Cabarrus Cheap Seats

I got up early Sunday morning and read this in my e-mail:

EXPOSED 

$10,000,000 surplus in 2005 !!!!!!!!!!!!!
Did you know that according to the 2005 audit report for Cabarrus County, that revenues for fiscal 2005 exceeded expenditures by over $10,000,000! The tax rate for that year was $.53 per $100 property valuation.
Coy Privette, Robert Freeman and Richard Suggs were right in reducing the tax rate from $.56 to $.53 for fiscal year 2005.
Remember how Bob Carruth and Carolyn Carpenter said that the tax reduction would ruin the county. They proclaimed that the “sky would fall”.
What is worst was for Commissioners Carruth, Juba and Carpenter to raise the tax rate for fiscal 2006 to $.63, or an increase of 19%. Larry Griffin and Grace Mynatt, two current candidates for commissioners, supported this 19% tax increase. Not only are they over taxing the citizens; They also transferred the excess surplus to a reserve account for future pet projects. The excess surplus should be returned to the taxpayers through lower taxes.
Now you can understand my frustration with the current Commissioners Carruth, Juba and Carpenter. I have coined a phrase, “The Circle of Idiots” to describe the situation. Refer to my website, www.goharoldsmith.com for more information.
Harold Smith
www.goharoldsmith.com
PS: Visit my website to review Cabarrus County revenue growth for the last ten years. See section “Cabarrus Co. Budget”

Naturally, he’s being a subtle as a chainsaw about where he’s going with this: They want to tax you for their future pet projects. That’s probably going to be the central issue in the upcoming election.

However, is he right about this $10,000,000? Actually, it depends on what question your asking. Check this out.

Go to the Source - Of Course
I’m not a fan of taking someone else’s word for it. If you want to see the budget numbers for yourself - go to the newly updated Cabarrus County website. For the FY2005 Audit Report from August 2005 - Go Here: 2005 Cabarrus County Comprehensive Annual Financial Report That’ll be the source of most of this post.

The Answer You Get Depends on the Question You Ask
During my time on the Cabarrus County Parks & Recreation Board - I’ve dreaded the budget process.

It’s dreadful; because as someone who is not trained in accounting - there’s something I’m sure I’m getting wrong. Like Fiscal Year designations: you agree to next year’s Fiscal Year budget this year. The Fiscal Year lies half in the year before its designation and half in the year of its designation. However, most of the decisions you make are in the year before. Let me give you an example. This summer, the Board of Commissioners will hammer out the budget for FY2007. FY2007 starts July 1, 2006. Most of the decisions: major projects, staffing positions, fee structure, and tax rates are made in 2006. Because accounting strikes me as being counterintuitive - I usually approach it with a degree of openmindedness and inquisitiveness…which has served me well I guess. So, let’s go ahead - ask questions - find the truth and find Harold’s $10,000,000 - which aren’t the same thing. I’m sure all the accountants reading this are wondering if some geeky engineer can pull it off.

Was There A Surplus in FY2005?

Yes. If you look at the Financial Report - Exhibit 5: Statement of Revenues, Expenditures, and Changes In Fund Balances - Budget and Actual - General Fund you’ll find that in FY 2005 Total Revenues were $136,949,940 and Total Expenditures were $132,328,390.

FY2005 Revenues Actual: $136,949,940
FY2005 Expenditures Actual: $132,328,390

That yields an actual surplus of $4,641,440

Well, what was all of the hubbub about the tax rate if there was going to be a surplus?

Ah, notice that those were actual and not budgeted. Remember how I described the budget process before? When the budgets are created, staff basically have to guess at what the incoming funds are going to be and commissioners agree to expenditures. Think about that for a $130 million budget over a year for a county of 140,000 with hundreds of employees. Needless to say, it ain’t a walk in the park. So, what was the budget that Privette, Freeman, and Suggs voted for and Carruth and Carpenter voted against in the Summer of 2004?

FY2005 Revenues Originally Budgeted: $127,720,804
FY2005 Expenditures Originally Budgeted: $130,880,459

That yields a budget deficit of $3,159,655.

How could they be so wrong?

Lot’s of variables. For instance, the FY2005 budget assumed that there would be $1.2 million in sales of fixed assets (vehicles, property, etc.); but there was only $267,034 in sales for FY2005. So, that’s about a million dollars they were counting on that didn’t happen. However, not all news is bad news - the Board of Elections spent $150,000 less than they thought they would.

The big money came from a growing economy. Sales taxes, as a whole, were $3,451,223 higher than budgeted (that’s an increase of about 12%). Property tax collections were up $1,860,821 (about 3% higher than they thought).

Also, as the year moves on, adjustments need to be made. On the revenue side, staff will update projections based on recent receipts. On the expediting side, Commissioners will address needs and update the budget accordingly. It’s not always that simple - but that’s generally how it goes. After it was all said and done in 2005, budgeted revenues grew from the Originally Budgeted $127,720,804 to the Revised Budgeted $130,058,341 or 2%. However, the Commissioners agreed to a budget increase of $5,385,379 to make the Revised Expenditures $136,265,838 - the increase was 4%. So, here’s the bottom line:

FY2005 Revenues Budgeted - Revised: $130,058,341
FY2005 Expenditures Budgeted - Revised: $136,265,838

That yields a Revised Budget deficit of $6,207,497.

Alright, Hot Shot, Where’s Harold’s $10,000,000?

Harold’s $10,000,000 wasn’t a surplus; but an overall variance. After the auditors performed their annual review of the budget and compared that to the actual receipts - this was the result.

FY2005 Revenues Budgeted - Revised: $130,058,341
FY2005 Revenues Actual: $136,949,940

This is an increase in Revenues from the final budget of $6,891,599 or 5%

FY2005 Expenditures Budgeted - Revised: $136,265,838
FY2005 Expenditures Actual: $132,328,390

County staff spent $3,937,448 less than the Commissioners budgeted for them. They were about 3% under budget.

So, because the County took in more money than originally expected and the staff spend less than their budget. The difference between the budgeted defict of $6,207,497 and the actual surplus of $4,641,440 is the variance of $10,848,937 - about 8% of the original budget of $130,880,459.

After it’s all said and done, the variance is a measure of how well the staff did in prognosticating county population growth, inflation, business sales, and overall expenditures for the upcoming year. The $10,848,937 variance is not a measure of any actual surplus. The of $4,641,440 surplus came because FY2005 was a good year in comparison to the past few for our local economy (which was influenced by high national GDP growth) and that County Staff kept costs down and stayed under budget.

I’m going to leave it to you to take away whatever conclusion you will. Some might look at this as Harold pushing half-truths. However, I’m going to assume innocence and believe that Harold simply misunderstood what he was looking at. Those budgets are very complicated and it’s easy to pull the wrong number if you’re looking for an answer before you examine the facts