FAYETTEVILLE — Last year’s lofty revenue projection for Washington County is coming up short and tough economic times are hurting next year’s budget requests and cash reserve.
Washington County’s 2009 projection shows revenue on just two items — sales tax collection and interest income — is expected to come up more than $2.3 million short. Officials are taking a more conservative approach for next year, budgeting no sales tax growth.
Washington County Treasurer Roger Haney said Thursday he is projecting the county’s general fund will end the year with almost $19 million in unappropriated money, or carryover. That’s more than $3.6 million less than last year, according to Haney.
Last year’s Quorum Court approved the 2009 budget expecting 9.1 percent growth in sales tax revenue for both the county’s general fund and road and bridge fund. The jail fund budgeted sales tax growth of 5.8 percent.
Collection of the countywide sales tax through October is down 3.7 percent. As a result, the county’s sales tax revenue this year is expected to miss the mark by about 11 percent or $1.6 million, according to Haney.
Haney said he’s not sure why so much growth was projected in sales tax last year. He said he’d have budgeted for flat growth.
Officials planned for nearly $1 million in interest income in 2009, but is expecting to collect about a quarter of that. Haney said banks will pay little for deposits this year. Bankers said because loan demand is so low they don’t need more deposits, they’ve got more than they need.
Cities more cautious
Fayetteville and Springdale officials were more cautious than the county in projecting sales tax growth. That’s good because cities rely more on sales tax collection than counties.
Springdale projected a 7.6 percent decline in sales tax and collection is down 8 percent through October. The city is on track to come within about $34,000 of its projection on its 1 percent sales tax, according to Wyman Morgan, the city’s director of administration and financial services.
Fayetteville budgeted sales tax growth of only one-half percent and revenue through September is down about 5 percent, said Paul Becker, the city’s finance director. He expects the city to come up nearly $900,000 short on its 1 percent sales tax collection — about 5.4 percent less than budgeted.
Battle Brewing
The Quorum Court has not yet approved the 2010 budget, but drafts include no sales tax growth next year and 2 percent raises for county employees. Officials expect a heated discussion over the proposed raises at Tuesday’s budget committee meeting.
The county has adequate money in reserve to make up for this year’s revenue shortfall and to pay for modest raises next year, said Dan Short, Washington County chief of staff. He believes raises are necessary to retain the county’s most valuable resource, its employees.
Once the economy turns around, employees will start looking for better paying jobs elsewhere if the county doesn’t keep its pay competitive, he said.
Two Republican justices of the peace from Springdale said after Thursday’s Quorum Court meeting they do not believe raises are necessary or affordable now.
Micah Neal said he’s not against employees getting raises, but it’s not prudent to approve them during hard times when businesses are struggling to stay open. No one is getting raises in this economy except government employees and teachers, he said.
He said he’d rather budget raises to be paid as bonuses later in the year if conditions improve.
“If (the economy) does not turn around, we are in trouble,” said Rex Bailey. “That’s why we’re voting against this budget.”
Steve Zega of Fayetteville, budget committee chairman, said he expects the budget to pass with raises. He agreed with Short that the county can afford modest raises.
“Same as last year,” Zega said.
The budget includes no big, new spending plans, officials said.
The county budget includes three parts — the general fund, road fund and jail fund.
Revenue from the general fund can be transferred into the jail or road fund, but money cannot be transferred from jail and road funds to the general fund, Short said. The general fund includes most of the revenue and expenses and it has the most carryover.
When the general fund faces budget pressure, it limits the ability to transfer money to the road or jail funds, Short said.
Short said the road and jail budgets are hurt the most when sales tax projection falls short.
“We are just going to budget the same as last year,” said Shawn Shrum, assistant road superintendent. “We’re carrying on as normal.”
Short said if revenue comes up short, the county may have to postpone road projects.
The proposed jail budget for 2010 is slightly less than this year’s and includes no new positions, said Chief Deputy Jay Cantrell.
“We submitted a bare bones budget,” Cantrell said. “We have not implemented a freeze on hiring yet.”
The jail has been fortunate in recent years because the quarter-percent jail tax and other revenue have paid for operations without requiring help from the general fund, but that could change next year, officials warned.
“Remember the (jail tax) was never sold as a self-sustaining revenue for the jail,” Cantrell said.
Coming Woes
Short said he’s not worried about the 2010 budget, but tight budgets are coming in the future.
Officials said the county’s portion of the 1 percent countywide sales tax is expected to drop from about 23 percent to 17 percent in 2011, based on the Northwest Arkansas Regional Planning Commission’s estimate of the 2010 Census. That’s going to have a bigger impact on the county’s budget than this year’s reduced collection, officials said.
Both Haney and Short warned the county’s property tax revenue will also begin to fall in 2011, 2012 and beyond as lower property values are reflected in lower assessed values.
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