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County projects $1.4M deficit

Doubled pension cost, other issues push up shortfall

News Photo by Steve Schulwitz Alpena County Treasurer Kim Ludlow on Friday shows off the draft 2020 Alpena County budget that will be combed through by the county commissioners. Ludlow said early numbers show a possible $1.4 million deficit, but she added there are things the board can do to lower that amount significantly. The county’s first budget workshop is Monday at 1 p.m.

ALPENA –When the Alpena County Board of Commissioners begins its 2020 budget process in earnest on Monday, commissioners will see preliminary figures showing an eye-popping$1.4 million deficit.

County Treasurer Kim Ludlow said that gap between revenues and expenses can be reduced, depending on what the commissioners choose to fund and at what level. She said there are several things that stick out in the draft budget, including $933,354 budgeted for the annual pension contribution into the Municipal Employees Retirement System of Michigan.

Last year, the county paid $484,113 toward its unfunded pension liabilities, but MERS says the county should pay about $1 million for the next decade to catch up.

The county is 62% funded, meaning that, if all retirement benefits were claimed today, the county could only pay about six in 10 of its retirees. The county is about $8.9 million away from being fully funded.

Actuaries factor in the amount of benefits earned, benefits that could be earned, average lifespans, the stock market performance, and other factors to determine pension debt. Governments’ debt and annual costs have climbed in recent years as pensioners live and claim benefits longer.

Ludlow said county commissioners could choose to pay the recommended amount toward pensions or scale it back to reduce the county’s deficit.

Also contributing to the 2020 shortfall was the news earlier this year that the county had lost the contract to provide security at the Alpena Combat Readiness Training Center.

Currently, about $500,000 remains in the base security fund, with an additional $300,000 in payments expected. But that amount needs to be set aside for things like unemployment claims and paid time off by base employees.

Normally, commissioners take $100,000 from the proceeds of the contract and use it in general fund. Ludlow said they may or may not elect to do so again.

Ludlow said it is important for people to remember that all of the numbers in the draft budget are preliminary and the deficit could be reduced.

“It depends,” she said. “The commissioners could decide to pay what they put toward MERS last year or still add the $100,000 from the base security fund. That would be a $500,000 swing, right there. It all depends on what way the commissioners decide to move forward.”

Ludlow said the county tends to budget expenditures on the high side and, in years past, has ended gloomy-looking fiscal years with a surplus.

“They will budget salaries for positions that are vacant, in case they decide to fill them, but that hasn’t really happened,” Ludlow said. “Often, we really never spend that money.”

Ludlow asked the board to use a five-year average for revenues and expenses so there aren’t such big swings in the budget throughout the year. It is not uncommon for the budget to be hundreds of thousands of dollars in the red at the start of the year but come out well into the black at year’s end.

In 2016, for example, the county added $415,000 to its cash savings. It added $108,000 in 2017. Last year, it was $30,141 to the good. Deficits were projected at the start of each of those years.

Ludlow said that trend shouldn’t be considered a given this year.

A municipality can run a budget deficit if there is enough money in its cash on-hand account to make up the shortfall. Ludlow said the county’s current fund balance is $5.2 million.

The county will host a budget workshop at 1 p.m. Monday and commissioners will begin sorting through the department’s proposed budgets and debating what to leave in, what to remove, and how much money to allocate to various programs.

The meeting is being held in the Thomas Male Conference Room in the county’s annex building on Chisholm Street.

Steve Schulwitz can be reached at 989-358-5689 at sschulwitz@thealpenanews.com. Follow him on Twitter @ss_alpenanews.com.

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