 County government working for you. This is a monthly show where we bring you the departments and services of Sheboygan County, the services that you as the taxpayers are paying for. And I'm the co-host of the monthly show and Dan Lemihue, County Board Chairman, co-host with Adam Payne, our administrative coordinator. And this month we have with us Tim Fincher, Finance Director, and we're gonna be looking at the roles and responsibilities of the Finance Department and our budget process, which we are in the middle of as we're taping the show late in September and we're in the middle of that process. But Tim, why don't you begin our show today by just telling us a little bit about yourself and when you started working in the Finance Department for Sheboygan County? Thanks, Dan. I'd be glad to. Been in Sheboygan about two years now, came here two years ago, started at the healthcare centers as accounting manager. Prior to that I worked in Kenosha for a number of years for a corporation as a CFO and a vice president. Started at the healthcare centers here and then after 10 months there, the opening came up for Finance Director, which I was extremely interested in and was lucky enough to be selected for that position. So as of May 1st, 2000, I've been the Finance Director for Sheboygan County. It was an exciting time to come on board with everything happening with JD Edwards Computer System, which I know you and Adam are both well aware of the challenges faced and the great potential that that system holds for us. So it's been an exciting time since I've been here. And now that you've been here in the Finance Department for a year and a half or so, could you just tell us a little bit about the roles and responsibilities of that department? Sure, finance is all-encompassing. There's so many areas that finance is involved in. Some of the major functions would be budgeting, which we're now in the process of doing our annual budget for 2002. That's a very big effort for a number of months at the county-wide level. Auditing, of course, is another area where we get involved heavily with external auditors who come in each year and audit all of our financial statements and our grants, et cetera. Payroll, we're involved in payroll, and along with data processing, make sure that the payroll checks get out each two weeks. We're a direct deposit, so we don't actually have payroll checks, but there's still a lot of processing that has to go on to do that. Service to our other departments, I think, is one of our biggest areas that we deal with, always giving advice, making sure that financially other departments are running according to policies and procedures and helping them out with analysis. And I guess maybe the most enjoyable part is just, for me anyway, is being a function or extension of the finance committee and working with them closely on developing new financial policy and looking forward to the future. On an earlier show, you were one of our guests, and we talked about some of these other functions of the department, but today we'd like to focus in a little more on the budget process because of the time of year and where we are in the process. So maybe you could just zero in on that process a little bit and give us a little more details to how that process works. Sure, it's a long process. We really start thinking about the budget in April or May. Administrative coordinator, yourself and I will start looking at what's coming up in the future in the finance committee. We'll start talking about what's coming and just getting an idea on what kind of challenges we're gonna face in that area. The first official meeting we have is in June. We have the annual budget kickoff meeting. And at that meeting, we develop, actually we pass out a comprehensive set of budget instructions, which I know you two are very familiar with. Looks like this, Sheboygan County 2002 budget instructions. This is handed out to each department head and some other key people within the system. And it has all the instructions that they need to prepare the annual budget. So they use this as their key to go by as they go through and work on their budget process. And part of the process is to, we set goals at the beginning. We have targets that are set as to where we wanna end up with our budget when we approve it in November. How are those targets set? It's a cooperative process of a number of individuals under the direction of the finance committee, administrative coordinator, and yourself as a chairman and with my activity as well. We look at what we're gonna see as challenges over the next year. What we think is gonna happen with our revenue, if we think there are areas where we can increase our revenue or if we see pressure for some reason that our revenue would go down, we start looking at those and setting a target. And then we come up with a realistic goal. What's the realistic tax levy rate based on what we're gonna be looking at over the next year? And are there any limits? I mean, our revenues come from the taxpayers. Can we just indiscriminately raise that tax levy as high as we want or are there some limits? Yeah, absolutely there are limits. We can't go past the state mandated limit. Currently for the 2002 budget year, that would be about $6.63. So we're targeting for 2002, we're targeting around 650. So that would be, we're under the maximum limit at this time. A lot of counties have had severe difficulty in staying under the limit and actually are right at their maximum at this time. So Chauvin County's done a good job at staying below that target, but