File Photo Kim Ludlow

ALPENA — Another large budget shortfall looms for Alpena County for the 2023 fiscal year, and, like its current budget, the Alpena County Board of Commissioners may rely on a portion of the $5.5 million it received from the American Rescue Plan Act to lower it.

It will be up to the board of commissioners to lower expenses in order to better align the county’s costs and revenue.

How the county will address large budget deficits when the ARPA funds are gone has yet to be determined, but if the deficit trend continues, the board may be forced to further dip into its fund balance.

County Administrator Mary Catherine Hannah said the county is healthy financially, but said finances are being propped up somewhat with money from the federal government and other non-traditional revenues.

She said steps are already being taken to cut expenses, which includes better maintaining facilities and equipment. Hannah said it is imperative to look ahead several years to try to project what revenues and expenses may be, so a plan can be implemented before the ARPA money and other funding sources the county now receives temporarily dries up.

“Long-term forecasting and long-range planning is key to making good fiscal decisions,” Hannah said. “If we can forecast out two, three, four years, and get a handle on when those extra funds rub out and our piggy bank runs dry. That helps us to be aware of what we can do in the meantime to prepare for it.”

According to Treasurer Kim Ludlow, the general fund budget shortfall for this year is about $1.2 million and is expected to balloon to about $1.6 million. She said $500,000 could be shaved off the shortfall before the end of the year, if spending is limited.

The commissioners are also considering using $800,000 in stimulus funds to drive the shortfall lower.

Ludlow said that would likely leave a budget shortfall between $300,000 and $400,000. She said the ARPA money only helps prevent the inevitable — having to make large cuts when the stimulus money is exhausted and the budget shortfall is large.

Ludlow said if the county begins to use $800,000 a year from its savings — like it currently does with ARPA funds to offset deficits — after the stimulus funds are gone, the savings will drop quickly.

She said if financial issues aren’t addressed soon, the county could be at the mercy of the state government for help.

“When that emergency money is gone, our fund balance can only drop so low and then the state will come in and take over for us,” Ludlow said. “What are the commissioners going to do when the ARPA money runs out?

The commissioners have considered seeking a small millage to make up for the revenue the county loses from the Headlee Rollback, which could mean about $700,000 in additional tax money for the county.

That is still less than what the county currently uses in ARPA funds to keep the deficit as small as possible.

Headlee requires a local unit of government to reduce its millage when annual growth on existing property is greater than the rate of inflation. As a consequence, the local unit’s millage rate gets “rolled back” so that the resulting growth in property tax revenue — community-wide — is no more than the rate of inflation.

A Headlee override is a vote by electors to return the millage to the amount originally authorized via charter, state statute, or a vote of the people and is necessary to counteract the effects of the “Headlee Rollback.”

Ludlow said if the voters pass a higher tax to make up for what is lost from Headlee, the county won’t be much better off if cuts aren’t also made.

Hannah said the county is facing the same issues as households and businesses nationwide — costs are going up and revenue is shrinking. She said if more revenue streams aren’t found, cuts in services may be in the cards.

Hannah said law enforcement and reduced hours of operation could be considered examples of potential cuts — but only as a last resort.

“We are statutorily required to provide a jail, but we can get around that with contracting, which is how some of our neighboring counties have done it,” she said. “The downside of it is downsizing the number of deputies and road patrol. That’s not a great option, and we don’t like it, but it is something that has to be discussed.”

Hannah said if a tax hike is on a future ballot, ultimately voters will decide the fate of what the county can and can’t afford.

“If the citizens of the community are not willing to increase the revenues for the county, then we have to think about how we decrease expenses and that is going to be people and services,” she said.

Ludlow said department heads are sorting through the costs and revenues and will present them to Hannah. Ultimately though, it will be up to the board of commissioners to decide what, if any cuts are made, and what money will be spent on next year.

The first budget workshop for the county is slated for Oct. 11.