

In 2010 the $232.8 million generated by the two HHS levies will help pay for these programs.

Levy dollars serve as a local match to draw down approximately $300 million in State and Federal revenue for reimbursement of HHS program expenditures.

The next State budget cycle will most likely result in a drop in State funding for County HHS programs.

HHS Levy dollars are restricted to social services and health & safety purposes and must be balanced amongst mandatory and discretionary programs annually.

HHS Funded Programs 2009 2010

Services for Children & Families $132.20 $114.50Services to Seniors 16.7 13.9Mental Health & Alcohol & Drug Addictions Services 36.6 35.7Community Health Care/MetroHealth 39.6 40Other Human Services Programs 19.0 28.7

TOTAL $244.1 $232.8

$ Millions

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Changes in Staff Levels 2002 to 2011

The 2010 estimate includes cost/savings associated the Early Retirement Incentive Program (ERIP) and non ERIP attrition.

2010 FTE levels are 22.4% or 2,317 FTEs less than in 2001; and 1,487 FTEs or 15.6% less than in 2008. Personnel costs dropped by 15% or $63 million from 2008 to 2010.

9,479

8,909 9,025 9,0459,267

9,502 9,523

8,706

8,0368,203 8,192

7,000

8,000

9,000

10,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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Where We Are Today

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Recent Economic EventsGreat Recession – largest economic decline in the U.S. since the Great Depression.Government rescue of the financial system (Fall 2008).Massive intervention by federal government.

American Recovery & Reinvestment ActMeasures by Federal Reserve to shore up banking system

Collapse of housing market followed by wave of foreclosures nationwide and Cuyahoga County.Highest levels of unemployment in almost thirty years.GDP and consumer confidence and retail sales drop starting in 2008.Local Sales Tax collections were really bad last year, we saw a 10.9% drop in 2009.Limited signs of a weak recovery in Cuyahoga County.LeBron James leaves for Miami.

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Economic Indicators Dashboard

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Inflation Adjusted Revenue – Decline in Real Terms

Revenue adjusted for inflation highlights the decline in real dollars available for programs.

In real terms revenue has declined by over $96 million dollars or 23% since 2001. The decline in 2011 is 27%. Over one quarter of our purchasing power.

General Fund Operating Revenue 2001-2011 Adjusted for Inflation (millions)2010 - 2011 Based on 2010 Budget Estimate

Prior Year Revenue based on 2010 dollars using Consumer Price Index Inflation Calculator.

321.5 305.0

417.9392.3 386.4

385.6369.5

362.0381.3

357.2320.2

$275.0

$300.0

$325.0

$350.0

$375.0

$400.0

$425.0

$450.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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2010 Budget Summary

•The Exhibition Hall reserve represents revenue from the 0.25% increase in sales tax that is specifically set aside to support the Medical Mart project.

•Those dollars are NOT useable for operations.

2010 1st Quarter EstimateGeneral Fund and All Funds Summary

Revenue Estimate 360.6$ million 231.9$ million 592.5$ million 1,382.6$ million

Operating Expenditures 321.5$ million 235.1$ million 556.6$ million 1,324.4$ million

Surplus (Deficit) 39.1$ million (3.2)$ million 35.9$ million 58.2$ million

Exhibition Hall Reserve 39.0$ million -$ million 39.0$ million 39.0$ million

Surplus (Deficit) 0.1$ million (3.2)$ million (3.1)$ million 19.2$ million

Ending Balance 100.2$ million 29.9$ million 130.1$ million 381.9$ million

Balance to Expenditure %

General Fund Health & Human Total AllOperating Service Funds General Fund Funds

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Near Term Budget Estimates – More Challenges

2011 and 2012 budget estimates currently reflect large operating deficits if revenue does not pick up in the near future. This is a HUGE problem for the County to contend with in 2011.

The projected decline in revenue will continue to deplete County General Fund resources beyond the 20% reserve requirement within the next two years.

2010 Estimate 2011 Estimate 2012 Estimate

Revenue 553.5$ million 536.3$ million 536.8$ millionExpenditures * 556.6$ million 555.6$ million 557.6$ millionOperating Surplus/(Deficit)

(3.1)$ million (19.3)$ million (20.8)$ million

Ending Balance 130.1$ million 108.8$ million 86.2$ million

Balance to Expenditure % 23.4% 19.6% 15.5%

Excludes .25% sales tax increase for Medical Mart and Exhibition Hall

No salary increases in 2009 through 2012

Combined General and HHS Levy Funds

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Deficits Continue to Persist

In 2011 and 2012 the County will take in less dollars than it is projected to spend. Even though we are spending less and less.

The main cause is the severe decline in revenue – remember that recession?

The critical gauge of fiscal strength is the ability to contain or avoid the continual draw down of cash reserves. General Fund and Levy Funds.

