Predicting the Future

It's budget time again, and assembling any budget is an exercise in predicting the future. In Otsego County, the future – specifically, 2014 – will present some interesting changes, which will make our budget-making task both easier and harder.

The 'easier' part is that we'll be seeing some one-time revenues, and we'll see some major costs disappear permanently. The disappearing costs will disappear when the Manor is sold; we're hoping that this happens during 2014. The process is moving well, and this may come to pass. We will spend about five million dollars on the Manor this year – that's above and beyond all reimbursements the Manor receives from Medicaid, Medicare, private pay, etc. They are taxpayer dollars subsidizing the Manor, and next year it will probably cost more.

We won't save the whole five million-plus next year; just the part of it we would have spent after the day that it is transferred to the new owner. In addition, there will be savings from services the county provides – building maintenance, payroll, IT – which won't need to be provided any more. There will be some legacy costs – health insurance for retirees, interest on the bonds, for instance – but the fiscal difference will be enormous.

Interestingly, the actual payment we receive for the Manor will not have as massive an effect on the budget as we might think. At the end of 2014, we will owe a little more than 15 million dollars on the original bonds that funded the Manor – our mortgage, so to speak. No matter how much we sell the Manor for, we will be required to put that 15 million-plus into escrow, and we will pay the yearly principal from that fund, until 2021, when we can pay it all off if we desire. Until then, we'll pay the interest from the general fund. If we sell the Manor for more than what we owe, that excess is ours to put into the financial system. But we're not planning for that, because it is too soon to estimate what we might get when the Manor is sold.

The one-time payments involve MOSA. When MOSA is dissolved, the assets will be split up. Otsego County will, by agreement, get 40% of the liquid assets (things like equipment and real estate will probably be distributed by common sense, rather than percentage). Depending on how we progress with solid waste in our County, this money may or may not have a significant effect on our finances next year.

The 'harder' part, of course, is that we don't know how any of this will shake out. The current version of the budget does not reflect any of this: revenue projections don't include the MOSA money, and the expense side includes the whole-year cost of the Manor. However, Acting Treasurer Russ Bachman has recommended that we essentially skip the grueling work of cutting positions and services to get to the point where we're under the tax cap (1.66% this year, not 2%) and have about 16% of the budget in the fund balance. He's willing to move some money from the fund balance to make up the current deficit (which changes every day as adjustments are made), assuming that, because of the Manor and MOSA issues, we'll have a surplus at the end of next year.

That's a risky approach, and the Board is mulling it over; in some ways, it sounds like magic. And the NYS Comptroller's office, which is measuring the fiscal stress of municipalities, will take notice of this reduction in the fund balance, because that's the kind of thing they take notice of. However, if everything works out, this will be a very temporary thing, and all will be well at the end of 2014.

If everything works out. Even though the vectors of unpredictability are generally good, it's making me a little uneasy to predict the future with these loose cannons involved. Sometimes, unremitting bad news can be comforting, because it's so predictable. 

UPDATE:  After I finished this post, I went over to the Daily Star site and read this article about Treasurer Russ Bachman's suggestions.  Nothing much to add to this, except that the raises for the non-unionized managerial and confidential staff (M&C) will be more controversial than dipping into the fund balance.  I'm for it - they haven't had a raise in years - but I have to be a little more convinced that the money is - and will be - there.  We'll see.