it's gonna be a constant struggle to do that. Is there an easier way of explaining how that limit is set by this day? They originally back in 93, they actually froze the rate at what it was at that time and said you can't go above that rate unless your equalized value increases. So what they've allowed is that only increases with equalized value. So as the equalized value goes up, we can increase the amount we levy as well. So it was what the rate was at each one of the 72 counties that year. Correct. So the limit is different for every county. Sure. And then the budget that we passed as a county board is made up of multiple departments, we call them business units. Companies. Companies. It's correct. Maybe you could just go through the process while one of these departments or companies would go through it to do their budget. Sure. In the new computer system we use now the JD Edwards One World System. As you said, the departments actually are termed companies in the system, that's how it's designated. Each company is a separate department within the county. They go through their own process prior to coming forward to meeting with the finance committee with the administrative coordinator. They go through their own process of meeting with their individual managers and supervisors to develop what their budget is gonna be for the upcoming year. So each one probably is a little bit different. They structure it to their own operation. Come up with their numbers, make sure they agree on what's gonna happen in the upcoming year. Then they have to come forward and they have to present what we call their base budget to the administrative coordinator and myself at a base budget meeting. And we pretty much go through everything they have in their budget and challenge them. Challenge them on areas where we think maybe there can be savings or revenue possibly is increased or should be looked at more closely. So we really challenge them to go back and look at certain areas in their budget that we're not comfortable with before they would go to their liaison committee. What were, our viewers have probably seen over the last couple of years where they've seen a headline where it says county departments are asked to cut their budgets or freeze their budgets or what were the goals this year for each department as far as the limits that we put on them? Sure, based on the targets that were set by the group that we mentioned before, they were asked to go back in and have a 0% increase in both operating expense and capital outlay. And they needed to do that in order to meet the target for this year of a 650, no more than 650 tax rate. So they were not held accountable for increases in wages and benefits which, due to union contracts and other reasons, it's very hard to control those increases. But the areas where they do have control, we asked them specifically to come in with a 0% increase. They followed the directions to come in with their base budget at a 0% increase in those two areas. However, they were given the opportunity to ask for additional items if they thought they really needed them. And it was called a very inch request. And there were very inch requests submitted by a number of departments that were in excess of that 0% increase. Now each of these departments reports to a liaison committee or a committee that oversees their operation. Sheriff's Department reports to the Law Committee, the Health and Human Services Department to the Health and Human Services Board. What role do these individual liaison committees play in this process? Their role is huge because they really are the, they're the decision makers as far as what budget is gonna be presented to the finance committee. Finance committee has the final say, but the liaison committees know their operation the best of anyone. They know what the limitations are. And they're the ones who really should challenge their department head to justify what's in that budget. They're the first line defense to the taxpayer, I guess is the way I would put it. And I think they, this year for 2002, I think they did a very good job at that. And so their role is huge. And then when the department head comes to the finance committee for approval, liaison committee is a very important part of that because they'll come and support their recommendations for that budget. We've talked about the department heads working on the budget, trying to determine the needs and the revenues available. We've talked about you as the finance director and our minister of coordinator meeting with these department heads for dealing with their base budget. The liaison committees looking at it. Now it goes to the finance committee. The finance committee does correct. They do their thing. They're the final gatekeepers prior to final county board approval. But they'll go through it again and pretty thoroughly with each department. They'll meet with every single department after that department's met with the administrative coordinator and myself. And each department has to justify their budget to the finance committee. And they ask a lot of tough questions. And I know you're involved at that level. And I know you ask a lot of very good, good tough questions at the same time. So the finance committee really has, in my mind, I guess they have the last, they're the last decision maker before it goes to the full county board for their final approval. Of course the county board is the final decision maker on the budget. Okay, so we've frustrated that the department has been making a book through all these steps. Now the full