2011 Budget Process will have to address this imbalance.

Total General Fund Operating Surplus/Deficit 2002- 2012 *

($ millions)

Not adjusted for inflation

$(14.3) $(11.6)

$0.6

$(6.8)$(7.5)

$18.7

$(15.0)

$38.2$20.5

$8.6

$(24.3)

-$50.0

-$20.0

$10.0

$40.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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Why Is The Ending Cash Balance Important?

Over sixty percent of General Fund Operating revenues (Sales Tax and Investment Earnings) are tied to resources that are sensitive to economic swings.

State and federal budgets, which the County has minimal influence over, govern how much the County receives each year in intergovernmental revenue which is the County’s largest revenue source.

Unexpected catastrophes or situations (lawsuits, fires, etc.)

Cash flow needs since the state reimburses expenses and advances are not received in a timely manner.

Achieve the lowest possible interest rates on long-term bond issues to support capital needs of the county.

One basis point (.01%) on a $350 million year bond issue would cost the County about $35,000 per year in additional debt service.

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Preparing for 2011 and Beyond

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Top Concerns Status of future outlook in the County budget for 2011-2012.

Deficits in GF and HHS Levy Fund will have to be addressed.

Sales Tax growth / economic growth- where and when will a recovery take root in Cuyahoga County?

Will fiscal austerity at the federal level derail a local recovery or worsen the State’s budget problems?

Condition of State Budget. (The estimated $7 billion shortfall)

Impacts of Health Care Reform and potential reforms to OPERS.

Transition to charter government and 2011 budget process, maintaining bond rating, major projects, etc.

These concerns will have to be addressed based on the fact that County operations are funded by shared resources.

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Condition of State Budget How do you fill an $7 billion budget deficit?

Cuts to HHS program will strain our local match from voted levies.

Cuts to Local Government Fund – currently provides $31+ million to General Fund. There is a possibility that this shared pool of funding will be cut in the next State budget.

Additional cuts that will impact all levels of local government in other program areas related to corrections, justice, development and education.

Inability to find replacement revenue for phased out personal property tax.

Ohio Budget Planning and Management Commission - bipartisan budget panel created to address looming budget crisis.

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Good News on the HorizonHHS Levy was renewed by voters in May.Major Local projects that can make a difference:

Medical Mart Convention CenterDowntown CasinoMajor Highway ConstructionFlats East Bank Development

Continued use of ARRA dollars and RZ bonding provisions.Possible end of the recession in Cuyahoga County – getting worse at a slower pace.County has weathered the worst of the “Great Recession” while maintaining healthy cash reserves and exceptional bond ratings.Potential release of 2007 and 2008 audits will relieve some pressure on the County.

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2011 Budget Objectives

Stabilizing the General Fund and HHS Levy Fund in 2011 and beyond.

Balancing revenues and expenditures in a manner that best serves the interest of all county residents.

Sustain the most critical core service priorities for our community.

Continual search for creative solutions and increasing efficiency in service delivery.

Defining priorities based on a strategic planning objectives that each County agency is expected to develop and maintain.

Collaborate, collaborate, collaborate.

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Where Will We Look for Savings?The past three budget cycles have required budget reductions.

Where else can we cut?

Big Picture – look at ways the County operates in general. Administrative overheadPhysical space and information technologyEmployee benefits programs

Programmatic Focus– How do individual agencies prioritize programs and where are the opportunities to find more efficiencies?

County Transition – leverage the organizational changes mandated in charter to realize savings in the next several years.

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County Transition – Budget ImpactsWhat are the near term budget implications

related to the transition to charter government?

Mandates to create new County entities (Internal Audit).Consolidation of organizational structure.Specific changes to budget reporting (section 2.03).Required changes are not reflected in most recent projections (Q1).Major governance changes will be included in 2011 budget development process.Some charter changes may be addressed in a revised 2011 budget early next year.

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2011 Budget Process – What’s Next?

OBM is currently completing work on the 2nd Quarter Projection.

The estimates for 2011 will serve as a “building block’ or the base budget in 2011.

2011 Budget would adhere to the aforementioned objectives.

2011 budget will be an annual budget plan and will address the structural deficits in the General Fund and HHS Levy Fund.

Final recommended budget will be presented for approval in the final quarter of 2010.

Additional transition changes could be incorporated as a revisions to approved budget per final recommendations in early 2011.

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Additional Budget Information Budget & financial reporting is available

on our website: www.obm.cuyahogacounty.us

Suggested Reading:

2010 Budget Plan Annual Information Statement Quarterly Reports – Q2 Due out Early August Thinking The Unthinkable – Finding Common Ground For

Ohio’s Fiscal Crisis (Center for Community Solutions)