Thursday, April 4, 2013

Wayne Co. struggling with cash flow problems, rising deficits, report says

Detroit — An unprecedented, state-ordered review of Wayne County finances has found that reforms have yet to improve cash flow, deficits are still increasing and the county is relying on disappearing revenue streams to pay its bills.
County officials recently received a 156-page study that found the county relies on money intended for the disabled to plug cash shortages, and its general fund had a negative cash balance of $104million last summer. Even so, the county regularly overspends despite a $167 million budget that is expected to grow by $40 million this year.
For about a year, aides to Executive Robert Ficano have met almost weekly with state Treasury officials about the situation. A few months ago, the state imposed new spending and reporting restrictions on the county, but Ficano officials acknowledge they have yet to solve the problem.
The county has hit at least four of 18 triggers that would allow Gov. Rick Snyder to appoint an emergency manager, but Ficano officials said any talk of one is premature. "We don't need the state to come in and tell us we have financial problems. We know we do and we're working on them," said June West, a Ficano spokeswoman. "How many emergency managers is the state interested in, able to or desirous of putting in place?"
State Treasury spokesman Terry Stanton didn't respond to emailed questions Monday about the situation or the study by Detroit-based consultants Pierce, Monroe and Associates.
The study, the second phase of a review that began last year and cost the state at least $365,000, comes amid feuding about finances between Ficano and elected county officials including Prosecutor Kym Worthy and Sheriff Benny Napoleon.
Ficano staffers blame the officials for much of the overspending — especially Napoleon, whose office is already $35 million over its $85 million budget this year.
Napoleon and Worthy said they are chronically under-funded. Worthy is suing on claims her $25.6 million budget is too low and has withdrawn prosecutors from some misdemeanor cases, while the sheriff's department successfully sued the county a few years ago over funding of jail operations.
The Treasury has yet to sign off on Wayne County's 2011 deficit elimination program. Last year, Ficano withdrew a plan to solve the deficit by diverting unused grant money when it became clear the state wouldn't sign on. Instead, he agreed to a state plan that forces the county to report monthly spending in order to insure the issuance of $90 million in bonds each year to pay its bills before taxes are collected.
The rules empower the Wayne County Commission to decrease funding for overspending departments, but it has yet to do so, said Carla Sledge, the county's chief financial officer.
Commission vice chairwoman Alisha Bell, D-Detroit, said it's too soon to tell if the reforms are working or if the county is on the road to an emergency manager.
"We have been trying to work out our financial issues for a few years, but the decline in property taxes and the exodus out of Detroit are contributing to them," Bell said.
"If we don't continue to work to address the deficit, we definitely could have (an emergency manager) but we are diligently working to avoid it."
The study spread the blame around. It found:
The county relies on borrowing money intended for the disabled to pay its bills. The county handled money for the Detroit Wayne County Community Mental Health Authority, which receives some $500 million in state and federal funds. Last summer, the county's general fund borrowed up to $100 million to pay bills.
The pool will soon disappear because Snyder signed a bill making the agency a separate authority in October.
"The loss of the agency's cash in-flow … could cause the county to have serious cash flow challenges," the study found.
Sledge, the county financial officer, said the practice is legal, the money is repaid and services aren't affected.
Napoleon's office deploys as many as 20 jail officers to other departments, such as monitoring tethered inmates or drug enforcement. Doing so forces other officers to cover the jail on overtime and balloons the budget.
Napoleon's office released statistics Monday blaming much of the problem on jail populations, which he can't control. His budget is set assuming an average inmate population of 1,754. That's about 1,000 less than the county has in jails or on tethers, the sheriff's office said.
In "numerous" county accounts, budgeted amounts varied substantially — or had no budget whatsoever. Sledge said the county is seeking an outside consultant to recommend ways to increase efficiencies. She offered few details but said the contract could come to the commission in the next few weeks.
Commissioner Kevin McNamara, D-Belleville, said there's little the commission — or an emergency manager — could do if elected officials continue to win court settlements about funding. In addition to the other suits, the county also agreed in 2011 to pay $50 million and spend up to $300 million on a new courthouse to settle a funding lawsuit with Third Circuit Court.
"The short story is the commission isn't giving up the money. We're already holding the line — people have found a way to get around us," he said.
"Unless somebody at the state level — the legislators and the Supreme Court — fix the system, we're not going to clean this up."
The state tried to intervene, but bills stalled in the Legislature last year to curtail such suits by changing state law so counties' chief administrative officers or CEOs could sue over budgets.
"There is no emergency manager that could clean up Wayne County's finance problems because an emergency manager can't trump a court order," McNamara said.
jkurth@detroitnews.com
(313) 222-2513

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