In years past, County Commission oversight of the budget has been about as useful as a baby-changing table in a men’s restroom—an idea more enjoyed in the abstract than having any practical application.
Commissioners have been repeatedly stung in recent months when raising questions about spending by County Mayor Mike Ragsdale by his constant reminder that, “You voted for the budget.”
There is nothing so arcane as a government budget. They run to hundreds of pages. They are different from a P & L statement by a private business. The revenue coming in to the county fluctuates wildly, depending on the time of year. But the county has fixed costs month after month—like payroll and gasoline for sheriff’s cars. Matching up the revenue to the expenses in a government budget is often a crap shoot. You spend money for six months in the expectation the revenue will be there, when property taxes are paid.
So you leave a healthy reserve in the county’s accounts to cover day-to-day expenses. That’s where the fund balance is so important. It’s like the balance in your checking account. You have checks you mailed to Kalamazoo and they will be coming through next week. You have an insurance premium due next month. But in the meantime, you can go to Aubrey’s and have dinner on the debit card, because the money is still in your account. If you are smart you leave a little extra in the account to cover situations like this—a fund balance to cover you until next payday.
Knox County took money out of the fund balance last year to cover shortfalls in a budget that many people believe to have been smoke and mirrors. Commissioners are worried the same thing is going to happen this year, leaving the county in a bind in the middle of the budget year.
The county budget this year is getting more scrutiny than ever before, not just by Commission, but by citizens who are finding it more fun than The New York Times crossword puzzle.
We’ve had the recent example of a state budget getting slashed. There is a great deal of skepticism regarding the Ragsdale budget which proposes no property tax increase and a six-month hiring freeze to cover increases.
A couple of points repeatedly raised need explanation.
Commissioners inclined to support the Ragsdale budget point out that bond-rating services have not raised any questions about Knox County’s growing debt burden, indicating there must not be a problem.
The bond rating services have as their function to determine whether the debtor can pay back the debt. Until Ragsdale came along the county has had little debt, and compared to other metro areas, the county property tax rate is not onerous. The bond rating services see that the county can pay back the bonds—they could merely institute a 75-cent property tax increase. They don’t see a problem—though you might not think it’s good public policy. It just means the county has the power to tax and the power to raise the revenue to pay off the bonds.
It really isn’t the concern of the bond rating agencies whether you like or don’t like a hefty property tax increase down the road when balloon notes come due. Their sole concern is whether you can come up with the money.
Citizen auditors, empowered by the Internet, have raised a question about some $50 million in county debt that is in “interest-only” bonds. No payment is being made on the principle.
Government finance experts tell me interest-only bonds are not that unusual and can be beneficial. You pay interest only until you re-finance another bond issue, then you fold it into one debt—make one payment. Or you are waiting for rates to come down before you commit to a long-term bond issue.
But it again comes back to trust. Some County Commissioners (and citizens) do not trust the Ragsdale administration. They feel the interest-only bonds are a stratagem to defer spending to the next administration.
Perhaps commission needs to call in former Commissioner Frank Leuthold, the budget hawk of yesteryear, and find out what the real situation might be.