HomeMy WebLinkAboutCOM 1039.049 2006-2008
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Harry Kim William Takaba
Mayor Director
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Nancy E. Crawford
•y.,, » Deputy Director
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County of Hawaii
Finance Department
25 Aupuni Street, Room 118 • Hilo, Hawaii 96720
(808) 961-8234 f Fax (808) 961-8248
May 20, 2008
The Honorable Chairman Pete Hoffmann
and Members of the County Council
County of Hawaii
Hilo, HI 96720
Dear Chairman Hoffmann and Council Members:
Thank you for the opportunity to present comments on Bill No. 252. Communication No.
1039.28 is the last of a series of communications amending Bill No. 252, draft 2. This
amendment increases our revised FY 2008-09 estimated fund balance projection to $26,241,869.
This is $10.1 million more than originally projected when the Mayor's amended budget was
submitted to you on May 5.
I believe it is my responsibility to let you know that this projection is unrealistic, and to explain
the consequences of not reaching this amount when the County books are closed in October, and
the fund balance is determined.
Attached for your information is a sheet prepared by our Budget division containing answers to
the most frequently asked questions about our "elusive" fund balance - and it is elusive, because
as you can see on the second sheet that I have attached, over the last 27 years, the County's fund
balance has fluctuated from a low of $1.17 million to a high of $18.9 million - not even close to
the $26 million that is being proposed.
Some of you may remember the County's FY 2001-02 operating budget. Although this budget
projected a $7.8 million fund balance carryover, the actual amount turned out to be $5.4, creating
a budget shortfall of $2.4 million. And it was mid-year that we had to amend the budget to
reflect the shortfall in revenues. Certain programs, positions, and equipment were eliminated,
and the following year we had to raise taxes. This was not a happy time for the public who
depended on County programs, and for employees who were counting on receiving more help
and better equipment. This also took away our ability to address unanticipated financial needs
mid-year.
/039. it?
Refb Toy ca! M i I
Ref. Date may 2 0 2008
Hawaii County is an equal opportunity provider and employer.
Honorable Pete Hoffmann, Chair
Page 2
May 20, 2008
So in short, let us not over-project our fund balance projection only to have to reduce our budget
later in the year, especially if positions have already been filled, equipment purchased, and
financial commitments made. Mid-year is when we usually count on an excess fund balance to
address unanticipated financial requirements.
Thank you for the opportunity to comment.
Aloha,
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William qTakaba
Director
F A Q's
What is fund balance and how is it used in the budget process?
Fund balance is the excess amount available for appropriation at the end of the fiscal
year. In our budget process, we try to project what that amount will be and use it as a
revenue source for the following fiscal year's budget.
What is the amount projected as a revenue source in the FY 08-09 budget?
In the Mayor's amended budget we are projecting fund balance at $16,115, 000.
What was our fund balance at the end of June 30, 2007 and what was budgeted in
the FY 07-08 budget?
We ended with $18,959,2 73.95 and had budgeted $18,979,555. 00 or $20,681.05 over the
actual fund balance.
Can we expect this year's fund balance to end up higher than $16,115,000? If not,
why not?
It is possible but not much more than that. It should be pointed out that in FY06-07 the $4
million appropriation for post-retirement benefits (GASB 45) lapsed and contributed to
the 2007 fund balance carryover. Hence, excluding the $4 million, the 2008 projected
carryover is greater than the 2007 carryover.
Has the fund balance carryover been less than the amount projected? If so, when?
Yes, the last time was with the FY 01-02 budget, fund balance was projected at
$7,830, 000 but the actual carryover was $5,458,145, a shortfall of $2,3 71,855.
What happens when there is a shortfall?
Naturally, the budget has to be amended to reflect the shortfall in revenues. How you do
it needs to be determined. Do you cut programs, freeze hiring, cut out equipment
replacements, postpone repairs and maintenance, etc. In any case, operations will be
somehow affected.
Is the fund balance easy to project?
No, it's because of all the variables and unknowns. One must be familiar with current
and past trends in revenues, expenditures and encumbrances. Fluctuations in and timing
of revenues and expenditures also impact the calculation.
kCounty of Hawaii
Fund Balance Trend - General Fund
Ending
Fiscal Year Fund Balance
1981 5,564,649.40
1982 2,656,177.78
1983 2,820,914.94
1984 4,100,753.10
1985 4,475,780.68
1986 5,670,317.41
1987 3,937,911.06
1988 4,970,016.37
1989 3,452,576.16
1990 7,393,586.92
1991 4,911,896.20
1992 3,520,877.98
1993 2,634,472.77
1994 6,548,128.13
1995 11,512,246.23
1996 19,337,343.73
1997 19,827,742.99
1998 15,452,102.23
1999 13,865,287.29
2000 13,442,471.37
2001 5,458,145.64
2002 1,171,127.11
2003 6,678,888.54
2004 10,385,457.37
2005 12,506,861.95
2006 18,344,524.76
2007 18,959,273.95
4A <A 69 169 69 -1.9
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