To the people of Harney County:

Introduction

Harney County is experiencing a tight budget and an ongoing financial shortfall. There is a lot to process in understanding the nature of the situation, and this letter is presented as a way to help inform, particularly as it relates to closing out last year’s finances and for understanding the current budget and future challenges.

The Harney County Budget Committee, consisting of the three County Court members (Judge Pete Runnels, Commissioner Mark Owens, and Commissioner Patty Dorroh) and three citizen appointees (Chairperson Terri Hellbusch, Holly Smith, and Curt Blackburn) met for more than 40 hours during 10 meetings between April 10 and June 5, 2019, to develop a balanced 2019-2020 budget. Unlike a typical Harney County budget process, where the Budget Committee is presented with a balanced budget from which to work, the committee began with a budget in deficit by more than $1 million.

The Harney County budget for 2019-2020 was adopted on June 27, 2019, and can be viewed online at the county website (www.co.harney.or.us), or in hard copy at the County Clerk’s office. We encourage people to become familiar with all the county services and expenditures paid for by your tax dollars.

Background

Harney County realized its finances were in crisis in 2018. For five years, from 2013 through 2018, annual budgets were mistakenly created based on projected beginning fund balances that were erroneous and unreconciled to actual or audited numbers until this budget cycle. This error continued for all five of those years, resulting in $2.3 million worth of expenditures that were above annual revenues.

Stopgap measures

Once these errors were realized, temporary stopgap measures were implemented to reduce spending during the 2018-2019 fiscal year. Nevertheless, employee furlough hours ($104,000 savings) and cutbacks on travel, materials, and supplies did not come close to ending the 2018-2019 fiscal year in balance with actual revenues. The County Court then identified and authorized legally allowable fund transfers totaling $517,000 from various other county accounts into the General Fund in order to end June 30, 2019, without resorting to an inter-fund operating loan.

The current year

For the current 2019-2020 budget, department budget expenses were reduced, personnel cuts were made, the stopgap furlough hour pay cuts were lifted, and an administrative fee schedule was implemented across county departments. We adopted a balanced budget through June 30, 2020. We will have to operate with minimal General Fund Contingency dollars to meet unexpected needs, as fund transfers significantly reduced the remaining unrestricted county reserve funds. Additionally, the county had to arrange for an inter-fund operating loan from its road department in order to cover operating costs between July 2019 and January 2020, to carry us over until property tax receipts are received and distributed, at which time the operating loan will be paid back in full. The county will likely have to do this for many years as we rebuild our beginning fund balance.

Community members implored us not to drastically cut services and positions all at once. We were able to do that for this current year. However, with the reduction of our unrestricted reserve funds, which we needed to fund service levels through June 30, 2019, we will no longer have those resources remaining. Harney County will recover and remain fiscally responsible and operational at a sustainable level. This means, however, that some services may have to be reduced and/or moved outside of the county budget to continue.

Fiscal realities

The current levels of county services and payroll are challenging. Costs continue to rise for payroll, fuel, and general expenses, while property tax receipts increase slightly and federal timber payments are insecure and not guaranteed. Public Employee Retirement System (PERS) costs are increasing as are medical insurance benefits, which cost the county approximately $20,000 per year per four-member family. Payroll expenses are in excess of $3.6 million annually. Additionally, the county must begin to build back some reserves and prepare for the state-mandated county PERS obligation payment, which means an additional $200,000 in cost to the county in 2021. The reality is that the cost to provide current services goes up faster than revenue increases; therefore, in order not to expend more than yearly revenue there may be additional cuts. The county will also have to expend $230,000 less per year than annual revenue in order to build the General Fund back to where it was within 10 years.

Next steps

To prepare for the hard decisions that must be made next year, the County Court will:

1) contract for a year-to-year analysis of the increase in expenditures that occurred throughout the five-year period, in order to understand where costs, staffing levels, and services increased;

2) conduct strategic planning for a five to 10-year plan to help the county meet its future anticipated expenditures and rebuild the reserves essential for sound fiscal management; and

3) provide months of lead time for advance notice and planning around possible reductions across county departments and services.

It’s important to know that Harney County will be facing this significant fiscal challenge for many years. It will take the community coming together to find near and long-term solutions, with open minds, and acceptance of reductions or changes in service delivery. We appreciate how hard this will be and are grateful for the community partners and individuals who will work with us to find solutions.

Sincerely yours,

Pete Runnels
Harney County Judge

Mark Owens
Harney County Commissioner 

Patty Dorroh
Harney County Commissioner