Palm Beach County is facing projected budget deficits of about $50 million a year starting in 2019, according to an analysis prepared for commissioners, who met to discuss the budget Tuesday.
Growth and its corresponding need for expanded services, particularly law enforcement, are driving those deficits, county staff members said.
Concerns about the budget — frequently expressed by Commissioner Hal Valeche — led commissioners to schedule a workshop several months before they would ordinarily discuss the budget they must approve next fall.
“We are going to have to deal with this close to $50 million shortfall,” Valeche said as Tuesday’s budget meeting got underway.
Palm Beach County Sheriff’s Office services accounted for about 48 percent of the county’s general fund budget in 2018. In 2007, PBSO accounted for 36 percent of the general fund budget.
Commissioner Mack Bernard asked County Administrator Verdenia Baker if the county could continue to “sustain the increase in the future in our budget.”
Baker replied: “That’s a decision that the board is going to have to make.”
For the past seven years, the County Commission has been able to meet its state-mandated responsibility of passing a balanced budget while holding the property tax rate steady. But based on the analysis county staff members provided to commissioners, that will be an increasingly difficult challenge to meet in future years.
The projected gaps — $47.9 million in 2019-2019, $50.1 million in 2019-2020 and $57.9 million in 2020-2021 — assumes property tax rates that bring in the same amount of revenue as current rates.
The projections assume 7 percent growth in property values — which is in line with what has transpired in recent years but far ahead of what the county experienced during the Great Recession — and the projections assume that voters will approve a $25,000 increase in the homestead exemption when it appears on the November 2018 ballot.
If approved by 60 percent of the state’s voters, the new homestead exemption would go from $50,000 to $75,000 for homes worth $125,000 or more for non-school property taxes; the $25,000 expanded exemption would apply to the value of the home between $100,000 and $125,000.
County officials have said an expanded homestead exemption could cost the county $25 million to $30 million a year in lost property-tax revenue.
If commissioners want to raise property tax rates to bring in additional revenue so services won’t have to be cut, they’ll have to cast a vote that would likely be politically perilous and unpopular.
Other options — curtailing law enforcement or Palm Tran bus services, for example — could be just as unpalatable.
A decade-old provision in state law establishing a maximum property tax rate makes it a challenge for the county to raise property tax rates going forward. The maximum rate, a calculation that factors in such things as property values and per-capita income, varies from year to year. The county’s rate of $4.78 per every $1,000 in taxable property value is below the maximum rate for this year and for next year.
But that maximum rate is expected to drop below the current rate in 2020 and 2021, meaning that, even if commissioners wanted to keep property tax rates at their current levels, a super majority — five of the commission’s seven members — would have to agree. The maximum rate calculation, a non-factor for the county in the years immediately after the Great Recession because the county was far below it, now adds more political complexity to an already challenging scenario.
If commissioners took a super majority vote to keep property taxes at current rates in 2020, the projected deficit that year would drop by $2.1 million, county staffers estimate. It would drop by $21.6 million if they did the same in 2021.
While Valeche sounded the alarm about the projected deficits, Baker said she typically faces a deficit as she begins crafting a budget draft to recommend to commissioners.
Earlier this year, as she began work on the 2018 budget, department budget requests exceeded expected revenue by about $50 million, Baker said.
That prompted Bernard to wonder aloud whether the budget woes are critical.
“If we had a projected shortfall in 2018 of $50 million, and we have one of $50 million in 2019, it seems we can land this plane,” he said.
Baker, expected to recommend a balanced budget, responded: “I don’t have a choice; I have to land this plane.”
Valeche had hoped department heads making presentations would lay out how they plan to trim their budget requests in light of the looming budgetary challenges. But that’s not what happened.
One department head after another sat before commissioners, gave an overview of how their department is financed and what it does and pointed out noteworthy accomplishments.
They did not make a formal request for a specific dollar amount, but they also did not say how much their department could do without.
“I can’t identify anything that’s an easy cut,” Youth Services Director Tammy Fields said after her presentation.
Much of Tuesday’s workshop dealt with needs — for more work to combat the opioid crisis, for more staffing.
County Mayor Melissa McKinlay made an early pitch for an expanded legislative affairs department, which she said would help the county in the long run through more effective lobbying for financial assistance from Tallahassee and Washington, D.C.
Valeche said the budget workshop wasn’t a waste, but he did not get from it all that he had hoped.
“At some point, the ideas for these cuts will have to materialize,” he said. “The name of the game here is how do we save $47 million without harming our level of service.”