Aiken County’s Fiscal Year 2016 end of year financial report paints a mixed picture. While the combined balance across all funds grew roughly $20 million during the fiscal year that ended on June 30 – a healthy increase by any measure – the financial path forward remains perilous.
The general fund, or what the annual audit calls the “operating fund,” posted a $5.3 million surplus. Though the $62.1 million in actual revenues during FY16 lagged behind the $63 million in budgeted revenues, the actual expenditures of $56.8 million fell well below the $63 million in planned spending.
General fund expenditures were $1.6 million under budget for personnel costs, $4.3 million under for operating costs, and $300,000 under for capital outlays.
Note that these General Fund numbers are preliminary. The county’s books are still being closed, and the posting of accruals and interfund transfers will change the numbers slightly.
The final surplus in the general fund will be around $5 million. This will increase the general fund balance from $14.2 million a year ago to approximately $19.2 million today. The general fund has finally recovered from the massive, unbudgeted Winter Storm Pax cleanup costs incurred in 2014.
What about the other $15 million of positive growth in Aiken County’s fund balance? Much of it is temporary and meant to be spent down eventually.
Fund 514, which contains the general obligation bond issued to repair the Langley Pond Dam, grew from zero to $9.6 million. It will drop back towards zero as the dam is rebuilt.
Likewise, Fund 413 Sales Tax Referendum 3 grew by $7.7 million, from $15.3 million to 23 million. This fund supports the projects planned under Capital Projects Sales Tax 3, passed by Aiken County voters in 2010. This fund will be liquidated as the list of capital projects is completed.
Several funds shrank in FY16. Fund 410 Sales Tax Referendum, covering the Capital Projects Sales Tax 2 as passed in 2004, dropped by $2.6 million from $15.2 million to $12.5 million. No new revenues are flowing into this account, and the remaining projects funded by these sales tax revenues are working towards completion.
More troubling is the $500,000 reduction in Fund 507 Debt Service. This fell from $5.5 million to $5 million. Simply put, the Aiken County Council hasn’t raised enough revenue to cover all of its annual debt service.
Instead, it’s made a conscious decision not to raise taxes, and instead is covering part of its existing debt service with this fund balance. At the current rate of depletion, this fund will be exhausted in another 10 years.
So among this reasonably good news, where’s the peril? About $4.7 million of last year’s General Fund revenue was one-time, or non-recurring, revenue.
This included $3 million transferred from a closed debt service fund and $1.7 million from the S.C. General Assembly for Winter Storm Pax reimbursements.
Without this non-recurring revenue, the general fund balance wouldn’t have grown by $5 million. Instead, it would have remained essentially unchanged with a negligible $300,000.
So while Council can pat its collective self on the back for restraining last year’s spending, the growth in the fund balance was from one-time fiscal shots in the arm.
And this dependence on non-recurring revenues carries into the FY17 budget. As passed by Council in June, this year’s general fund budget includes $1.2 million from the general fund balance, $600,000 from raiding the other post employment benefits, or OPEB (retiree medical) fund, and $500,000 from selling the county owned Teledyne Building in the Verenes Industrial Park.
This reliance on ad hoc funding schemes is unsustainable. In 2018, there’ll be no more OPEB to raid, no more Teledyne Building to sell, and no more Winter Storm Pax reimbursements. Sooner or later these expedients will run out. Then what?
Meanwhile, County employees will endure another year without merit increases or cost of living adjustments. The impact on morale and turnover is all too predictable.
But Council will take action only when it’s pushed against the wall. It’ll have four options: hope for accelerated growth in recurring revenues, continue drawing down fund balances, cut spending or raise taxes.
Council will neither raise property taxes nor seriously cut spending. The fund balance can be raided for only so long. And regarding revenue growth, hope isn’t a strategy.
An aggressive, fiscally conservative strategy is needed. A smaller, better paid work force is imperative. Both taxpayers and county employees will benefit. But who on the Aiken County Council will champion this long overdue course correction?
Gary Bunker is a former member of Aiken County Council.