 Welcome to Sheboygan County government working for you. I'm Dan Lemuel, Sheboygan County Board Chairman, co-host of this show with Anna Pien, our administrative coordinator. On a monthly basis, we bring you the services and the people that are bringing those services to the residents of Sheboygan County, the many departments that Sheboygan County government has, and this month we're gonna be talking about our budget process and the budget that we just passed. It's an important document that the County Board passes every year and we just passed it last month, earlier this month, actually. And we're gonna talk about the finance department this morning and the budget process and the 2003 budget. And we have with us this morning Tim Finch, our finance director. Tim has been working on the budget for about three years now, but Tim, why don't you start out by just telling us a little bit about yourself and when you started working for Sheboygan County. Sure, glad to, Dan. Started working for Sheboygan County in June of 1999 at the healthcare centers as the accounting manager. In less than a year, the finance director position came open and I threw my head in the ring for that and I was fortunate to get that position. So I've been in the finance department since May 1st of 2000. Prior to that, I worked in the non-profit sector as a CEO and a treasurer of a corporation. And you've been in the finance department for a few years now. Could you just tell us a little bit about the role and responsibilities of the finance department? Sure, it's all-encompassing. We're responsible for all of the county-wide financial functions, the accounting system, auditing, budgeting as you mentioned is a major factor. It takes up a lot of our time. Financial reporting and one of our big responsibilities is support to the other departments with our JD Edward software system, which has been new within the last few years and has been challenging to get up and going. But it has been a success and it's given us computing power that we didn't have before. So it's been a good thing. It definitely was interesting trying to get it going the way we wanted to, but now it's working quite well. So we have to help the departments on an ongoing basis because it is a very comprehensive program. So that's one of our biggest functions. I think this is about the third time you've been on our show and the other times you've been on, we have talked about that system quite a bit. And I noticed this time we had no questions about that system, so it has to be working well. Yes, I'm pleased to say it is. We passed a lot of policy, pieces of policy legislation with the county board and the most important is the budget. Could you just tell us a little bit about the process that's involved in passing that document? Sure, glad to. It's exhaustive. It really is pretty much a year on process. We really never, never stop budgeting once it's adopted in November within a month or two or certainly by February of the following year, yourself, Adam, the finance committee, and I would start talking about what are gonna be some of the targets and goals we wanna set for the upcoming year. So it really begins very early in the year. February through May is kind of an exploration of what do we think is gonna happen, what's on the horizon that's gonna affect us over the next year. It gives us kind of a target to shoot for. Then in June we have our annual budget kickoff, which is an affair with all department heads, the finance committees and attendance year and attendance, Adam is there, and we give the department heads their directions for how they need to approach their budget for that coming year. That's when any targets would be given to them. What our overall goal is if it's a rate or a levy amount, we would let them know at that time that that's what our goal is. Here's how you need to meet that goal and a target would be one way to do that. We've used targets for several years now and they have been effective in controlling both operating and capital outlay. They were especially effective for the 2003 budget. So that's in June, the budget kickoff. July and August, every department head has to present their budget to Adam and myself in what we call a base budget review. And that's where they do their initial justification for what's in their budget. And we put them through the ringer sometimes. We make them explain why are their expenses up if they're up in a certain category. If their revenue's down, they have to explain that too and come up with alternate sources. So we grow them pretty good. And then after that, they have to go to their own committee but they're prepared at that time. They know what kind of questions will be asked. So in July and August, they go to their own committee for review. And the liaison committee is really the, I guess the most important line of defense against a rising budget because it really is there. It's really their budget. So they do scrutinize it and then ask more questions of the department heads. Then in August and September, come joint meetings held between finance and the liaison committees to once again go over every single budget. So every department head has to come back to finance with their committee and present their budget again. And finance has a chance then to alter it, to ask questions, ask them to go back and we look at it at that