County just about out of budget Band-aids

The Kitsap County commissioners face a daunting task in drafting the budget for next year, since there is not yet a sign that revenues will increase significantly.

The Kitsap County commissioners face a daunting task in drafting the budget for next year, since there is not yet a sign that revenues will increase significantly.

Previous stopgap measures to balance the budget bought time while waiting for the economy to turn around and start increasing revenues again.

The commissioners face a situation in which their available revenue will eventually increase, but spending has to be cut back to a level that existed before the “housing bubble” and then allowed to grow slowly afterwards.

The main reason for declining revenues appears to be the slumping construction industry.

Construction activity in both the residential and commercial sectors is much lower than it had been in the few years prior to 2008.

Since materials and services used in construction are subject to the sales tax, this slump contributes a lot to the substantial decline in county sales tax revenues.

In the peak year of 2007, county sales tax revenue as of the month of June totaled $13.8 million. This year, revenue through June totals $11.2 million.

If the trend continues for the rest of the year, this would be a decline of more than $5 million, or almost 19 percent, since the peak year.

At some point, construction activity will rise again. But it seems clear that county revenues generated by the construction industry won’t return to their pre-recession level anytime soon.

This reduced construction activity also affects the county’s property tax revenues by reducing the rate of increase in the levies.

County levies for the general fund and road fund have increased by $4.1 million or 8.4 percent since 2007 — an average annual increase of 2.7 percent.

Naturally, the commissioners and other elected county officials look longingly back to the days when annual increases in property taxes could be 6 percent without voter approval.

Including the amounts generated by new construction, levies could go up by an average of about 8 percent annually prior to 2002.

The budgeting task would be much easier if the commissioners could have increased the levy amounts by more than 6 percent a year to fill the gap caused by lower sales tax revenues.

Now, they need voter approval to increase the levies by more than 1 percent plus the amounts generated by new construction.

Having not yet sought voter approval of a “lid lift,” the commissioners have looked for other ways to do more with their existing levy authority.

For this year, the commissioners diverted roughly $300,000 more revenue from the road fund levy to the general fund to pay for traffic law enforcement, as allowed by state law.

But taking more revenue away from roadway maintenance cannot continue forever without making future costs greater as pavement deteriorates.

The commissioners also decided to increase the levy revenue available to the general fund by another $300,000 by skipping one year’s levy for the veterans assistance fund.

The effect is to draw down the veterans assistance fund balance rather than add more to what was an almost $1 million beginning fund balance.

Next year, the levy for the veterans fund has to be reinstated to avoid drawing the fund balance down too low to be sure of fulfilling the fund’s core function — emergency financial assistance to county veterans.

They may not yet be out of ideas for stopgap measures, but some day soon the commissioners have to find ways to make permanent reductions in both the amount of general fund spending and the rate of growth.

Since the cost of paying the salaries and benefits of county employees constitutes the largest part of overall spending, the commissioners have to look there for reductions.

Reducing both the number of employees and their total compensation may be necessary in order to reset the level of spending to an amount that matches revenue.

Restraining future increases in total compensation seems unavoidable, if the commissioners are to match spending and revenues.

None of the permanent fixes to the budget problem are likely to be easy to achieve, but the county cannot spend money it doesn’t have.

Bob Meadows is a Port Orchard resident.