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Franklin County finances look dire

October 11, 2013
By John Quenell

A report on Franklin County's fiscal stress was released by the Office of the state Comptroller on Oct. 4. This was referenced, but only briefly, in the Enterprise's Oct. 8 article entitled "Tentative Franklin Co. budget exceeds tax cap." I believe that everyone should at least read OSC's actual report summary, reproduced below in its entirety. It is the most scathing OSC audit report I have ever seen, the problems are very serious, and it is clear that they have been caused by the Franklin County Legislature.

"The Legislature adopted budgets for the general fund that were not structurally balanced; instead the Legislature routinely relied on appropriating significant amounts of fund balance and reserves to finance operations. In addition, the County's enterprise infirmary fund was not self-sufficient, and therefore required subsidies from the general fund through both interfund transfers and advances. The Legislature also had not adopted a policy establishing a reasonable level of unexpended surplus funds to maintain and had not developed and adopted comprehensive, multiyear financial and capital plans. As a result, the general fund realized annual operating deficits, a declining fund balance, and a declining cash balance over the last four fiscal years (2009 to 2012). In fact, the general fund's cash balance was so depleted over the last four fiscal years that the County could not transfer cash to the county road, road machinery, and enterprise infirmary funds for the entire amounts that were included in the general fund budgets for interfund transfers to these funds. In addition, we found that the County's financial condition declined further during 2013 to a position that the County did not have sufficient cash to pay its bills and other obligations when due, resulting in the County issuing short-term debt in the form of a tax anticipation note for $4 million on May 31, 2013. The County's financial condition will likely decline further during 2013 because the general fund budget is not structurally balanced."

This is quite a contrast to remarks made by county Manager Thomas Leitz in the above-mentioned Enterprise article. (Mr. Leitz was appointed by the county Legislature in 2011.) Concerning the possibility of a high property tax levy increase for 2014, caused by financial stress, he blames a lack of growth in sales tax (i.e., not as much as the overly optimistic Legislature had predicted) and sharply increasing outlays for the county sheriff, nursing home and social services department. Funny, none of these are mentioned by the comptroller. But Mr. Leitz does say, "We're trying to get through this juggling act where we manage our finances until times improve, but it's tough to do with these additional mandated costs."

That "juggling" has occurred appears to be one point of agreement between Mr. Leitz and the OSC, although he thinks it's an acceptable practice while the OSC definitely does not. And then, you have to wonder what Mr. Leitz means by the phrase "until times improve." The OSC says the county has been mismanaging its finances for the past five years, and apparently times haven't improved yet.

I also have to wonder about those mandates. If it is true the "additional mandated costs" are driving the county over the edge, then let's just stop paying those costs. We tell the state that we cannot afford to pay them and at the same time stay within the 2 percent annual tax increase cap, period. What will happen then? Will Gov. Cuomo have the entire county placed under arrest? Perhaps more likely, the county would be legally enjoined to make the expenditures anyway and then would slide into a Detroit-style bankruptcy, accompanied by a transfer of financial management from the county Legislature to a state-appointed receiver. Given what the OSC has to say about the Franklin County Legislature's financial management track record, this may be inevitable anyway.

The complete OSC report may be found at www.osc.state.ny.us/localgov/audits/counties/2013/franklin.htm.

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John Quenell lives in Paul Smiths.

 
 

 

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