point. October, we publish the notice of when the actual budget public hearing is gonna be. That's when the public can get involved. And we hold that in October. And also we have then the line by line review by the county board. That's when the full county board will go through the entire budget, asking any questions, make additions, deletions, basically do whatever they want to to modify that preliminary budget. And in November, it's final adoption time. That's one last chance to make changes. Normally by that time, things are pretty much ironed out. So there's not a lot of change, but it's a long, long, very demanding process. You mentioned in July and August that the department had come, meets with you and Adam and goes over their budget. And that's the first time somebody outside of the department really looks at it. How does that department develop that budget and how does the liaison committee get involved with that? Right, the department head is responsible for getting together with their staff and developing a preliminary budget that they would take back to Adam and then take to their committee. So they would do that initially with, every department head knows their department best. So they're the best ones to develop those preliminary numbers, but they do it with the input of their staff. And then after going through the base budget review, then they have to go to their committee. Their committees are also intimately involved with their department. They have a real good idea of what goes on in that department. And I think they know pretty much if there's areas they need to look at more closely and they'll do it at that time. After we set the budget, then we come up with our tax rate or property taxes, which that's when we hear from the, that's usually when we start hearing from the public. Yes, we do. Not during the process. Is there a limit to what we can tax or is there a limit to where that mill rate can go? Yes, there is. There's a limit was set by state statute back in 1992 for 93 taxes collected in 1993. So actually all the counties have been restricted to that limit. It's actually a two-part limit. There's a limit on your operating expenses and there's a limit on your debt service for paying off borrowed money for major projects. So there are really two limits that we, when we talk about our overall tax rate, we kind of combine those things together. But Swiggin County is under the limit, but it changes, the limit changes over time because as the relationship between debt service and operating expense changes, the limit actually changes as well. So we're one of the counties that is well within their limit. Many of them are actually at their limit, but you cannot exceed it unless you have a referendum to exceed your limit. If you do exceed your limit, you, the state will actually withhold state-shared revenue. So if you levy more tax than you should, you're gonna lose it in the aid payments from the state. So the only way to get around that is to have a referendum and have that approved. And you went through the process before, which is a fairly lengthy process, but just one more time. When is the budget finally, the final approval? Final approval is in November at the November County Board meeting. And the public input would be in October. There's an actual public hearing that's held in October. So if the public wants to get involved, the October meeting would be when they can come. And as you know, anyone can speak to the budget. And I daresay, Dan, that's one of the reasons why Tim looks so relaxed this morning. The budget has been approved and we've got a month or so to take a deep breath and start preparing for the next one. And it's good to have him with us. He mentioned that he started with the finance department. What was it, late 1999, early 2000? May 1st of 2000. May 1st of 2000 and has definitely been one of the reasons we've been successful over the last few years in maintaining our rate. Why don't we turn to some of the charts that you developed for us, Tim, and start with how have we performed? What's been the success rate of the County Board of Laid in maintaining our tax rate? Sure, glad to, Adam. We've got a chart that shows the historical tax rates over the last 11 years from 1993 to 2003. The years are plaited along the bottom here. So we start with 1993, goes out to our current rate for 2003 for our coming budget year. And as you can see, one of the experiences that we've had here is the kind of pendulum effect where it had a pretty high rate of 662 in 1993. And then it started to drop and it started to go back up and these kind of swings are what we've really tried to avoid. I know that's been an emphasis of the County Board of the Chairman and of the Administrative Coordinator to try to eliminate swings in the tax rate, keep it more on an even keel. And in the last few years, it's been very successful. The targets that we've set have been responsible really for doing that. So you can see for the last, actually five years beginning, are ending with 2003, got a pretty steady rate going there. Bumped up a little bit in 2001. From the rates were steady and 99 in 2000, bumped up a little bit in 2001, dropped two cents in 2002 and is dropping another two cents in 2003. So I think the targets have done a really good job of trying to keep an even rate and keep us on track and avoid those wild swings