County proposes $507 million budget

UNION COUNTY — If the county goes along with the county manager’s proposed budget, taxpayers could see an average tax increase of $84 for the county portion of their tax bill, but that is unlikely once the freeholder board’s Fiscal Committee begins paring it down.

The bill taxpayers receive includes three parts: school, town and county taxes. Only after all three parts have been tabulated will taxpayers have an accurate accounting of their actual tax increase for 2014. Considering most municipalities are just beginning to put the 2014 budget together, that could take a few months.

The draft budget of $507.3 million submitted by County Manager Alfred Faella calls for $330.8 million in property taxes, or $13.3 million more than last year. The proposed spending plan, he noted, is under the 2-percent state-mandated spending cap allowed by law. The proposed budget is about $1.1 million more than last year’s final budget.

According to Faella, the 2014 executive budget maintains critical governmental services and invests in educational and recreational infrastructure, in addition to funding economic development initiatives that will ensure “the high quality of life in Union County that is valued by our residents.”

Faella stressed that although the condition of the county’s budget has improved over last year, there are still areas to be addressed so “down the road” there does not have to be layoffs or any elimination of positions.

“We’ve made progress aggressively pursuing revenue collections and controlling our costs but this is tempered by the need to address the annual subsidy required at Runnells Specialized Hospital and to explore efficiencies at the county jail,” the county manager said, mentioning the value of all taxable property had dropped by $1.6 billion, or a 2.45-percent reduction.

Faella explained the county began an effort two years ago by privatizing Runnells’ housekeeping and dietary services in addition to “a resolve to pursue outstanding debts.”

“This year I’m pleased to report we were able to collect $1 million owed by Middlesex County for placement of psychiatric patients at this facility,” he explained.

However, that is hardly a dent in the millions the county has had to pump into Runnells to keep it afloat. For example, Faella said, by the close of 2013 the subsidy for this facility was $13.5 million, a total of $30 million in just the last two years, and it is anticipated that both Medicare and Medicaid reimbursements will see further reductions.

Ten years ago reimbursements from these two agencies covered the cost of patient care, but this has continued to steadily decline year after year.

The county has been deeply involved in seeking a solution to what should be done with Runnells, which Faella hinted may be coming to a conclusion shortly due to the county’s request for proposals, or RFP, last year.

“We are now at the conclusion of the RFP process that will determine the future steps needed to ensure Runnells can operate in a fiscally sustainable manner,” the county manager said, adding the county anticipated “a final decision to be made in the next few months.”
According to sources, though, this decision may be closer than that and in fact may happen in the next few weeks.

In question is whether the county will decide to lease the facility or sell it. This will depend heavily on whether a lease will alleviate the county subsidizing this facility, or if a sale ends the financial bleeding.

In October the county issued the RFP for companies that might be interested in running or buying the facility. Sources indicated recently that this resulted in multiple favorable responses that could result in bringing this financial drain on taxpayers’ dollars to an end.
However, while it is expected the freeholder board will be hearing about these proposals shortly, no information has leaked whether this involves a sale or lease of the hospital.

The Union County Improvement Authority has been handling the RFP’s and also preparing a report for the freeholder board, but Dan Sullivan, acting Executive Director of the UCIA, has remained tight lipped about whether proposals involved the sale or lease of the facility. He also would not confirm nor deny if the freeholder board would be making a decision regarding Runnells in the next few weeks, as reported by sources close to the issue.

Faella also brought up that the county will be receiving a study mentioned in his 2013 budget message that focused on the Union County jail. The study, he said, will focus on the jail’s management, personnel, staffing, custodial care and labor contracts.

“This study will supplement an ongoing policy initiative, conducted through Luminosity, which has continued to reap operational and cost efficiencies at the jail over the past two years,” he added, indicating this was the result of the efforts of Luminosity, a consulting firm that aids jails with operational problems. Faella said this brought about a 20 percent reduction in prisoner population and cost savings.

“This reduction allowed us to re-negotiate two competitive contracts: medical services and food services,” the county manager reported, adding the reductions resulted in savings of $765,728 annually.

Another area that was targeted for financial reduction was Watchung Stables, which ran at a deficit of $600,000 in 2012. Using a commissioned study and working with staff, Faella said the county was able to trim $200,000 from this budget through restructuring.
Faella did point out the county is still laboring under large federal and state reductions in aid, which put a dent in any revenue increases they were able to make.

Some of the other leading drivers contributing to the $15.5 million deficit this year included a reduction in red light camera revenues of $700,000; an increase in pension costs of $500,000; an increase in all insurances, including workman’s compensation, general liability and prescriptions plans totaling $1.8 million; declining grant money for programs administered by the county totaling around $300,000, and an increase in debt service by $3 million for expansion of the Union County College Cranford campus and state-mandated family courthouse, which is expected to open next year.

The county manager pointed out that despite this, the county has been able to maintain its bond rating and it remains one of the highest available. A recent report from Moody’s, the leading provider of credit ratings, reaffirmed the county’s bond rating, Faella explained. The report from Moody’s did mention they expected the county’s debt burden to remain manageable “given the modest direct debt burden,” while also citing the county’s “conservative” fiscal practices and diverse tax base.

The county manager said it was important to note they were able to increase surplus by 25 percent or $24 million over the past year, “a key indicator of fiscal health.”

Moody’s did mention Runnells hospital, suggesting the county would be “challenged by volatile hospital revenues” should medical reimbursements continue to decline.

Faella said the county was also able to settle with half the collective bargaining units and realize more than $1 million in savings by negotiating changes in co-pays for prescriptions, network deductibles and network reimbursement.

The freeholder board’s fiscal committee will now take a look at the budget and likely look to trim expenses, before the entire freeholder board will get a final look.