Montgomery County Budget Workshop Will Impact Future Tax Rates

Montgomery County Gazette
Seal of the Montgomery County Commissioners' CourtFile Photo/Montgomery County Gazette

By: Sherrie Shorten

CONROE – As the Montgomery County Commissioners Court heads into the 2021-2022 Budget Workshop, the Court faces some insurmountable odds to balance the county budget without over burdening the taxpayers.

Finishing FY 2021

On Tuesday, July 27, 2021, County Auditor Rakesh Pandey is submitting fiscal year-to-date June 30, 2021 financial reports for approval. Page 19 of the Monthly Unaudited Financial Report for June 30, 2021 contains some revealing facts.

The remaining “Unexpended Budget” is $41.3 million. Since there are three months left in FY 2021, the “Unexpended Budget” is the amount the county has left to spend in this fiscal year without further reductions in the county’s fund balance.

If the remaining budget is spread evenly over the next three months, the county should spend no more than $13.7 million per month in July, August, and September. However, Page 19 also reflects actual June expenses of $27 million. Therefore, it is highly unlikely the county could sustain operations on $13.7 million per month at the current spending rates.

Before beginning the 2021-2022 budget workshops, the Court needs a plan to address the current FY 2021 shortfalls.

Higher Healthcare, Workers Compensation, and Self Insurance Costs

On July 13, 2021, County Budget Officer Amanda Carter informed the court of cost increases for employee and retiree healthcare, property and casualty insurance, and workers compensation insurance. Carter also presented several options for the Court’s consideration.

Of the six options presented, four of the options involved further reductions in fund balance to cover the increased costs and attempt to minimize the impact on the property tax rate. However, Carter’s presentation included disclosures indicating the potential for the following budgeting pitfalls:

  • Heavier tax rate burdens will make it harder to issue future debt
  • Constant transfers from the fund balance to cover shortfalls could look bad on the county’s credit rating
  • Even with an increase in tax rate, the county may still need to reduce fund balance to meet other priorities

The remaining two options call for increases to the property tax rate over the next three years as follows:

  • FY 2022 increased between .5532 cents and 1.1063 cents
  • FY 2023 increased by an additional 1.3916 cents
  • FY 2024 increased by an additional 1.5308 cents

Regardless of which option is chosen, every option involves increasing the tax rate in FY 2024 by 1.5308 cents just to cover the increasing cost of healthcare and insurance.

Fund Balance

Montgomery County’s current fund balance policy is to retain 10-15% of the annual operating expenditures in unassigned fund balance. The Government Finance Officers Association recommends a minimum of two months of operating expenses. If the county is subject to natural disasters, they recommend increasing the fund balance for the appropriate level of risk. Therefore, the county’s fund balance policy is low when compared to current best practices recommending a minimum of 16.67% unassigned fund balance.

In 2020, Montgomery County received $105 million in CARES Act funds from the federal government. During FY 2020 and the beginning of FY 2021, the county was able to offset COVID-related expenses with these CARES Act funds, including purchasing a half-million-dollar medical tent that has never been used.

Salaries and overtime for county personnel used to operate testing and vaccine centers were also reimbursed by CARES Act funds so the county would not have to use fund balance to cover COVID costs.

However, Montgomery County has continued to fund other priorities from the fund balance.

Tax Rate

While County Judge Keough and Precinct 3 Commissioner James Noack are eager to pass a “No New Revenue” tax rate, passing a budget that doesn’t cover all the costs, will leave the county no choice but to keep reducing fund balance.

As the Court attempts to hold the tax rate at current levels, it’s shifting the costs to future years without solving the underlying budgetary issues.

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The Montgomery County Gazette is an online newspaper serving the needs of the citizens of Montgomery County, Texas. While we cover news on the national and state level, we primarily focus on providing accurate and up-to-date local news and events. The Montgomery County Gazette aims to restore journalistic integrity to the media by not interpreting the news, but reporting the news. This is an added benefit to the residents of Montgomery County in delivering them news that is accurate, informative, and unbiased. Founded in 2015, the Montgomery County Gazette has grown exponentially from a simple Facebook page to this website. We are dedicated to the community because not only do we cover Montgomery County, we live here too.

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