Montgomery County FY 2022 Proposed Budget Lacks Transparency

Montgomery County Gazette

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County Judge Mark Keough presiding over Commissioners' Court session on April 24, 2021.Montgomery County Commissioners' Court LIvestream

By: Sherrie Shorten

CONROE – The Montgomery County Budget Office published the FY 2022 Proposed Budget and a Public Hearing is scheduled for Friday, August 20, 2021 at 9:30 a.m. Citizens are welcome to comment during the Public Hearing and unlike normal comment periods, the Public Hearing will allow citizens to ask questions and receive answers from Commissioners Court.

The FY 2022 budget consists of $372,246,436 and is supported by a tax rate of .4083 cents per $100 of property valuation. While the tax rate is down from .4312 cents per $100 of property values last year, the FY 2022 revenue collected will be higher than FY 2021 due to growth in the county as additional properties were added on the tax rolls and the number of taxable parcels increased.

The Proposed Budget is published in summary format with only four categories for each department: salaries, employee benefits, operations, and capital expenses. Previous budgets have included line items for each specific expense category, such as supplies, travel, continuing education, dues, etc. This year’s summary format lacks transparency and allows the Budget Office and the department heads to operate under a fluid budget where the individual expenses can change as long as the total for each department remains the same.

A fluid budget also allows department heads to spend the entire budget for their department by shifting excess salary funds to operational expenses and vice versa. Since the Commissioners Court directed department heads to limit their requests during the budget workshops so employees could receive a 5% raise, the department heads will need the flexibility of a fluid budget to correct the budget process with “budget neutral” changes in future months.

During the budget workshop, the Court was unclear about how to apply the 5% increase to employees who already received raises in July 2021. Then, County Judge Keough refused the pay increase for himself but approved the increase for all other Montgomery County employees. However, the FY 2022 salary schedule has not been posted by the Budget Office.

It will be difficult for citizens to understand the summarized budget format without reviewing the underlying salary schedule since most of the budgeted expenses are salaries.

Contingency

The FY 2022 Proposed Budget contains a Contingency of only $53,697, representing 0.014% of the total budget. Commercial projects use 5% to 10% contingency and even the International Monetary Fund recommends 2% to 3% contingency for global projects.

Montgomery County’s contingency for FY 2022 is extremely low and increases the risk the budget will not cover future unexpected events. For example, when Hurricane Harvey hit and the county was devastated, while eligible for FEMA assistance, the county paid out-of-pocket until FEMA reimbursed them. In a possible future hurricane event, the county’s expenses would far exceed $53,697.

In comparison, FY 2021 had a Contingency of $572,218 and it was used in its entirety during the current fiscal year.

Fund Balance

When county expenses exceed the budget, the county can reduce the fund balance to pay for the expenses. However, Budget Director Amanda Carter warned the Court on July 13, 2021 that constant transfers from Fund Balance to cover shortfalls could also look bad on the county’s credit rating.

On August 3, 2021, County Auditor Rakesh Pandey submitted a letter to Commissioners Court that was approved on the consent agenda during the August 10, 2021 meeting. The letter indicates $8 million from fund balance will “buy down” Montgomery County’s calendar year 2022 retirement plan contribution to the Texas County and District Retirement System (TCDRS).

In other words, the FY 2022 county budget does not include $8 million to fund the 2022 retirement plan. Instead, this portion of the retirement plan was funded from fund balance, outside the budgeting process.

It also means the $7 million included as employee pay raises in the budget displaced the retirement plan funding of $8 million that should have been in the budget.

The Auditor’s August 3, 2021 letter indicates the $8 million will be sent to TCDRS before the end of FY 2021 even though the payment applies to calendar year 2022. If the payment is counted in FY 2021, it will decrease the fund balance on September 30, 2021 (fiscal year end) and the retirement plan will appear to be funded at a higher rate, when in all actuality, the retirement plan at the end of FY 2021 would be pre-funded for 2022 to attempt to inflate the county’s bond rating based on FY 2021 financial data.

The county plans to keep the unassigned fund balance at 10% to 15% of annual expenses even though this policy was established in 2014 without any analysis of the current risks facing the county.

Additional Risks to the County

The budget workshop also reduced $40 million of CARES Act money restricted for law enforcement to $20 million. This allows funding for law enforcement’s data depository project. The Auditor recommended $40 million be restricted because the Auditor is not sure all the overtime that was classified as CARES Act qualifies as CARES Act expenses. Therefore, the county’s exposure to risk is increased by the risk the federal government could ask for more than the remaining $20 million back if they disallow some or all of law enforcement’s overtime for reimbursement under the CARES Act.

If the CARES Act clawback is more than the remaining $20 million restricted, the repayment will further reduce fund balance. If the federal audit allows more than $20 million of law enforcement overtime as CARES Act eligible expenses, then the restricted $20 million returns to the fund balance.

The agenda for Friday, August 20, 2021 contains three items to establish and fund 13 law enforcement positions to assist mental health services using American Rescue Plan Act funds (ARPA), including the related vehicles, equipment, and supplies for those positions. The request also adds $150,000 for ad-litem attorneys to represent mental health cases. While County Attorney B.D. Griffin has indicated to the Court that mental health does qualify as an acceptable use under ARPA, Griffin continues to warn the Court not to stretch the definition of ARPA uses because any expenses disallowed by the federal government will need to be funded from other sources of county revenue.

Overall, the FY 2022 budget does not contain all the expenses for FY 2022. Fund balance covers gaps in 2022 retirement contributions and the capital improvement fund, resulting in a Fund Balance within county policy without adjusting the county’s policy for the increased risks apparent in the current economy. Meanwhile, the fiscally conservative citizens of Montgomery County watch the Court trade risk for reward in a gamble with a CARES Act audit and ARPA funds suggested as the solution for nearly every problem.

The FY 2022 budget created by the Montgomery County Commissioners Court sets up FY 2023 and FY 2024 for additional increases in the county budget. The Court is counting on future growth to raise additional revenue so the tax rate can continue to decrease. However, if future growth in taxable values and new properties lag behind the needed revenues, eventually the tax rate will increase too.

On July 13, 2021, Budget Director Carter presented six options to the court for long-term planning and every option resulted in a tax rate increase of 1.5308 cents by FY 2024.

Citizens can voice their concerns at 9:30 a.m. on Friday, August 20, 2021 on the 4th floor of the Alan B. Sadler building located at 501 N. Thompson Street, Conroe Texas 77301.

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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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