By Mary Alice Murphy
With no public input received at the special meeting on Tuesday, July 28, 2020, the commissioners heard from Financial Officer Linda Vasquez on the proposed final budget for fiscal year 2020-21.
Because of foresight by County Manager Charlene Webb and Vasquez in March at the beginning of the pandemic, the budget, as presented, was not as dire as it could have been.
With decisions to freeze vacant positions and a request to department heads and elected officials to stop unnecessary spending, such as travel and unneeded purchases, Vasquez said the county saved about $180,000, which left the county with about $1.3 million in unexpended funds at the beginning of the current fiscal year.
This is the final budget that will be submitted to the New Mexico Department of Finance and Administration by end of business July 31, 2020.
"We were able to continue to fund employee insurance at 100 percent," Vasquez said. "The frozen positions are one in the manager's office, one in the clerk's office and three in the Road Department. This budget also includes 13 furlough days from January to June. We are putting off the furloughs until the first of the year in order to be able to review the revenues received up to that time. There will be no furloughs in the Sheriff's Department or in corrections, because both operate 24/7. The furloughs will equal about 5 percent decrease for employees or about $1,500. No capital outlay is expected, so none is built into the budget, except for the capital outlay already received to complete phase 2 of the parcel mapping project. We also had a discussion with the Extension Office to see if they would agree to a 5 percent cut. They agreed."
District 1 Commissioner and Chairman Chris Ponce thanked the agricultural agent's officer for being "a member of the team and agreeing to the cut."
District 2 Commissioner Javier "Harvey" Salas asked how many furlough days were estimated.
Vasquez said: "Thirteen days, so the budget will be accepted by the DFA and we will keep the three-twelfths required reserve."
Salas said he talked to the Treasurer Steve Armendariz who told him a CD would be coming due in August and could be put into the General fund. "A 5 percent burden may not seem like much, but $1,500 less for the year can be a substantial hit to some."
Vasquez said that was one reason why the 13 furlough days were being put off until January, so the county could see how much in property taxes is collected. "If we instituted the 13 furlough days now, it would be one day a month, but in January, if we need them it will be two days a month. Maybe in January, we will realize we don't need them. My recommendation is for every department to stagger them to best fit their needs. Over the year, it is about a 5 percent savings."
She explained that if the county started now with the furloughs and then in January discovered they didn't need them, it would be hard to repay the employees. "We can't give cash; it would have to be through administrative days, paying them for taking a day off."
Salas said he thought the investment fund should be savings for a "rainy day. This is a rainy day, so we should use it and take only what is needed and revisit the rest of the fund."
Armendariz reported the investment fund is currently valued at $8,798,480.50. "That is not accounting for accrued interest. That is held in our Morton Capital account. We just received $200,000. I would normally reinvest these funds, but I have left it in checking for easier access. We have $1.5 million in the money market account, which we can transfer to another account the next day. We have laddered CDs, with one coming due in August, one in September, one in September 2021 up through 2024. I'm on the outside looking in when I see $20 million sitting in different bank accounts. A lot of those funds may already be encumbered. My property tax receipts for this first month of the fiscal year are $1.3 million, about the same as last year. On a daily basis, I review all the accounts. When the balance of the Treasurer's checking account goes under $2 million, I move money. We buy and hold CDs. When they are redeemed, if we need the money, I put it into the account, instead of reinvesting. I know how much is in our account, but I have no clue whether it is encumbered."
Vasquez said when the treasurer redeems a CD, "I don't know where it goes. I work on cash on hand that is in our checking account. I don't manage his checking account. If I understand there is $1.3 million in checking, I'm already using it. It's budgeted. I will be transferring $1.2 million to the General Fund. The treasurer's checking account is all the funds, including municipal and school funds, so it's hard from me to know what it's from or for."
Armendariz said his office writes distribution checks to the municipalities for their tax receipts. Every day checks from the finance department are transferred from the Treasurer's checking account. The total of all the accounts should balance. "I do verify and reconcile the accounts."
District 3 Commissioner Alicia Edwards said: "To simplify, we have X amount of dollars. How we spend it is governed by the budget. If we carried over $1.3 million to this year, there is no savings. It is simply a transfer. The question is: Do we want to take money out of Morton? Everything in the budget is encumbered by the budget."
District 5 Commissioner Harry Browne also clarified: "The treasurer keeps $2 million in the account for the county to use. When it is needed to get it to $2 million, the treasurer transfers money to reach that amount."
Armendariz noted that when he began in the office in 2009, the investment portfolio had $4.3 million. "During my 11 years, it has grown to $8 million. As money is needed it is transferred out. Morton has not been below $7 million in the recent past. The revenues have decreased only slightly since last year. I'm on the outside looking in, but I see the reality that money is available for county needs. The debt service fund has to stay to pay for bonds. We started with about $8 million in bonds. They are now down to about $5 million. The interest from the LGIP (local government investment fund) goes into the General Fund."
