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Fiscal Guidance Not Required

Board’s practice of setting limits on budget proposals is a relatively recent development.

Loudoun County Board of Supervisors Chairman Scott York made a good point on Oct. 3 when the board was discussing the fiscal guidance it would give the county administrator and school system regarding the development of the budget for Fiscal Year 2014.

Earlier in the discussion, Blue Ridge District Supervisor Janet Clarke prefaced her remarks by saying, “I appreciate the fact that we have to go through this exercise every budget season.” By “appreciate,” I assume she meant that she understood that the fiscal guidance was a necessary first step in the process.

But it really isn’t necessary. In fact, the board hasn’t always kicked off the budget process by delivering fiscal guidance. This is a relatively new phenomenon.

When York’s turn came, he acknowledged that previous boards have given fiscal guidance at the beginning of the process.

“But I think there is at some point…I’m ready for the county administrator to actually do his job,” York said. He went on to say that he would like to see a budget based on the county administrator’s recommendations as to what the government needs to run its operations properly.

It is the county administrator’s job – arguably his most important job – to propose a budget that lays out his budget recommendations. 

It is his job to determine what the county government should be doing to meet the needs of its citizens, how the government should be organized, and what level of funding is necessary for the government to carry out its responsibilities properly. His budget proposal should convey his recommendations in all these areas.

It is also the county administrator’s responsibility to transmit the adopted school board budget as part of the overall draft budget for the coming year.

That’s how it used to be done when I first started working for the county in 1989.

My boss, County Administrator Phil Bolen, would give it his best shot, proposing a budget to meet the county’s needs and advertising tax rates to fund his budget proposal. Most of the attention was given to the real property tax rate, which would affect the biggest slice of the county’s revenues.

During the budget process, the board can lower the tax rate, but it cannot raise it above the advertised rate without re-advertising it and holding another public hearing. So it was generally understood that the advertised tax rate set an upper limit for the tax rate discussion.

Some board members would occasionally say that the board should simply set a tax rate at what it thought the county residents could afford, and let the administrator decide how to allocate the money.

Bolen would reply that he could do that, but that it would shift much of the decision making responsibilities from the board to the staff. He would argue that it was better for the board to decide what the proper functions of government were and how much funding to provide, based on the best advice the staff could provide.

The same process would take place on the school side. The superintendent would present his budget proposal and the school board would review it and make changes before adopting it and sending it on to the county administrator. However, one major difference through the years is that the school board doesn’t have to set tax rates for its portion of the budget. That is left to the county administrator.

As a result, the school board has historically had less incentive to reduce its budget before transmitting it to the county administrator. The school board has been able to wait until the board adopts the budget, then make any necessary reductions if the board doesn’t fully fund its request.

Over the years, the board started providing fiscal direction to the county administrator early in the process, sometimes asking for several budget scenarios, or tiered options for budget cuts. This allowed for some streamlining of the budget review process after the county administrator’s budget presentation.

Now the board has gone a couple of steps farther. It appears to have set a cap on expenditures on the county side, limiting its funding to whatever can be generated by the equalized tax rate.

If the county administrator advertises a rate three cents below the equalized rate, in accordance with the board’s fiscal guidance, then that will effectively cap the revenues available to fund county operations and the school system.

The county administrator, not the elected board, will make most of the decisions as to how that funding would be allocated among county departments and programs. Yet the he will also be preempted from telling the board what he thinks it will really take to run the government well.

The board also took the unusual step of providing direction to the school system – not just to the school board, but to the school administration – to develop a budget that could be funded with a tax rate three cents below the equalized rate, with the school system bearing the entire brunt of the reduction.

It was an expression of frustration on the part of the board, which feels that the school administration has not done enough to rein in spending.

It will be interesting to see how it all plays out.

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