in the tax rate. Now, Tim, I don't know how well our viewers can actually make out the numbers. They can see the bar graph, I think, reasonably well. What is the tax rate then for 2003? Sure, it's 646. This would be the last bar here. So $6.46 per thousand dollars of valuation. And over the last four years with the goal and target that the County Board has established, we've seen, then, what, roughly a little less than 1% on average? Correct. Increase per year? Correct. On average, less than 1% per year of an increase in the rate. That's very good. Well, why don't we turn our attention to some of the other charts? We obviously have a great deal of revenue and expenditures to operate County government. Let's just start with the revenue and give us a sense of what type of revenue we operate with. For 2003, we're gonna have a budget of about $135 million. And our total revenue has to match our budget. We have to have a balanced budget. So in our revenue sources, there's a pie chart here, which is probably gonna be also difficult to read. But some of the bigger categories would be our intergovernmental revenue. That would be grants from the state, both in highway aides, grants to health and human services, charges to other governments. The highway does some work for other governments. So if it's visible, and it's probably not readable on the screen, but that's the top line here, intergovernmental revenue, almost $42 million. We also have interest revenue on some of our investments. It's a smaller piece of the pie. Property taxes, the third item here is $39.1 million. That'll be our 2003 property tax levy, just over $39 million. And we have a number, excuse me, a number of other categories here. The biggest one will be public charges for services. And that's where we charge for, mainly for the healthcare centers. There are room charges, room and board charges. We also have a number of other departments that charge for services, register of deeds, charges for a number of items. Many departments do, but the major amount in there would be for the healthcare centers. And then of course our bonding proceeds, the money that we borrow to do our capital project five-year plan, that's in there for 2003. It's about $3.6 million, which is quite a bit less than we've borrowed over the last number of years. We've reduced that a lot, about in half. So that's positive. And then our interdepartmental revenue is between departments and overall to the county has no effect on the tax levy. So the biggest chunks, if you want to look at it that way, property taxes, 29% of our revenue comes from property tax levy, intergovernmental revenue, which is mostly state aids is 30% and then public charges for services 21%. So those three are the big three when it comes to revenue. So the total for the 2003 budget is? $135,490,489. $135 million. And when our viewers look at the pieces of the pie that Tim did a nice job describing, again the levy portion, the tax rate, the levy, the property taxes that they're paying, that's approximately $39 million of that 135. Correct. All right, how about the expenditures? Sure, same total amount for expenditures. This chart breaks it down by type function. What are we actually using our dollars for? And the justice and law, which would include the sheriff's department, district attorney, clerk of courts, is a large segment of that at about $16 million. General administration would be for all the other departments, finance, treasurer, register of deeds, et cetera, UW extension, many, many departments, $21 million. Health and human services, $37 million are biggest department as far as expenditures go. So by a little bit larger than the healthcare centers, but much larger than most other departments. Healthcare centers, $31 million. So between health and human services and healthcare centers, you have about 67 million of our total budget. So that's a very, very large percentage. Public works, which would be highway, et cetera, about 13 million. And our capital projects, a total of $6.6 million for 2003, but we're not gonna need to borrow that much. We have some offsetting revenue in that category. And then debt service, about $7.5 million. So debt service is still a substantial part of our budget, but it is gonna go down as we borrow less down the road that's gonna reduce our debt service. So in the coming years, we're gonna see that start to reduce. So the total expenditure then is equal to the total revenue. Correct. A balanced budget. Now I know our viewers are probably struggling to see some of these numbers a little bit, but I think this last slide will help put it into perspective. You talked about the tax rate earlier. Again, going back to the levy, the property tax levy. This next slide, share with our viewers the breakout. What exactly are they paying for with their property taxes? Okay, good question. This is my favorite. Pie charts always seem to give a good picture of what's really going on. If you look at our tax levy rate for 2003, we know it's gonna be $6.46. We know that. And the breakout is what people don't always know. Where's the money actually going? Where's our tax levy going when we pay taxes? Number one is the law enforcement area, the sheriff's department. At $1.95, so of the $6.46, a dollar and 95 cents goes to the law enforcement area. The next biggest would be health and human services, which