Burleigh County To Form Home Rule Charter Commission to Address Budget Shortfalls
Previous county commissioners and county staff have led to a situation where the county's reserve funds will be drained in the next few years, and a solution will be needed to fix the budget.
Since the November election, newly elected Burleigh County Commissioners have been saddled with figuring out what happened last year during the budget approval process. This budget situation was first exposed back in January when the commission held a questionable meeting to disclose the fact the county simply did not have the money to do the full renovation it planned for the Provident building in downtown Bismarck. At the time, I had placed a request with the Attorney Generals’ office to look at that meeting
That request was acknowledged on February 15th as received. No results have come from it yet.
Since then, I have been working with Burleigh County Commissioners to come to a full detailed explanation has been difficult due to turnover in staff, and a lack of good record keeping. (For the record, the commissioners I have talked to have been very cooperative, mostly because they themselves wanted more clarity on what really happened.)
In March, I asked the following questions of county staff:
Related to revenues, two explanations have been circulated (by separate county commissioners):
1. The budget shortfall was due to improper estimation of revenues.
2. The budget shortfall was due to improper reconciliation of sales tax revenues/outflows related to the bonded debt payments on the jail bonds.
Related to financial control, two claims have circulated (by separate county commissioners) :
3. The county commission did not realize that reserves would need to be tapped to "balance the budget".
4. Decisions were made by former staff to move money from the reserve fund to the general to "balance the budget" without the awareness or explicit approval of the commission.
The last written explanation I received attempting to close the book on this discussion was from the current Deputy Finance Director for the county (who was not in that role last year at the time of the troubles):
Related to the Revenues:
Upon Clyde Thompson and I coming into the Finance Department in November of 2022 we did a comprehensive review of the approved 2023 budget. What we could not locate was the Estimated 2023 Revenue Budget by department that was used to establish the budget. We found some work papers that we believe were utilized and those papers had the estimated tax revenues higher than what the Final Mill Levy Calculations were.
At that point we decided it would be best to start over on Revenue calculations for 2023 rather than try to use partial information and the fact that we were not sure if that was the information that was utilized by the former Finance Director. On January 13, 2023, we gave a brief update of General Fund estimated revenue for 2023 of $25,547,200. Since then, we have spent substantial time and effort fine tuning that. At this point we believe a more accurate number is $27,562,400.
At the January 13, 2023 meeting I pointed out the fact that since we were utilizing reserve funds for the 2023 budget that it may be best to put a hold on any remodel or building discussions until the County had more time to do a full review of our total financial picture and plan on how to avoid utilizing reserve funds at as high of a level for future years. It was pointed out at that meeting and future meeting discussions that no money was missing, simply that we wanted to make sure that all current commission members were aware of what was approved for the 2023 budget and how that will impact future years.
The Burleigh/Morton Detention Center Bond payments and Sales Tax collections were not related to the 2023 Budget. The only issue there is that the sales tax collections were being receipted in monthly which overstated our Cash Balance. Since the sales tax collection and bond payments are both handled by the Bank of ND the County should not have receipted those funds. We are working with the State Auditors Office on how to make our adjusting entry to remove those receipted funds and going forward they will not be receipted. This did not have any impact on budgets, but simply showed an incorrect Cash Balance related to the Detention Center Bond.
Related to Financial Control:
In reviewing commission meeting recordings, we did find where the previous Finance Director did inform the Commission that Reserve Funds were being used in the 2023 budget. I believe there was some clarity that could have been given to make sure the Commission understood how much and what the future impact of utilizing reserve funds for ongoing expenses could and would be. Since neither Clyde nor I were part of the Finance Department at the time of budget approvals we cannot speak any further to the specifics of any conversations.
More recently, County Commission Chairwoman Becky Matthews (who has been extremely cooperative in this ordeal) responded with the following statement:
I discussed this response with Justin Schulz and Mark Splonskowski. I felt I personally needed to send you this response since out of the three of us I was the only one involved with the 2023 budget cycle. I,, in addition to you, have had questions and have meet with the State Auditors office regarding our 2022 audit and findings. I have gone over the financial information several times with Mr. Schulz and Mr. Thompson.
In December of 2022 the former finance director, resigned due to performance issues with the county. Mr. Thompson and Mr. Schulz soon stepped in to take over the financial responsibilities the former finance director held. During that time, they discovered that a number was used for budgeting that provided an inflated revenue for tax collection in 2023. Second, they discovered an unsustainable use of reserve funds to cover the 2021, 2022, and 2023 budgets.
With all my discussions noted above, there has never been any money missing, any wrongdoing, or any coverup. Poor financial decisions were made regarding the use of the reserve fund by the county staff and commissioners involved. I hope this provides clarity to the financial issues and questions you had.
I have also spoken with State Auditor Josh Gallion about getting to the bottom of this situation in the next audit of the county. As of February, Gallion had stated he expected this audit to start sometime this summer.
Tax Hikes Likely Coming, Due Diligence On Spending Needed
In the video at the top of this message, you will see the conversation that county commissioners had during the last two meetings where they discuss what to do about the budget shortfalls going forward.
Luckily, the county was well positioned with a $17 million surplus cash reserve going into the 2023 budget - however, with a projected shortfall of $5 million each year, including the current already-passed 2023 budget, that surplus will only last just over three (3) years, including the current budget year.
Last week, the Burleigh County Commission decided to create a new Home Rule Charter Commission to discuss the possibility of using sales tax to close the budget gap in future years - as an alternative to increasing the property tax mill levy by at least 10 mills.
The current half-cent sales tax for paying off the county jail is set to expire at the end of 2024. It currently brings in roughly $10 million per year.
From a strict math standpoint, extending the existing sales tax would eliminate the need to increase property taxes, fix the budget shortfall, and leave enough left over to reduce the mill levy by about 8 mills. That reduction could be more if there are savings to be found on the spending side of the ledger.
There are also discussions being had to add a second half-cent sales tax to possibly reduce property taxes further. A dedicated half-cent to remove the on-going operations costs of the county jail and the Sheriff’s Department would allow for the county mill levy to be reduced by another 15-20 mills.
If there is to be an extension or expansion of the sales tax, ideally 50-80% of the new revenue could go toward permanently replacing line-item expenses that are currently covered by property tax revenue.
Burleigh County residents need to keep an eye on this topic, and can apply to be on the Home Rule Charter Commission by filling out this form and sending it to the county auditor. (I have already personally applied, as was discussed at the last county commission hearing.)
Burleigh County To Form Home Rule Charter Commission to Address Budget Shortfalls