PORT ANGELES — To make up for an unexpected budget shortfall without borrowing money, nearly 400 Clallam County employees will be asked to take 24 unpaid vacation days in 2011 if a preliminary budget is approved.
A combination of a $2.2 million hit to interest income and an increase in mandatory retirement payouts will force the county to cut $2.7 million in expenses to balance next year’s budget.
Most offices will be closed twice a month if the proposed furlough days are approved by commissioners when a final budget passes Dec. 14 — following negotiations with employee unions.
County Administrator Jim Jones presented a preliminary budget Tuesday. In it, projected expenditures in the general fund ($31.3 million) outweigh revenues ($30.4 million) by $937,628.
To make up that difference, the county will draw on its $9.5 million reserve pool, leaving more than $8.5 million behind for emergencies.
The 24 unpaid furlough days that Jones proposed would save the county more than $2.4 million, which is needed to offset layoffs.
“This method of cutting expenditures was chosen by me to avoid layoffs, which would be necessary — somewhere between 35 and 64 full-time equivalent people — depending on how we decided to pay for the unemployment costs,” Jones said.
“This decision to furlough, and the resulting impacts, must be bargained with all of our unions before we can implement any changes.”
The preliminary budget is available on the county’s website, www.clallam.net. Click on “Board of Commissioners,” “Meeting Agendas & Minutes” and “Complete Meeting Packet” for a line-by-line summary of the preliminary 2011 budget.
Commissioners Mike Chapman, Mike Doherty and Steve Tharinger would decide which two days the courthouse would close every month.
Jones will hold another round of budget talks with county department heads and the six unions that represent county employees before preparing the final budget.
Jones proposed the 24 furlough days in part to offset a spike in retirement contributions.
Contributions to the state retirement fund will rise from 5.3 to 8.7 percent of salaries beginning next July, at a cost of about $700,000 per year to the county.
Those costs are projected to rise to 9.4 percent of salaries in 2012, 11.5 percent in 2013 and 11.6 percent in 2014.
To make matters worse, new rules require banks that accept public deposits to keep the entire sum of the deposit as collateral, rather than a 10 percent collateral.
“What that means is if a bank takes, under the new rules, $100 from a public entity, it has to reserve all 100 of those dollars,” said Jones, who spent 17 years working at First Federal in Port Angeles.
“It means they can’t loan any of it out. It means they can’t make any money on that $100, so they don’t want it. They don’t want public deposits any longer.”
As a result, Clallam County projects its annual $2.7 million interest revenue will fall to about $400,000 beginning next year.
“That’s something that we now have to deal with on a permanent basis, unless the law changes,” said Jones, who added that the county doesn’t control most of its revenue.
“Those two items have basically put us in a new realm.
“We just have too many staff right now — not for the work we do because we’re thin — but for the amount of money that we have to support them.”
Salaries and benefits make up more than 70 percent of costs in Clallam County’s general fund.
“I am proposing a budget that will permanently take care of that problem, moving into the future,” Jones said.
Despite the reduction in services, law enforcement coverage will remain all-hours.
Judges and prosecutors would not take pay cuts because their salaries are mandated by the state.
Chapman noted the budget was “spot-on balanced” before the loss of interest income and the spike in mandatory retirement contributions.
“There’s going to be great concern among employees and probably among the public of a loss of services,” Chapman said.
“But when $2 million of revenue goes ‘poof’ because of banking regulations, it’s either loss of services or new tax revenue. We all know how difficult new tax revenue is in this climate.”
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Reporter Rob Ollikainen can be reached at 360-417-3537 or at rob.ollikainen@peninsuladailynews.com.