is the burgundy piece of the chart. A dollar 84 of the $6.46 is for our health and human service department. And there are a number of programs over there that they provide. Then some of the smaller pieces, debt service is 85 cents of that dollar. All the other departments combined, 76 cents. So a lot of these departments do generate revenue. That's why their tax levy is not great for all those departments. Highway, 61 cents. And healthcare center is 45 cents. And this is the one healthcare center that's kind of deceiving. You say, well, their budget is huge, and it is, it's $31 million in expenditures. Why is their tax rate such a small piece of the puzzle? And it is because they generate most of their costs are offset by revenue they generate for charges to their residents. So they do cover most, unfortunately, part of the reason they're able to do that is because of IGT, which I think we'll discuss in a minute, and that is gonna decrease. So this piece of the pie is gonna get bigger for healthcare centers. Very good, thank you, Tim. And as our viewers absorb this information, if you were struggling to see the charts or the paragraphs or wanted a little bit more information, please don't hesitate to contact our office. And we can certainly provide you with a copy of these materials. And I know that from time to time there are different organizations that appreciate a presentation, whether it's the county board chairman or myself or the finance director, we'd be happy to share more information with you. So we've talked a little bit about where we've been and the county board adopting the budget earlier this month. Now let's talk about where we're headed. What do you see, Tim, as some of the real challenges on the horizon to continue to maintain a stable tax rate and continue to meet our constituents' interest in not seeing taxes go up? Well, when I was fortunate enough to get this position, I hoped it wouldn't be boring and that's certainly been the case. It's gonna be nothing but exciting and challenging over the next few years. We know we have a couple of really big challenges, state-shared revenue is one of them. I know Dan's intimately aware and probably gonna get much more involved in that in his duties at the state level now. But at the counties too, they're gonna have to struggle with the loss of state-shared revenue. For Sheboygan County, it looks like for 2004 it's gonna be about 600,000. That would be the worst-case scenario and I know we've been talking about some numbers recently and that's one that I think I've been able to nail down. So it looks like about $600,000, worst-case scenario in 2004. Beyond 2004, we really don't know at this point. So... And at one point earlier this year we were making plans and preparations for losing all of our shared revenue. We were. Or half of our shared revenue and our total shared revenue is about how much? About 3.6 million. So it's a significant amount. If we were to lose it all, it would definitely hurt. Sheboygan County has done an excellent job with their finances in the past. So it's put us in a position where there's no way that that would severely hurt Sheboygan County. But it would sting. There's no question it would sting. So that's one issue is state-shared revenue that we'll have to deal with. Health insurance is another problem area we've experienced for 2003 an increase in the budget for health insurance cost an increase of over $2 million. So we're now looking about 9 million plus for health insurance for our employees. We are self-funded. So our costs are low. Our rates per person are low compared to a lot of businesses. But they're still high. We're looking at a family rate of over $800 for 2003. So that is gonna be a constant challenge to find ways to provide good coverage and not break the bank. So that one will be challenging. And earlier you mentioned IGT. IGT. IGT is intergovernmental transfer program for those people who don't know what it is. But it's federal dollars that come through the state to compensate counties that have nursing homes for losses on their Medicaid patients. And basically what happens is that Medicaid does not pay enough to cover the cost of providing care. Health care is very expensive. So the federal government as an incentive to ensure that there are enough nursing home beds available have funnel dollars to the state, to the county nursing homes, those dollars are gonna start to dry up. And in fact, we know probably by 2005 of the state trust fund, right now they're predicting is gonna be gone will be used up the nursing home trust fund. From that point on, the dollars will drop dramatically. So we could see half or less of what we're getting now in IGT. Currently we're getting about five and a half million. Might be a little bit more for this 0203 state fiscal year period. But we're gonna see it probably drop to half or less of what we've received historically. So it's gonna be millions of dollars that we're gonna have to come up with somewhere else. So on the horizon, we have the challenges of losing funds for a health care center. We have the possibility of losing state-shared revenue. We have health insurance that's just going through the roof. And we also have continuing demands for more service and the cost to provide those services, unfunded state mandates, federal mandates. Fortunately, in Sheboygan County, the