board has the final say on the budget. They can amend it, pass it, reject it, whatever. What is the process and the timeline for the full county board to work on the budget? Sure, good question there. There's a whole timeline process of getting the budget to that point where it goes to the county board. In October there's gonna be a public input at the county board level for the budget would be on October 30th at 6 p.m. in the county board chamber's fifth floor of the courthouse. That would be the point where the public would actually have input into the budget. The county board will get a draft copy prior to that point for their review. And then at that time they'll review every department. They'll go through every department and can question any item in the budget at that point. Public input is also accepted at that time. So as well as the county board supervisors looking at the budget and going through it with a fine tooth comb if that's their desire to do that, the public input is also available so anyone who wants to come from the public and I would suggest people doing it if they have a question about the budget or a comment that's their forum to bring that forward and I would suggest that they consider doing that. And then subsequent to that on November 6th, the final board approval of the budget would take place on that day. In order for the public to ask a question about the budget or to be informed about it, they need a copy of the budget or they need to have some information about the budget. Sure. How would somebody in Chewbacca wanted to know what our county budget was like or what was in it? How would they go about finding that out? It'll be published in the newspaper. And I believe the date is October 11th, a summary version of the 2002 budget will actually be published in the newspaper so they can refer to that. Then if they have any other questions, they can contact myself or anyone in the finance department and we'd be glad to get to it. So if you wanted more detail, they could contact the finance department, get a copy of some of the detail that's in the budget. Absolutely. Three years ago, we established a new process of a goal and targets and one of our objectives was to eliminate large swings in the tax levy rate. You started as our finance director a little over a year and a half ago, have been a tremendous ally in helping us in this process. In your opinion, how have we performed the last couple of years? Yeah, I wish I could take credit for other performance over the last few years, but I really can't. I appreciate the kind of words though. If on the chart, we did bring a chart with us today that shows how our tax rate has gone over the last 10 years. And over the last four years, it's been very consistent for two years and a row was $6.30. Last year, we had to do some additional funding at the healthcare centers and that bumped it up to about 650. For 2002, now we're anticipating, at this time, $6.48. So for the last four years, it has, as you can see, there was a peak in there five or six years ago where it dropped way down now. But that I think that was a situation where really possibly we were under budgeting for what we needed to do. And now we've come back to what I think is a normal stable level. And for four years, it's been very stable. So I think we've done very well on that. So for 2002, the preliminary budget, we're at $6.48, what are your expectations? Where do you think we're gonna come in? I think we're pretty close to what the targets were, the direction of the finance committee, yourself and the chairman were to, based on the targets and the goals we set, we're pretty close to that right now. We're really right there. There could be some minor adjustments now before the budget is finally adopted that could drop that down a little bit more or maybe swing that back up to $6.50. But I would expect that we'll be no more than $6.50 and we could be somewhat less. We've, every show we emphasize a different department in the services. We provide 23 departments, almost $130 million budget. What are some of the primary expenditures and revenues that makes up this massive budget that we prepare each year? Sure, I brought with me my notes, sir, so I could kind of give you a sense of this without messing up too badly. One of our biggest sources of revenue is state grants. And we get state grants for various departments in the county, health and human services, probably the number one recipient of state grants. For 2002, we're budgeting over $30 million at this point. Charges to state of Wisconsin is significant that includes our IGT revenue, which is part of the Medicaid program. It has been the subject of a lot of debate at the state and local levels to what's happening with the IGT. That's $7 million, including about $6 million of IGT. We have certain charges that we charge to other local governments, about $2.5 million for various services we provide. This is an interesting law and ordinance violation fees, $460,000. So half a million to people who violate our ordinances. General government charges $1.36 million, $1.3 million for a variety of services. Another huge, very large one, healthcare service fees, over $23 million. That's for the healthcare centers. And that's significant because it's hard to realize that sometimes even though the healthcare centers do take tax levy, they provide the majority of the funding for their operation. And that's where it shows in the healthcare service fees category. That would be room and board fees for comprehensive rock and roll, sunny ridge as well as other