Long before Sept. 11, the fiscal outlook for many states was grim and counties began preparing for the budgetary repercussions. Then, factor in the terrorist events of September and the fallout, and you get what Tennessee Gov. Don Sundquist dubbed the “perfect storm” of economic factors.
With at least 36 states implementing or considering budget cuts or holdbacks to address fiscal problems, county governments are suddenly faced with decreased, or in some cases, eliminated funding from states.
When the state’s budget projections began faltering, Ashtabula County, Ohio commissioners approved a temporary budget in late 2001 that allows the county to continue paying its employees and keep the lights on until the end of the first quarter, but the permanent budget isn’t expected until late February.
And when that final budget does arrive, county commissioners are prepared for many to be unhappy with the results because of major cutbacks.
“This isn’t the first time the county has passed a temporary budget, but recently we’ve worked to pass permanent budgets,” explained Deborah A. Newcomb, county commission president. “But because of changes in revenue projections from the state, we decided to pass the temporary budget until we got a better idea of how we faired on the state level.”
The biggest hit Ashtabula (pop. 102,728) has taken so far is in their welfare-to-work programs. The state of Ohio diverted TANF funds causing the county to eliminate innovative programs they had just started such as in-school programs with at-risk teenagers.
“Our goal is to be able to at least maintain what we’re doing now,” Newcomb said. “It was a good feeling to be creative and implement these new programs, but now it’s about maintaining what we can.”
In Knox County, Tenn. (pop. 382,032) the county felt the statewide budget crunches long before Sept. 11. Since 1997, the amount of money the county receives from the state has decreased from 45.2 percent to 40.4 percent.
“It’s a formula driven funding system,” explained Kathy Hamilton, the county’s director of finance and administration. “But if the pot that’s being divided was growing more, we feel like we wouldn’t be in this situation.”
And the situation Knox County is in is indeed troublesome. Hamilton said the county relies on many reimbursement-based grants from the state and worries the money from these grants will be spent long before the county receives notification from the state that the fourth quarter payments will not be available.
The state has also cut funding for certain programs, such as the statewide inter-library loan program based in Knox County. Hamilton said that while the county appreciated the importance of this fairly long-running program, they didn’t feel that the local funds were available to make up for the lack of state funding.
Further complicating matters for Knox County is its reliance on sales tax. Twenty-three percent of the county’s budget comes from sales tax and when people aren’t spending, the county is not making money.
“I think we have a concern here in Tennessee that we could have a couple more years of problems,” Hamilton said. “So much of our state budget is made up of sales taxes and in addition to the problems with our economy, we’re also very aware to the whole Internet sales issue. We’re fairly exposed and we’re not that hopeful.”
And for some counties, particularly the smaller, more rural counties, the uncertainties of the state budget woes are simply too abstract to consider until states either ante up, or not, the money promised through grants.
“We’re not really sure how this is going to affect us,” explained Ted Lasley, Bacca County, Colo. commission chair.
Lasley said the county (pop. 4,517) continues to operate under the notion that the monies promised will arrive, but is also keeping an eye on ways to keep the county fiscally stable through the crisis.
Even though the need to cut or scale back some programs has arisen in counties nationwide, most county leaders are looking internally to make up for the shortfall.
“We’ve offered early buyouts and asked our department heads to tighten their belts so to speak,” explained Newcomb. “What we’re doing is looking at where we’re going a little more cost effectively. We don’t want the budget woes to affect the people.”
And while the short-term outlook is indeed grim experts say, long-term, states and ultimately county governments are in a much better place than they were during the recession 10 years ago.
“I’m trying to be optimistic,” Newcomb said. “I’ve been through these downturns before and we’re better prepared and we’re continuing with our economic stimulus packages that we’ve offered and we have some big projects that we’re still going through with. It’s just a matter of tightening our belts for the time being.”