constituents of this area decided to send our county board chairman to the state assembly. So I think we can continue to breathe a sigh of relief to him or in good hands. And I'll turn it back to Dan who has a couple of questions about what some of those challenges are as well as some of the good things that Sheboygan County has done. One of your charts, Tim, you showed that the tax rate had been fairly flat the last, a few years, last four years. And we did that with some goals and some limits on our departments. But we've also in that process recommended that they'd be creative in their budget process that they would come with new programs, new ideas, and improve the efficiency of their departments. What are some of the examples of some of the projects that we're looking at in 2003? As far as capital projects that we're... Capital projects and in other areas where departments are being creative in their budgets. Well, Dan, as you know, every year we do a five-year capital plan to try to control and manage our bigger projects, airport projects, road construction, the new science edition here at UW-Sheboygan is in the plan for 2003 and 2004, I believe they split it over two years. So one way we manage is through that five-year plan and there are a number of projects, the biggest one, again, is UW-Sheboygan for 2003. As far as cost-saving measures, when the governor dropped the bomb of taking Wayne State-Shared Revenue in 2002, all of it, for not just counties, but for cities, villages, and towns, we were asked by the administrative coordinator, every department was asked to look at what can you do to cut costs and to meet this challenge. So every department had the really pleasant task of going through and trying to figure out what can we do? Do we have to cut costs? Can we increase revenue? So there are a number of things being looked at across the county, I know in the finance department, we looked at something ourselves and we haven't been able to introduce or to accomplish that yet, but we're working toward trying to streamline our operations so we can do things more efficiently and I think all departments are looking at doing that. We talked earlier about the public hearing that where the public could come in and address the board in regards to the budget. I think this year we had two people come and talk to us and address the budget and they said we weren't spending enough money. How could the public get more involved in a budget process? They're the ones that are paying the bills and they should get more involved. How could they get more involved? One good way for them would be to, when the budget process starts in earnest in July and August and there are meetings going on at the finance committee, finance committee meetings are open. They're open meetings. Anyone can come to the administration building, attend a finance committee meeting. They're posted in the administration building. I would come to one of those because they get a real flavor for what the budget process is all about. After that, if they could go to any other committee meeting, if they're interested in law enforcement, go to a law committee meeting when the budget is scheduled and they will hear firsthand what's being presented for a preliminary budget and then very importantly, they need to come to the public hearing in October. And all the budget deliberations whether it be at the liaison committee or at the county board, that's all open meetings. They're all open meetings. So they're welcome to come. Encouraged and to come. We've talked a little bit also about some changes in the actual process that we go through and I know you and Adam have worked a lot on that and developing a process that is more accountable and where we can measure results in our budget process. Any things in the future that you're looking at? Yes, we are. We've talked about recently in fact, expanding the success of the targets that we've used so far operating in capital outlay. We want to expand that to an entire budget which really, we've eliminated wages and benefits from the target arena so far. I think it needs to be included. Wages and benefits are half of our entire budget. So it needs to be included in that target category. So we're working on trying to pull that together. And another big area I'd add is just prioritizing the programs. We've gone through that, we've done some of that but we need to do more prioritizing of how valuable different programs are and at some point the county board may have to make some very difficult decisions because not all of them are equally outstanding. There are different priorities. And with some of the concerns that you raised him in the next few years and with the limit on our taxing ability, some of those decisions will have to be made. Yes, absolutely. A few minutes ago Adam, you mentioned that the area residents in their good wisdom elected me to go to the assembly. And I sort of left that topic right away. Next month, we normally have a guest. Next month will probably be my last month doing this show. Be resigning as county board chairman and also from the county board. And so next month we're going to not have a guest and I'll just be you and me Adam talking about what we've done the last couple of years and the transition going forward with the county board. So I'll welcome our viewers to meet with us next month again. Thank you.