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Ehlmann sends 2017 budget recommendations to council

Rising medical claims are a major contributor to a proposed 2017 budget for St. Charles County that includes few new employees and a minuscule salary increase for current ones.

St. Charles County Executive Steve Ehlmann forwarded a budget message Nov. 3 to the County Council that includes a recommended $80.3 million general fund portion of the budget that includes a proposed 1 percent increase for the county’s more than 1,000 employees. The 1 percent depends on the council approving a resolution withdrawing from a back-to-school sales tax holiday, usually held in August, that may generate about $240,000 in revenue for a half-cent merit increase. Without that resolution, the pay increase shrinks to half a percent.

The county’s next fiscal year begins Jan. 1. The county executive is required by charter to submit a recommended budget to council for review. Ehlmann’s recommendations were discussed at the council work session on Nov. 14. Councilmembers will review the budget again at a work session on Nov. 28. A public hearing on the budget is scheduled for Dec. 5 and the council is expected to vote on a new budget on Dec. 19.

Even through sales tax collections –more than 60 percent of general fund revenues – are ahead of projections, increased medical claims may have eaten up additional funding in the general fund, which includes most of the administrative departments in the county. Joann Leykam, the county’s director of administration, told the council at its Nov. 14 work session that the county noticed a spike in medical costs paid by the county’s self-insurance program.

The county has had a self-insurance program for 13 years that has allowed it to avoid large increases in employee premiums. But beginning in late 2015 through this year, and including what the county is budgeting next year, the county has had to pull about $5 million out of the general and special funds that it wasn’t anticipating, Leykam said.

In October, the actual claims approached the original budgeted amount for 2016 and the county transferred $2.1 million from other county sources to cover health claims for the rest of this year. Fearing the same for next year, the county undertook a stringent review of county departments to free up any funding it could.

“We went into this budgeting process knowing we don’t have any new revenue to pick up this year,” said Bob Schnur, the county’s finance director, to the council on Nov. 14.  In a later interview, Schnur said there were a higher-than-normal large dollar claims, some involving treatment of long-term illnesses and major surgeries.

“So we’re hoping things will normalize again, but knowing where we are and where we’ve been for the better part of a year now with these high-dollar claims, we had no choice but to build a provision into the 2017 budget to assume that type of claim experience would continue,” Schnur said. “You don’t want to budget with rose-colored glasses on.”

In his budget message, Ehlmann recommended adding an additional $2.4 million to its self-insurance program.

“While in the past, we have managed the ups and downs of the health care needs of our employees and changing costs, the last nine months have raised a concern about whether changes in the health care market are resulting in a permanent increase in our costs rather than a temporary storm,” Ehlmann said.

The $2.4 million plus the $2.1 million transferred to the self-insurance fund in October has “virtually eliminated general fund dollars for other matters,” he added.

Ehlmann said next year the county hopes to hold the line at only a 3 percent increase in insurance rates for employees, but noted that deductibles will increase from $200 to $300 and co-pays will rise slightly. Next year, he said a committee will be appointed to review the county’s self-insurance program to try to determine if the rise in health care claims is a “short-term anomaly or an unsustainable trend” that will have to addressed by 2018.

County department directors and elected officials proposed budgets for 2017 reflect no increases over their 2016 budgets, Ehlmann said. This meant largely saying no to virtually all funding requests this year.

“This has not been a fun budget year,” Leykam said.

Those department heads asked for 37 new general fund employees.  They got four. Ehlmann is recommending an epidemiologist in the county health department to work with dentists, pharmacists and physicians in establishing the county’s new prescription drug monitoring program, established to combat prescription drug abuse, particularly involving opiate-based drugs.

He also recommended funding two new St. Charles County Police Department detectives – one to investigate illegal drug activities and the other to work a regional local law enforcement task supported by the FBI that monitors and combat terrorism and drugs being brought into the area.

The $80.3 million in proposed general fund appropriations includes a mandatory allocation of an emergency reserve fund of $2.16 million. Ehlmann said this “fiscally conservative budget” is projecting a general fund balance of $7.2 million by the end of next year.

The message notes that sales tax revenue this year could go up five percent from 2015. That may generate an additional $1 million or so, but not enough to address medical claims, Schnur said. The county is projecting a 3 percent increase in sale tax revenue next year over 2016.

Other sources of revenue expected next year include an anticipated $1 million in building permit fees, reflecting more construction activity anticipated in the county next year. Building permit fees paid this year are expected to reach the $900,000 anticipated in the 2016 budget. Recorder’s fees are expected to generate about $1,900,000 in revenue in 2017, about the same amount as this year.

Meanwhile, the county’s overall budget also includes separate funds from the general fund, some funded by separate tax levies and earmarked sales taxes, and which amounts to about $140 million. Ehlmann recommends total appropriations of about $24.5 million in roads and bridges, $66.4 million in transportation, $25.9 million in parks and recreation and $25.5 million in capital projects funds.

 

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