fees for physical therapy, occupational speech, et cetera. And health and human service does charge some fees for their services, about $3 million. And an interest income out of investments, unfortunately is going down significantly based on the current market conditions. We are estimating $2.5 million at this point, but if things deteriorate further and they could, we probably will not see that. So we might have to revise that at some point. And our borrowing for bonding, our bonding for capital projects, about $6 million. So that's the biggest revenue areas that we have for the county. Then on the expense side, number one, wages and benefits. Budgeting over $62 million for 2002. Purchase services and most of this would be in the health and human service area for their vendors and contractors to provide services in the community. Over $28 million for that. Another large category is just general operating expense, which includes all types of supplies, office supplies, medical supplies, et cetera. Utilities, so that's a big area that's quite expensive. And then our principal interest in our debt, which this is debt service to pay off our bonding, our general obligation bonding, which we borrow money for capital projects. This is a large, we're talking, processing $6 million, over $6 million, pushing $7 million for debt service in 2002. That's an area that finance committee, as well as I know the chairman and yourself, Adam, have looked at where we need to try to control it as much as possible. We're looking at ways now to try to do that. I know the chairman and the executive committee recently introduced a legislation to provide some parameters on how much we are borrowing each year that's a growing concern for the county board. So when you discuss all the expenditures, all the revenues, again, $130 million in approximate budget, about how much of that is tax levy? Tax levy we're estimating for 2002. We're looking at about $37 million, just under $37 million. So we provide a lot more of our funding than we get through tax levy, but it's still a significant number. And we always want to try to minimize that. I just want to mention one other expense too. Health insurance costs is one that a lot of counties and others have suffered with recently. We've been fortunate. We've done really well with our health insurance. We're self-insured. However, we're looking at claims just recently, exceeding, far exceeding what our normal experience has been. So this is going to be an area that we want to look at more closely over the next few months and see what happens with health insurance coverage. And that's a nice transition. What are some of the most challenging areas that we face in order to hold down the tax levy? Health insurance is one of them. And I think it's only going to get worse. I think we've done a real good job in this county. Ron Even, who's a county manager at highway, has worked with insurances. Luella, of course, our personnel director works with them. I think they've done a really good job at keeping our cost on as low as it has been over the past few years, but we're going to see the pressure of that. As a matter of fact, I can just tell you our experience for August where we normally would see about 500,000 costs for health insurance was a million dollars. So in one month alone, we were 500,000 over what we normally see. That's definitely going to be a challenge for us. Our constant increase in wages and benefits. County employees are, I believe, well compensated. And I think their benefit package is as good as I've seen. So I think we take very good care of our employees, but it's costly to do that. And we are restricted to what we can raise in levy to the increase in equalized value. So each year, whatever that increases, the majority of that's taken up by your increases in wages and benefits. So that's a pressure that we'll constantly see and have to try to control that. State grants to health and human services. If there's more pressure at the state level to reduce their budget, and it looks like there is going to be, that could put pressure on grant money that's given to our Health and Human Service Department. A large amount of their revenue comes from state grants. So I would look to see some pressure in that area. Nursing home reimbursement is a huge challenge. It's constantly changing. If the Medicaid rate is set by the state of Wisconsin, if they're suffering at their budget, they can reduce the rate at any time. So I would look to see continued restraint or continued control over how much the state pays us in reimbursement to our nursing home. So that's gonna be something we're gonna have to work with too, I think. I think most of our viewers are aware that county government is essentially an arm of state government. And there are a number of programs and mandates that were required to implement at this level. We just completed another round of state budget discussions. The governor just recently signed the state budget. What are the implications for Sheboygan County? What are some of the challenges we face as a result of the state mandates? As you mentioned, and we talked about before, the state grants, the Health and Human Service Department, it's a large part of their revenue. Any state mandated programs that they would not continue to fund at a reasonable level would hurt the counties and hurt Sheboygan County. If they expect us to increase our services or even maintain our services, where our costs are going up and not provide additional grant money from the state, we're gonna constantly be up against that