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Trustee has concerns about county’s fund balance

In an e-mail sent to county officials Sept. 26, Interim Anderson County Trustee Myron Iwanski outlined his concerns with the county’s unassigned fund balance trends in recent years. The information in Iwanski’s report was intended to be a follow-up to information Anderson County Finance Director Natalie Erb presented to the Anderson County Commission and the budget and finance committees last month detailing the concerns with the county’s general fund unassigned fund balance status and trend.

The unassigned fund balance trend serves as an indicator showing the general state of the county’s finances, explained Iwanski in the email.

“I believe the trend we have seen over the last few years raises some red flags. We need to be aware of and address these in a way that does not repeat mistakes from the past,” Iwanski stated.

Attached in the email to county officials was information based on the county’s annual budgets, annual audits, and minutes of the county commission and budget committee meetings.

The county’s goal for the unassigned fund balance, explained Iwanski, “should be to maintain a balance of at least four months operating expenses, which for the general fund is $8 million.”

Fund balances below $8 million have negative consequences, he said.

Credit ratings are reduced, in turn leading to increases in the costs associated with borrowing money, requirements in place when seeking approval for tax anticipation notes to pay for expenses during times when the county is awaiting to receive tax revenues, and not having fund, available during emergencies or economic downturns, were some of the negative consequences Iwanski listed.

Iwanski noted in his report to officials that it was essential to look at the fund balance trend during the past 20 years, particularly for the years 2008 and 2009, to get better insight into the county’s current situation and to “hopefully learn from our mistakes.”

“During the 12 years that Rex Lynch was Mayor, the budget committee always presented balanced budgets with proposed expenses always equal to expected revenues. Because actual expenses ended being somewhat less than actual revenues each year, the fund balance was built up over a period of years to a healthy $8 million in 2008,” Iwanski pointed out.

But, in fiscal year’s 2008 and 2009, increases in salary were proposed for all county employees to fund the county’s compensation plan and increases were given to Sheriff’s officers and jailers, noted Iwanski.

“Some of us proposed a 10 percent tax increase to help fund this. Instead, County Commission amended the budget to take this and other reoccurring expense out of the one-time money in the unassigned fund balance. As a result, the general fund budget was out of balance by $0.9 million in 2007-08 and $1.9 million in 2008-09, and the unassigned balance was quickly depleted,” Iwanski said.

By the year 2011, the county’s unassigned fund balance was less than $0.5 million with county expenses “higher than our revenues,” he continued. “As a result our credit rating services issued warnings, we had to issue tax anticipation notes, and we were at a point that we could not sustain the rate of spending we were at without a tax increase.”

Although county commission approved a tax increase in 2011 for the jail expansion, no tax increase for the general fund operating expenses were approved, but because of the spending cuts in 2011, the unassigned fund balance began to grow, Iwanski said, and over the next three years it grew to $4 million, but stopped growing in 2013.

In 2013, the fund balance “began decreasing to the point where it was less than $2 million and was headed lower,” Iwanski noted.

There were a few significant events and decisions during the last four years that contributed to the unassigned fund balance decrease, added Iwanski, who listed four major factors in the dwindling of the fund.

The areas that “raise the most concern,” according to Iwanski, are the adoption in 2013-2014 of “unbalanced budgets” each year beginning that year, county officials’ decision to take $1.6 million dollars from the unassigned fund balance to cover EMS budget shortfalls, taking out $433,000 of the unassigned fund balance to cover legal fees, and spending at least $200,000 to cover the computer breach last year.

Said Iwanski, “Just these four event/decisions have had a cumulative effect on reducing our unassigned fund balance by more than $4.2 million over the past four years. The unassigned fund balance would stand at $6 million today and growing if it had not been for these four events/decisions.”

Iwanski urged county officials to closely monitor the unassigned fund balance and manage it “carefully,” all while heeding the advice of Anderson County Finance Director Natalie Erb in looking for a way to address the county’s financial needs.

“As Natalie [Erb] pointed out in recent County Commission meetings, we have fallen short in recent years in taking care of some capital needs (e.g., sheriff’s cars, building maintenance) and in adequately funding even minimal salary increases for employees. I believe it is important to heed Natalie’s advice at recent County Commission meetings to look for a way to address these needs, cut spending, and/or increase revenue,” stated Iwanski.

Offering an opposing view of the situation was Anderson County Mayor Terry Frank, who was contacted on Monday for a comment on the fund balance issues.

Frank disagreed with Iwanski’s assessment, and noted that with an election year coming up, she expected Iwanski “to paint a bleak, misinformed, and at times, false view of the happenings of Anderson County government.”

Frank viewed the unassigned fund balance assessment by Iwanski as a political attack.

Said Frank, “Under Iwanski’s leadership [as interim county mayor], Anderson County received a ‘negative watch’ rating from Moody’s for spending our fund balance to dangerously low levels—and Mr. Iwanski led the charge on one of the largest tax increases in the history of Anderson County. He also arranged to ‘kick the can down the road’ on massive borrowing—meaning taxpayers will pay more in interest on our past capital projects.”

Frank said the county’s current unassigned fund balance figure, which is currently $4.2 million, is a healthy fund balance.

Continued Frank, “I am so proud to say that together with the help of so many Anderson County elected officials and departments, a fantastic budget committee and budget office, and a commission that deserves much credit for passing a strict policy of requiring a supermajority to spend down below $4 million, we were able to change the direction of the county in 2012. After steadily growing our fund balance and also strengthening our policies, the independent rating agency Moody’s removed our negative watch. Our Finance Director Natalie Erb reported it at this month’s (October’s) budget committee that thought the audited numbers weren’t final, we’re still at a healthy $4.2 million fund balance—and I agree with her fiscally responsible recommendation to Budget Committee that we continue to try to build that balance so we are able to weather any future storms.”