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County facing funding puzzle

Wheeler tries to make cuts as gap between revenue, services grows

When newly elected Multnomah County Chairman Ted Wheeler released his first county budget last April, he proposed $15 million in cuts, calling it “one of the largest single-year reductions ever taken by a local jurisdiction in Oregon.” But most of those cuts never happened. By the time Wheeler’s inaugural budget was sliced and diced and approved by county commissioners in June, the net cuts for 2007-08 amounted to $1.8 million. Now Wheeler is readying his second budget for release April 17, and he’s again pledging to get the county’s fiscal house in order. Wheeler, who entered local politics in 2006, once wrote a book on model government practices. He is intent on shrinking the county’s ongoing funding gap, often dubbed its “structural deficit.” Property taxes and other ongoing county revenues don’t cover the costs of its ongoing services, which range from public safety and mental health programs to animal control and libraries. For the 2008-09 budget year that begins in July, the funding shortfall amounts to $18.7 million, a hefty chunk of the current $368 million general fund. Wheeler said at last week’s county board of commissioners meeting that his 2008-09 budget “will take $20 million in cuts out of current operations.” Turning to Multnomah County Sheriff Bernie Giusto, who was seeking additional money from the current budget, Wheeler said, “Along with everyone else in this room, you’re going to be taking a haircut.” Balancing the budget will be challenging for the novice politician, because a slipping economy is trimming tax revenue while inflation is elevating costs more than expected. Wheeler also has talked of opening the built-but-never-operated Wapato Jail, one of his campaign pledges. That could require more cuts. In an interview, Wheeler said his priority is putting the county budget on a sustainable path, by again trying to shrink its long-term funding gap. The county was blessed with higher-than-expected property and business income taxes this year, before the economy slowed. That, plus unspent reserves, is expected to provide $35 million in “one-time” money for 2008-09. “We’ll take a majority of the one-time money and use it to pay down our debt,” Wheeler said. That would reduce the county’s ongoing funding shortfall, he reasoned. Opening Wapato also would likely require “some use of one-time money,” Wheeler said. But he stressed the need for patience in opening Wapato, to make sure ongoing funds are available to cover jail operations. Getting his way in the 2008-09 budget deliberations could be just as elusive this year as last year, particularly Wheeler’s insistence on using one-time money to shrink the funding gap rather than spare current programs. Last week, Wheeler was on the short end of a 4-1 vote to grant Giusto more money to reduce the backlog in unserved arrest warrants. Wheeler warned that money is tight to be expanding that program now, but he lost that battle. And this spring’s budget deliberations will be the last time around for three of the four other county commissioners, who aren’t running again and leave office midway through the 2008-09 budget year. The three commissioners all have been around awhile, and have their own spending priorities they will fight for, said Commissioner Lisa Naito, speaking of herself, Lonnie Roberts and Maria Rojo de Steffey. Naito isn’t so enamored of using one-time money to pay down debts and shrink future deficits. Getting new revenue sources may be the key to the county’s long-term fiscal stability, she said. “I think a revenue discussion needs to be on the table, not only a cut discussion,” Naito said. She said the county could lobby the Legislature to eliminate “pre-emptions,” state laws that bar local governments from levying some taxes. Naito noted that the current commissioners weren’t bashful about seeking new revenues during the last recession, when they endorsed a three-year income-tax surcharge. That provided $32 million a year for county services, limiting cutbacks during the recession. The county never has made enough cuts or raised other revenue to replace all that money, partly explaining the current shortfall, said Karyne Dargan, county budget director. The biggest concern among county leaders and budget analysts is that the dominant revenue source for the county general fund — property taxes — doesn’t keep pace with the dominant county expense, employee salaries and benefits. Voter-approved tax limitations prevent taxable property values from rising more than 3 percent a year, and much of the new construction in the county has been in Portland urban renewal districts that are kept off the tax rolls. The county expects property tax collections to rise 3.5 percent in 2008-09, said Mark Campbell, deputy budget director. But employee health insurance costs are pegged to rise 9 percent, he said. Employee salaries tend to rise along with the rate of inflation, as unions negotiate cost-of-living adjustments. The projected inflation rate for next year is 3.8 percent, said Bill Farver, county chief operating officer. The economic downturn is projected to thin other major county revenue sources. Business income taxes are expected to rise 2.5 percent next year, Campbell said. County real estate recording fees also are slipping because of the real estate slump. County commissioners expect to approve the final 2008-09 budget in June. This email address is being protected from spambots. You need JavaScript enabled to view it.