situation. And I expect to see some of that happen. Also, with the Medicaid rate setting for the healthcare centers, it's a very large issue. Most of their residents are Medicaid. So that's a big ticket item if they would reduce the rates there. And specifically, one particular example, they just recently increased with a new budget. The juvenile correctional institution rates went up 8.7%. So where their daily rate was 154.08, and this is a rate we have to pay to place a juvenile in a state institution. The rate that Sheboygan County had to pay was $154 a day. And now it's gone up to $167.5 per day. So on an annual basis, it's over $61,000 that we have to pay if we place a juvenile in a state correctional institution. And we have no control over that rate. Those rates, they set them where they wanted to. So that specifically was one area that hurt us with this new budget. That's an excellent example where we work very hard to hold the line, but if they increase something 6, 8, 10%, it puts a lot of emphasis and a lot of pressure on the county board either provide the additional resources or make cuts in programs. Yeah, absolutely. You really have to look at it. If it's not a state mandated program, and I believe this one is, but if it's not a state mandated program, you have to think very seriously, can we afford to keep doing this in Sheboygan County? Is it really something that Sheboygan County can't afford to do? A lot of the services, these are human services, so it's very difficult to cut funding for programs that are benefiting people. But it's something every department has to look at with their budget is, can we continue to afford to do what we do, or can we do it differently and reduce the cost? Excellent, thank you, Tim. Based on our chart, we have been able to control the levy rate, but in the last two years, I'm very close to the process and I know that we haven't just said to our departments, we're gonna freeze your expenses other than salaries. We've asked them to be, like you just said, creative and look at their programs, and maybe a program needs to be discontinued, a new program started, but be creative and more efficient in how they provide their services to the residents of Sheboygan County. Even though we're looking at a flat rate for 2002, are there any programs or anything that come to mind that will be new next year or some projects that we're gonna be working on in 2002, within that 650? Within the six, well, a lot of projects we'll be working on as far as the 650 does include debt service for our current five-year capital plan, and included in that five-year plan for major capital items would be airport improvements in their continuing to prove the hangar areas there, and the runway areas, improvements of the runway, and I think extension of one, relocation of a road, related to extension of a runway. Health Care Center's consolidation continues, and that'll be completed, so that's included in the debt service that we have in the 2002 budget. As you know, health care centers is going from three facilities to two. Been a lot of discussion over that for a number of years as to how to handle that. The plan was to go from three to two and improve the facility at Rocking Hill, so that'll be continuing and finished up in 2002, and then our residents will be consolidated into two facilities, so that's a major project that'll be finishing up. Mechanical improvements to UW-Shabuigan in 2002, there'll be significant dollars put into improving the mechanical HVAC system, et cetera, here at UW-Shabuigan, and in the following year, I believe 2003 is, or 2004 is a science edition, major addition to their infrastructure here. So a lot of things are gonna be happening within the budget that we have set out. And as we talked about earlier in the show, an important part of the budget process is public input. We need to hear from our residents as to the services that they would like to see provided or not provided, so maybe you could just recap just in 15, 20 seconds what the options are for the public to give some input. Sure, number one, attend liaison committee meetings for that if you're interested in a specific department, go to those liaison committee meetings, find out when they are, they're open to the public, go and express your opinion to that committee, because they form the first budget comes from that committee, go to the finance committee meetings. At those meetings you can listen in here with finances contemplating doing with a budget. You won't have a lot of input at that point, but you can hear what's going on and you can get the flavor from the finance committee of what they're doing. Public input is welcomed at the October 30th budget meeting that'd be at 6 p.m. at the courthouse on the fifth floor. There will be a period of time allowed for public input. I'd encourage anyone to come who has an interest. And I also know that at the liaison committee meetings that if you call the chairman ahead, they're willing to put a public address item on the agenda. Good point. Well, thank you, Tim. I appreciate it. Through a lot of numbers out at everybody, I don't know if they're gonna remember them all, but at least they'll understand the process a little bit better. Next month we'll be having Joye Schneider, our county information systems director with us. And we'll be talking about her department a little bit and the services she provides, not only to the residents, but to the other departments as you do it in the finance department. So we thank you for viewing. And we'll see you again next month. Thank you.