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TextInitial Budget Forecast Shows Need for Continued Spending Reductions
Fairfax County is not out of the fiscal woods yet. That was the message
made clear from the initial budget forecast presented to the Board of
Supervisors by senior County staff on October 24. As it stands today,
Fairfax County faces a $55 million shortfall in the coming year, rising
to $120 million if property tax payments are kept at their present level.
By law, the budget must be balanced when passed next April.
This preliminary forecast is provided each year as a starting point for
budget discussions. In it, the property tax rate is kept even, all
discretionary spending is held steady and no pay increase for County or
school staff is included. However, increased fix costs - retirement,
health insurance, workers’ compensation premiums, debt service - and last
year’s use of almost $68 million in one-time money, outpace the limited
revenue growth expected for FY2012, resulting in the projected shortfall.
Unlike the last several years, residential property values are projected
to increase, meaning if the tax rate is held at the FY 2011 level of
$1.09, the average homeowner, with a home valued assessed at $432,439,
will pay $156.96 more than last year. If the rate is dropped to $1.05,
then tax payments would remain the same, but the shortfall would grow
from $55 million to $120 million. For scale, in each of the last two
years, the Board reduced spending by about $90 million each year.
There are additional pressures on this year’s budget from the school
side. The School Board has called for increasing compensation for all
School Board employees, including teachers. Such an increase, along with
the expiration of federal stimulus funds and other factors, would require
the County to increase its transfer by $65 million over last year. There
is some discussion on the Board of Supervisors about compensation
increases for County staff, although the County Executive has recommended
one more year of pay freezes.
At $55 million dollars, the currently anticipated shortfall for FY12 is
smaller than FY10 and FY11 - which had initial projected shortfalls of
$648 million and $490 million respectively - but balancing this budget
will still be a challenge. During the past two fiscal years, the County
kept operating expenses roughly at the FY 2009 level. The transfer to the
schools was held steady at about 53 percent of the total budget, 481 net
positions were eliminated, compensation to employees was held flat, all
agency spending was reduced, some facilities were closed and some
programs were discontinued in order to balance the budget.
Balancing budgets over the next several years will become no easier
either as this multi-year down turn is not expected to abate. Incredibly
modest gains are predicted in the real estate market through FY14. Though
there was an increase in home prices over the course of the last calendar
year, suggesting perhaps better times lay ahead, it is assumed that this
is little more than a blip, as the growth rate is expected to slow the
following year.
Compounding matters is the high level of uncertainty in both the local
and national economy. Nationwide, eight million jobs have been lost
during the recession, consumer confidence remains dismal and economic
growth remains slight – the economy expanded only 1.7 percent in the
second quarter of 2010. Here in Fairfax, foreclosures are up: from a low
of 705 in March 2010, they have increased by 168, totaling 873 in
September. More troubling, serious delinquencies – home owners whose home
payments are 90+ days past due – are on the rise.
Despite the significant programmatic budget cuts over the last two
years, the increase each year in the fixed costs set forth above means
that this year’s projected spending is only 1.3 percent less than two
years ago. If the Board maintains the $1.09 rate property tax for FY12,
payments would be about $400 higher than in FY06, when home values were
about what they are now. Given those dynamics, further spending
reductions are necessary. Responsible budgeting now will build a sound
foundation for the future.
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