Clinton County Fiscal Court met in special session Monday at noon with all members present and was somewhat reaffirmed by state officials on the critical financial condition of county government.

The just under one-hour session was basically in the form of a budget workshop with two officials–Robert Brown and Matt Frohlich–with the Kentucky Department of Local Government (DLG) in Frankfort.

Frohlich opened the discussion, telling the court that “by law, you (county) must have a balanced budget.” He said the current year’s budget, which has been approved by the state finance officer, had no shortfalls at current time. However, the state monitors county budgets, including quarterly reports that are sent to the state and the Department of Local Government had become involved after being contacted by Judge/Executive Lyle Huff and County Treasurer Dallas Sidwell pertaining to the county’s financial situation.

Frohlich said that between 2011 and the first half of 2012, the county had lost about half of its projected revenues and noted the county had “real issues with both receipts and expenditures.” He noted that even if the county could pass a balanced budget for the next fiscal year, he didn’t see how they would be able to at current revenues the following fiscal year.

The DLG official noted such things as excess fees from the sheriff’s office and county clerk’s office being down and the fact that $40,000 had been budgeted to the animal shelter for the entire year, but $28,000 had already been spent from that line item in just the first half of the fiscal year.

Another major concern is the dwindling revenue from carryover, or funds the money has on hand from one fiscal year to the next. For example, in 2010, the county had $700,000 in carryover funds, which dropped to $290,000 in 2011 and was only $116,000 for the current 2011-12 year. “If you continue at this rate, the carryover will be at zero,” Frohlich said.

He also noted that the county basically hadn’t raised any additional revenues since 2003 but the cost of operating the county, just in such areas as salaries, utilities, etc., have continually increased.

“Without increases in revenues or cut backs,” where are you going to get a balanced budget, he asked.

The DLG official also noted the danger of having to dip into the road fund to pay bills, since road fund money is restricted and has to be put back into the road fund budget prior to the end of the fiscal year. Currently, the county apparently still owes back about $70,000 to the road fund.

Frohlich said without putting the money back, the county would either get a bad audit or would have to allocate the amount owed into the next fiscal year budget.

He also added that the cost of operating the jail was “an expensive animal,” saying about the only way to control the cost was with good management and keeping costs down. The LGEA is also a restricted fund and grants, he continued, were just in and out money which doesn’t help the county budget.

Frohlich touched on several services in which the county was responsible for paying for and several others they were not mandated to fund from county finances.

Both the ambulance service and jail is being maintained with the help of county money, primarily from the county’s Occupational Tax, even though the county itself is not mandated by law to provide an ambulance service, although many counties do take on the responsibility to provide the service.

Frohlichsaid the county did have an option to establish an ambulance board and have the ambulance service become a taxing district. This would allow for a separate tax to help fund the service, along with what revenue it generates from ambulance runs.

Frohlich then discussed the county’s disbursements, noting that data indicates the county spent more during the first half of the fiscal year (July through December 2011) than was budgeted. “There are mandated and non-mandated” appropriations in a county budget, he said, adding one of the biggest financial burdens to the county was health insurance to county employees. “I’m not telling you to cut out (employee) health insurance, but you don’t have to pay for it.”

Another non-mandated item counties generally pay for is costs associated with county officials’ and magistrates’ required training, conferences, etc. Although the state mandates some type of training, the county is not obligated to pay for any expense, such as hotels, travel and so forth, in relation to those trips.

Parks and recreation and senior citizen programs are also non-mandated expenses, but Frohlich noted those were the types of services citizens expect county governments to help provide.

Frohlich listed three options he felt the county has at this point to keep from running into a budget deficit in the future.

One option was to raise revenues, with various options pertaining as to how that could be done. One such would be to increase the occupational tax from .75 percent to an even one percent. Brown estimated this would generate approximately $200,000 more annually in revenue.

Another option would be an insurance premium tax, which at 6 percent, would generate around $450,000 per year, Brown estimated. However, some magistrates who did voice an opinion noted that since it would take at least six months for money to begin coming in–if passed by the March 23 deadline, it would be too late to help the county this year, or possibly even the next fiscal year.

The county also has the option of taking the four percent property tax increase, but it was noted that with the low tax revenues being seen in the county right now, it wouldn’t generate much annual revenue and would take literally years to build up any sizeable amount.

