News and Tribune

August 3, 2011

Clark County payroll pinched: Attorney recommends layoffs for all Clark County employees starting next week

$1.25 million deficit leaves council looking for loan or for help from commissioners

By BRADEN LAMMERS
Braden.Lammers@newsandtribune.com

JEFFERSONVILLE — Clark County employees could face layoffs as early as next week if the Clark County Council cannot secure a temporary loan or find another source of funding, according to Clark County Commissioners’ Attorney Greg Fifer.

In a memorandum sent out by Fifer on Tuesday, it was recommended that if the county council doesn’t secure funding by Tuesday, Aug. 9, the county department heads should issue written layoff notices to all of the county’s employees and close the county offices.

The drastic recommendation comes as a result of information received by Commissioner Ed Meyer and Jill Oca, a certified public accountant working with the county, in a recent meeting with the State Board of Accounts informing them that the county’s general fund was $800,000 in the negative, or red.



FOLLOW THE MONEY

The county receives its money from two tax distributions annually, one in a spring settlement and one as a fall settlement. The spring settlement has already been received by the county and the fall distribution is not expected to come in until December. While it is not uncommon for the county to run a deficit while waiting for the tax distribution to be collected, it has run out of funding much earlier than expected this year.

“That’s 45 days after we got half of our money for the year,” Fifer said of the county’s general fund being a negative amount. “It’s not unusual for it to go into the red, but it is usually at the end of that six-month period and you’re waiting for [money] to come in. But to already be in the red is an indication of our financial distress. We’ve hit the wall two months sooner than I expected to.”

Clark County Auditor R. Monty Snelling admitted the general fund was running in the red, but downplayed its significance.

“The state does not like it,” he said, referring to operating on a deficit. “As far as I know, every county we talk to does the same thing. It’s just a common thing.”

Councilman Brian Lenfert echoed Snelling’s statement.

“Every unit of government runs in the red until the settlement comes in,” he said.

Lenfert added that it is acceptable as long as the fund does not go into a deficit greater than what the fall settlement equals.

“This same memo could have been sent out in April before the spring installment came in,” he said. “It’s my understanding there will be at least $2.5 million coming in the fall settlement.”

But according to figures from the auditor’s office, as of Tuesday, the deficit in the general fund has grown beyond the SBOA’s $800,000 calculation and currently sits at more than $1.24 million.

So even after the fall disbursement, the county would have a little more than $1 million to fund its operations for the rest of the year.

“I have no idea how fast [the county’s] spending money out of the general fund,” Fifer said.

When asked how the county could expect to fund the rest of the year’s operations on $1 million he said, “that’s the council’s job.”



RECOMMENDATIONS

Fifer offered a series of recommendations in Tuesday’s memo — sent to various county officials and office holders — on how to deal with the deficit. Among the recommendations was for the commissioners to deny requests to pay any further claims or payroll out of the general fund, as he wrote that he does not believe they can legally be approved; that department heads immediately cease purchasing any supplies or equipment; all county department employees be issued written layoff notices, effective Tuesday; and to direct the department heads to secure and fully close the department offices no later than Tuesday.

Fifer admitted Tuesday deadline is not a hard and fast end date, but said it would be a day after the council is scheduled to hold its next meeting and have a chance to act on the deficit spending.

“It is really up to them to find funds to avert this,” Fifer said of the council. “If they announce a plan [Monday] ... yes, we can buy some more time. It’s just an indication we’re playing with fire. It’s a real problem and it has to be dealt with now.”

If the council does not take some action he said it is his legal duty to recommend to the commissioners to not approve claims or payroll invoices.

Fifer added that the commissioners may have already approved claims at their last meeting that should not have been paid, but that the commissioners had asked Snelling if the funds were available to pay the claims and payroll and had not been notified the fund had ran into the red.

But Snelling said the commissioners and council knew when they were approving the claims and payroll out of the general fund it was running in the red.

“They’ve got the funds report right in front of them,” he said. “They’ve been aware of the problem.”

The commissioners are set to meet Thursday and Fifer said he would be offering the recommendation that the commissioners not approve either the claims or payroll at the meeting.

“My recommendation Thursday, at a minimum, [is] those be tabled,” he said.



A SOLUTION?

Fifer and Snelling did agree on a remedy that may be available to the council.

“The only solution is for the county council to temporarily loan money from other funds,” Fifer said. “Those loans would have to be repaid by the end of the year. I have no idea about availability or which funds could be used for that, but that’s why I gave it to Scott [Lewis, the Clark County Council attorney], so that the council could start working on that before Monday to see if there is a solution.”

Snelling agreed and said, “there’s different ways they can do it. They can borrow from other funds then pay them back when the settlement comes; they can go out and get an anticipation loan to carry them over to the next settlement. It’ll just be up to the council and the commissioners to how they want to approach it. Probably the best solution is to get a short-term loan. The county’s done it before, a lot of counties do it.”

But the county council has previously said another temporary solution to its woes could come in the form of help from the county commissioners, who control the county’s Cumulative Capital and Economic Development Income Tax funds.

The council has previously requested the commissioners use some of its reserve funding to carry the county through the remainder of the year — a request the commissioners have rejected.

In an email Fifer wrote, “The commissioners have undertaken and completed every politically difficult task initially identified by Dan Eggermann when the magnitude of this problem became apparent.”

Eggermann helped prepare the county’s 2011 budget and an excess levy appeal, which was denied, but an appeal to the decision was filed in Indiana Tax Court on Aug. 1.

Fifer referenced the commissioners re-establishing the cumulative bridge tax and devoting EDIT and cumulative capital fund to the shortfall in the email.

The commissioners agreed to use up to $1.9 million remaining in its EDIT fund for various county costs, but have been reluctant to dedicate its reserve funding — the cumulative capital fund — to cover the shortfall in case they need it for an emergency.

But it’s a reluctance Lenfert said he hopes the commissioners will overcome, implying that the request would again be for the commissioners to make the payroll payments out of its cumulative capital fund.

“I would be very disappointed if they choose not to pay payroll while holding onto $1.2 million of tax dollars,” he said.

But Fifer said the cumulative capital funds will likely be eaten into by expenses later in the year and the commissioners are set on holding onto $500,000 for emergencies.

“Some of it is available, but it would be a very small Band-Aid on a very big problem,” he said.

Fifer continued in the email claiming that the council has not done all it can to address the shortfall by failing to enact a county wheel tax last summer or laying off county employees.

“The council has, to date, totally ducked responsibility regarding the issues they control,” he wrote.

Snelling offered that the delay in taking action has been the larger issue.

“I think the biggest problem was when they got the 1782 notice (from the Department of Local Government Finance) and the budgets were cut the county was kind of slow to adapt them to the new figure,” he said. “For the first few months [the county] kind of overspent.”

Again something that Fifer partially agreed with.

“That’s my frustration is we keep rearranging the deck chairs on the Titanic,” he said. “I think it’s legally required [to stop paying claims and payroll] and it will hit everybody right between the eyes that we’re not bluffing. This is not for political gain.”

Snelling again downplayed the looming shutdown and said he was confident the county can deal with the problem in the general fund.

Lenfert, while downplaying the dire nature of the memo sent out by Fifer, hoped it might prompt some action.

“If this memo from Greg is what it takes to get department heads to adjust their budgets to reflect what was passed down from the council in March, so be it,” he said.

Clark County Commissioners Ed Meyer and Les Young were contacted for this story but did not return calls as of press time.