As contemplated by the Kaua‘i charter, on March 15 Mayor Carvalho submitted to the Kaua‘i County Council his proposed operating budget for the 2011 fiscal year beginning this July 1. The budgetary process is intended to provide a best estimate
As contemplated by the Kaua‘i charter, on March 15 Mayor Carvalho submitted to the Kaua‘i County Council his proposed operating budget for the 2011 fiscal year beginning this July 1.
The budgetary process is intended to provide a best estimate of the costs and revenues for the county during the annual period. By law the revenues must equal the costs, i.e. the budget must be balanced. If our federal budget had the same balancing requirement we would live in a far different world.
The mayor proudly announced that the forthcoming budget would be $146 million, or 5 percent lower than the budget for the current year. Think how proud he would be if the budget had been 20 percent lower.
In his thoughtful budget message to the council the mayor cited the continuing economic problems affecting the county, noting that visitor arrivals continued to be lower than in prior years. He discussed the steps being taken to control operational costs, including worker furloughs. Noting the lower real-property assessments he is proposing an 8-percent decline in real-property taxes, the principal county revenue source, for the new year. Apparently he is willing to accommodate the nominal political barrier the council has to raising rates.
Budget items vary from those virtually certain to sheer speculation. The revenue projections are generally rather solid. Tax collections are projected to be about $93 million, of which about $84 million are to be from real-property taxes. Fees and licenses will comprise $6.5 million and Kaua‘i’s share of the state Transient Accommodations Tax (TAT) will yield another almost $12 million. The remainder of the revenues will be principally obtained from the over $24 million of so-called unappropriated surplus which generally translates into funds not spent in previous budgets. The reliability of the real-property-tax item depends on the council maintaining existing rates, which it appears they are likely to do, and reliability of the TAT item on the state continuing its pattern of sharing TAT revenues which is probable but not at this writing finally determined.
The bulk of the 242-page budget is devoted to describing sometime in excruciating detail proposed expenditures for the county’s various departments and operations. Over 40 pages of the budget illuminate us on the costs for our police department. Again the items run the range of presenting the definitive costs for interest on borrowings to matters that are essentially guesses. They portray the myriad ways county officials find to spend our funds.
A prime illustration of uncertainty is the presentation of the county’s legal expenses. It is virtually impossible to predict the county’s liability for claims and the costs associated with defending its position. A number of years ago I talked with the CEO (chief executive officer) of a very large corporation. He explained that all of the operations and departments of his company were very tightly budgeted. I inquired about budgeting for their considerable legal expenses and he replied smiling that his general counsel had an unlimited budget and that he exceeded it every year. In his State of the County message on March 19 the mayor stated that the County Attorney’s budget for special counsel would be reduced by nearly $300,000 for the coming year to $925,000. Let’s hope that the assessment made is a good one, but it really depends mostly on circumstances outside the county’s control.
Another imaginative gambit used in the budget is referred to as “money-funding.” This consists essentially of identifying an employee position that is not expected to be filled but nevertheless including in the budget the salary and related costs of the position as though there would be an actual employee involved. Altogether this techniques was applied sufficiently to generate a total of almost $2 million. What this really amounts to is a reserve for contingencies that can be applied to overruns on other cost items. There is nothing fundamentally wrong with having a reasonable reserve to meet unexpected or larger-than-anticipated costs, but the camouflage seems dubious.
In addition to the operating budget previously discussed the mayor is also proposing a capital budget for the coming year of over $100 million. As the county recently floated a $60 million bond issue most of the expenditures will be made from borrowed funds.
The budget document is a difficult one for public analysis. It does not have a meaningful comparison with costs and revenues in the prior period, so change is not readily ascertainable. It also fails to have a clear separation of the budgets of the various departments, and no summary. If our county would like to have public input it should better organize its presentation. The budget process records expenditures expected, but it does not point up ways to be more efficient or economical. The newly created auditor function is to pursue such goals, but to date the auditor has been disturbingly silent.
The budget process contemplates that the mayor’s proposals will be reviewed by the council. The budget-review process started on April 9. Historically this review has limited impact, and the great bulk of the budget proposed is accepted by the council. Perhaps this year’s airing by The Garden Island will increase its significance. Subject to a potential mayoral veto (which does not happen), the council will give its approval of the budgets normally by May 15 and also adopt the real-property-tax rates for the forthcoming year at that time.
While difficult for comprehension by our citizens the budget process is an important one for our county as it provides the financial structure for county operations.
• Walter Lewis is a resident of Princeville and writes a bi-weekly column for The Garden Island.
