Beaufort County administrators are taking steps to avoid a budget deficit this year, which could draw down reserve funds by as much as $2 million if unchecked, according to financial forecasts.
County administrator Gary Kubic said he is limiting employee travel and purchases by county departments. More painful cuts may be on the way.
"We're rapidly putting together a strategy so that we do not use any of the reserves," Kubic said. "I didn't want to, but a layoff or a reduced work week is now on the table for me."
Two months remain before the fiscal year ends June 30, and if financial trends continue on course, the result could be a $1 million to $2 million deficit, which would shrink the county's emergency financial cushion.
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At the end of last year, the county's general fund held a balance of about $18 million.
County officials keep that money in reserve to use in case of a disaster, such as a hurricane. Bond ratings -- which determine interest rates when the county borrows money -- are also tied to a healthy reserve.
Staff would like to preserve and ultimately grow this reserve. But the sour economy has reduced tax revenue.
Last fiscal year, $2.7 million was spent from reserve funds.
This year's revenues and expenses are taking a similar track.
"We are literally on par with where we were last year," said county chief financial officer David Starkey.
Deputy county administrator Bryan Hill said declining revenue is caused in part because many homes once classified as second residences and taxed at a 6-percent rate have been re-categorized as owner-occupied homes, which are taxed at a 4-percent rate.
Tax revenue is also coming in more slowly.
"What is happening on a real-time basis is that collections are being extended beyond a 12-month period because people are paying their (property) taxes later," Kubic said.
Foreclosures and appeals on assessments also can tie up revenue or force adjustments to it in the future.
And any growth the county sees is "eaten up" by these factors, Starkey said.
"We're really -- until the economy improves -- just treading water at this point," he said.
County staff have proposed budget cuts and had hoped to implement some by May 1. Proposals have included reducing hours at libraries and solid-waste convenience centers, closing one of the county's four swimming pools, and shuttering two community centers in northern Beaufort County.
Paring back now, two months before the fiscal year ends, could reduce a deficit and eliminate or soften a blow to reserves.
But council members haven't yet approved any of the cuts.
Kubic said he has directed the county attorney to research what budget cuts can be done administratively.
Council does not have a formal reserve balance policy but discussed creating one earlier this year.
A draft policy presented by Starkey would require the county to maintain a reserve balance equal to two months' expenditures, or about $16.7 million, using 2009 and 2010 averages.
By 2016, the requirement would increase to three months' cash, or about $25.1 million.
Kubic said the goal is to leave reserves untapped, since future budgets will probably have to make up for any depletion that takes place now.
"We're doing some math, and we're going to implement some changes," he said. "We may not make our goal, but we're going to reduce the negative impact."