The second option Frohlich gave was to simply cut appropriations. However, that would mean cutting some of the aforementioned services such as to the park, senior citizen programs and possibly having to create an ambulance taxing district to offset money provided for that service.

The last option Frohlich gave was to do a “combination” of raising revenues and making cuts in expenditures.

“I’m glad we are talking about this now, in February, before the budget process (for the next fiscal year) begins.”

The DLG official also noted the consequences to a county fiscal court if a balanced budget was not passed and presented by July 1. He noted that in one instance, the state had filed an injunction in circuit court which directed the court to hold a continuous session until a balanced budget was presented. At worst, court members would even be jailed for contempt and a county could basically be shut down, except for fee officers such as the sheriff, county clerk, judge/executive, and animal control officer, who would have no staff to work with if there was no budget in place.

Despite the financial situation of local county government, apparently Clinton County is not alone compared to many other counties in Kentucky.

Frohlich noted that last year the DLG assisted about 44 counties in the state that were having budget problems and financial shortfalls. He also continued that the Department of Local Government officials would work with the county throughout the budget process.

“Expenses have finally caught up with you,” Frohlich told the court during the discussion.

The court members and DLG officials again touched on some possibilities such as creating an ambulance taxing district, insurance premium tax or increasing the occupational tax rate by a quarter of a percent.

Sheriff Rick Riddle told Frohlich and the court members that people just weren’t paying taxes now as in years past, noting that many can’t afford the tax rates already levied and asked how people would be able to afford the extra four percent on property taxes, as had been previously discussed.

Frohlich had admitted earlier in the discussion that a four percent increase in the property tax rate wouldn’t generate much revenue on an annual basis.

Riddle said the sheriff’s office was getting more expensive to operate and since most of its revenue comes from fees and taxes collected, it is even harder now that tax collections are down. He noted he now has only three full-time employees and feared he may have to lay some off. “We probably didn’t collect $100,000 (in property taxes) in all of December,” the sheriff said, adding that was generally about the busiest tax collection month after tax bills are prepared and sent to taxpayers.

He also continued that in years past, his office had been able to turn in up to $20,000 to the court in excess fees, but that wasn’t the case this year.

Judge/Executive Lyle Huff then asked Frohlich to again go over with the court and a few spectators the options, the essentials and non-essentials that the county is responsible for actually funding.

The judge/executive also noted that things had really gotten worse since the downturn in the overall economy began in 2008.

In reviewing the county’s finances and budget, Frohlich also said he had questioned Judge Huff as to why the county was giving money to the public library. “They are already a taxing district,” he said.

Also, the judge gave magistrates a copy of the 2003 agreement with the Recreation/Park Board, in which the county agreed to give $10,000 a year to help that entity. It, along with the city and school board, agreed on the measure when the board was formed.

Magistrate Willard Johnson said he felt that since the agreement was on a year-to-year renewable basis, the county could get out from under the agreement if they chose not to renew it as is and County Attorney Michael Rains gave a tentative opinion agreeing with Magistrate Johnson’s assessment.

Johnson also said that (county) revenues have not increased since 2003 while expenses have and said that the state had set mandates for ambulance services and jails (the latter, for example in the amount of staffing required.) He said the public wasn’t aware that if an inmate had to spend a night in an out-of-town hospital, that a jail employee had to be with that inmate at all times.

Brown also recommended to the court that they expediently approve the sheriff’s and county clerk’s office budgets for the year. The issues have been postponed at Judge Huff’s request, citing a need to get the budget straightened out before taking action on those budgets.

Judge Huff, however, said that was his fault and not the magistrates and said those budgets would be placed on the agenda for action at the court’s regular meeting later in the week.

Brown noted the state usually preferred those budgets be in place by mid-January, prior to work on the county’s budget process beginning.

The DLG officials said the court had the option of setting a budget for each office, leaving those offices to be responsible for working under the budget, or a fee pool system, where fees from each office is turned over to the county on a monthly basis and the fiscal court would pay the bills for that office.

Prior to adjourning, one woman from the audience questioned the court about employee health insurance not being mandated for the court to pay. She asked why not cut back on employee health insurance, adding “there are a lot of people out there that can’t afford it.”

The fiscal court is scheduled to hold its regular monthly meeting on Thursday, February 16 at 5 p.m. The meeting is open to the public.