The commissioners just approved their $308,183,037 2018-2019 budget, but moving on to 2019-2020, revenues are expected to grow $7,026,573. Wood said the five main drivers of expenditures were: (1) The county’s automatic cost of living adjustment for employees should cost the county an additional $2,288,861. (2) Health insurance claims, trending with 10% annual growth, would cost the county an additional $2,700,000. (3) Trending scale-ups in requests from Asheville City and Buncombe County schools indicate the county can expect to allocate an additional $3,328,068 to them. (4) Debt service for capital projects would increase only $158,365. (5) The commissioners just accepted a grant for hiring six additional School Resource Officers with a match of $227,617.
Doing the math, Wood pointed out the county would fall $1,676,338 short for its 2019-2020 budget. Since the driving expenditures would be recurring as pertinent indices continued to rise, the deficit should be more than twice as much in two years. Making the puzzle easier – or harder – to solve, Wood reminded the commissioners they had already formally fixed three of the moving pieces: the county was committed to moving forward with its capital projects, the hiring of the SROs, and payment of the automatic COLA. Since defunding education, regardless of how unwisely funds may be spent, is political suicide; Wood put the bull’s-eye on employee benefits.
Specifically, he recommended the commissioners balance the budget by modifying the county’s health insurance and annual leave programs. In an earlier presentation, people in the room commented, “This is rich,” as Buncombe’s health plan was compared to those of the nine other large-population counties in the state, the City of Asheville, and the state, which offers two plans and covers public educators. Slides presented showed Buncombe’s offerings to be outlier, always offering the most for the least. Making budget cuts is a question of balance. Insufficient employee compensation can result in turnover or lack of motivation, which becomes more expensive in the long run. That said, Wood was of the opinion the county had lots of room to move toward the fulcrum without losing the county’s advantage.
One thing that had to go was the county’s 95-5 insurance plan, which requires employees to pay only 5% of costs beyond their deductibles. A 70-30 plan is closer to the norm. With its outrageously low out-of-pocket maximum., this plan was so expensive, the county stopped offering it to people hired after 2008. “We simply cannot afford this plan, nor can we justify to our taxpayers keeping it, when compared to other counties, Asheville, and the state,” he said. The county also offers a core 70-30 plan and an 80-20 buy-up plan.
Wood recommended offering two plans. Most employees would sign up for an 80-20 plan. Overall, deductibles would be relatively low, and rates would stay about the same. Copayments and prescription costs would not be changed, but emergency room costs would increase from $150 to $250 to disincentivize overutilization. The county would pay for all preventive care. For employees wanting to risk living with wider deductibles, the county would offer a consumer-directed plan with Health Savings Accounts. HSAs, unlike the flexible spending accounts the county now offers, allow the bearer to roll over to subsequent years any unused balance, including an annual $1000 contribution from the county. The John Locke Foundation would be happy.
Wood projected the changes would save the county $1,600,000 annually, “and both of our medical plans will still be among the richest,” offered by large-population North Carolina counties, he said. In other jurisdictions in which he has served, he worked with insurance agents to bring annual health insurance cost increases below 4%. He said employers in both the private and public sectors have been struggling with the problem for years. Buncombe County employees were sheltered from the tug-of-war because the county in past years had absorbed the increases. Director of Employee Benefits and Risk Management Curt Euler said employees had not had a premium increase since 2014 and added the county and employees would be splitting future increases.
As for allowing employees to cash out unused annual leave, Mecklenburg was the only other county among the comparables to do so. Mecklenburg capped the cash-outs at one week, but Buncombe had no caps. Wood recommended adopting Mecklenburg’s cap while requiring employees to maintain at least one week’s worth of annual leave. That was expected to save the county $348,000 annually.
Register of Deeds Drew Reisinger, a staunch advocate of employee benefits, was in the audience; and Commissioner Jasmine Beach-Ferrara said she and her peers had heard from over 100 employees on the new Let’s Talk line, which was set up, as federal investigators pursued indictments against former county management, a sense that government was going to be more transparent and inclusive. Ferrara had heard from dozens more employees through other channels, and a couple spoke at the meeting.
When Ferrara asked how management had arrived at its recommendations, Euler said they were somewhat restricted by federal law and what their agent, Blue Cross/Blue Shield of North Carolina could allow. Various a-la-carte items were modeled, and some choices were made to incentivize consumerism. Commissioner Joe Belcher stressed the importance of getting the most bang for the buck and looking for tradeoffs that benefit the lowest-compensated. He believed adopting an “aggressive wellness program” would help control costs, and Commissioner Al Whitesides thought the county should adopt policies that reward healthy lifestyle choices. Wood encouraged the commissioners to give him and Euler suggestions for costing-out.
There’s More –
A conversation about an anticipated $8,100,000 in additional property tax revenue hitting the county’s books from the sale of Mission Hospital to for-profit HCA softened the blow of additional budgetary woes exposed. But first, Wood cautioned that the vast holdings of the hospital, a nonprofit, have never been appraised, so the $8,100,000 estimate could be far from accurate. Secondly, there is a good chance the sale won’t close in time for the county to collect on it in the coming year.
Provided all goes well, Wood recommended first applying the proceeds to recurring expenses the county is funding with one-time appropriations. Namely, $675,000 was diverted from savings on capital projects to replace county vehicles; $1,500,000 was transferred from the county’s insurance fund to balance the general fund, not one but twice; and thirdly, the county has been diverting revenues from the quarter-cent sales tax voters approved for capital projects at AB Tech – to pay for general-fund projects. “You’ve been balancing your budget by doing things like that and that’s not sustainable. And you’ve also been using other one-time revenues, and you can’t keep doing that,” said Wood.
A spreadsheet was shown of projected revenues and expenditures for the quarter-cent sales tax. The beginning balance this year was $17,622,802. Following a $5,800,000 transfer to the county’s general fund, all subsequent years showed a transfer of $6,500,000, or about half the amount of the tax collected. By 2024, the fund would be in the red, and Wood said that was with the county only addressing essential maintenance on campus, like roof replacement and HVAC replacement and refurbishment. Commissioner Mike Fryar said the county used to give the college over $8,000,000 a year, cut the disbursement to $6,000,000, and is now taking from it as a slush fund to build, for example, the fire training center and shooting range.
Stopping the bleeding from illicit expropriations under former management would, presumably, not close the gap. Indictments to date have only disclosed $200,000 worth of improper card purchases over several years. The $2.3 million used to purchase whole life insurance policies came from a one-time fund-balance appropriation. The rest of the graft appears to have been paid out of the pocket of the contractor who offered kickbacks in exchange for $15 million in contracts, again over a period of years. The defendants did abuse the county’s compensation system to some degree, but no public announcement has been made as of this writing quantifying the extent to which the county may have been overbilled by the contractor.
“I cannot emphasize too strongly that when you add the $1,676,338 structural deficit noted above to the $3,695,000 of one-time revenue sources in 2018-2019 that won’t be available in the 2019-2020 budget, you are facing a structural deficit of $5,371,338. This has to be addressed,” said Wood.