Browne used a metaphor to try to explain it better. "The treasurer's checking account is a reservoir. Water flows in and out, but the reservoir stays the same. So, I propose we forget about the reservoir. DFA will not look at the reservoir but will look at whether the flows in and out match. DFA will not let us go below the three-twelfths reserve. The gap in understanding is why the reserve is $2 million, but we have $8 million in Morton."
Ponce pointed out that insurance will increase in the future. "Going down this road of taking from investments is dangerous."
Salas asked if extra money would be put into the reservoir.
Browne said it would be on the audited report. "I don't think we have the authority to use the three-twelfths reserve."
Salas asked what the purpose of savings is if you can't use it.
"We have to have money for the next payroll, for instance," Browne said. "The reservoir funds everything. I think it's all encumbered."
"I disagree," Salas said. "I think savings should be able to be used. How much in Morton is unencumbered?"
Armendariz said it was his frustration, too. "I watch the accounts and keep transferring money back and forth. Obviously, the money is not being spent. We meet expenses every month."
Salas asked if the $200,000 from the CD could be used in order to not have furloughs.
Vasquez explained that everything she spends comes from the revenue accounts, which hold revenues from gross receipts taxes, property taxes and grant money. "What I'm working on is actual receipts. I don't look at anything that has to do with investment accounts, when I develop a budget."
Salas asked if the county could consider using some of the unencumbered money in the investment accounts to keep from having to impact employees with furlough days.
Browne said the CD money is not revenue and DFA will not allow the use of that as revenue.
Vasquez pointed out that DFA does not consider investment as savings and during her years in the office, it has never been used as such. "We have never used a CD to put into revenue flow. DFA would not allow it. They always recommend we cut expenses if we need more revenue. I have no idea if there is a process we could use. We would have to ask DFA."
"Exactly," Salas said. "That's the question I'm proposing."
Browne said "I know exactly what DFA would say. What would you say, Manager Webb?"
"Linda put it very politely," Webb said. "I've never encountered the issue either, in all of my years, I have never used an investment account to balance the budget. I don't think DFA would receive it well at all. What I'm understanding about the $8.7 million and perhaps you, Mr. Armendariz, could clarify, but the treasurer has no idea where that money comes from or is for. You don't know how much belongs to the General Fund, to the Fire Fund, so we go cashing in monies that we have no idea where it belongs or where it comes from. Since 2009 have you instituted any process to track the money where it comes from and where it goes?"
"No," Armendariz said. "Statutorily, it says that the treasurer shall take any funds not immediately needed by the county and invest them. If the time comes, I also transfer back into investments."
Webb said she understood that. "I'll be very blunt. I think it's a terrible idea to tap into that. I don't think it will be well received by DFA. Commissioner Browne explained it very well. That's what DFA expects for the flows in and out to match. I think if that's not what we do, we would have some explaining to do to DFA."
Salas said even if it's a terrible idea, "if this isn't the situation when it's time to use it, when is the time to use it? I don't really care what DFA thinks. I want to know if we can use it. If we can't what is the purpose of saving money? If we can't use it, what good is it?"
Browne said he agrees, and he thinks it is unfair of the DFA to require the county to keep 25 percent in reserve year after year, never using it.
Salas said: "I want answers and how much we have in a savings account that is not encumbered. We should know how much we have and why we can't use it."
Webb suggested getting a DFA representative to talk to the commissioners and explain things. "We put money into the investment account for different reasons. It is not all unencumbered in the traditional way. This is uncharted territory for all of us. We have to make sure we have the reserve of three-twelfths to make sure the county has three months of being able to pay expenses in case of a tragic event and for the Road Fund, it is a one-twelfth reserve. But our budget has to have the DFA stamp of approval. Sometimes they will come back with tough questions and we have to be able to explain that."
Browne said he would commit to work with the treasurer, Vasquez and Webb to find answers within the next few months.
Armendariz said he had asked for the same answers in 2010 when the treasurer's account was out of balance by $700,000. "An outside auditor came in and he couldn't say where the balance was off with the Finance Department. It doesn't make sense to me. I have asked forever to be able to balance Eagle Treasurer with Encode. I've been told it costs too much to update the systems to do that. I was able to go back and balance all the accounts. That's why I feel comfortable that what we have in the treasurer's account always balances. My inclination would be not to project that much of a decrease in revenues. If you don't, it allows me as Treasurer, if this $1.2 million in collections stops tomorrow, we don't know. The assessor thinks there will be an increase in what is billed, but we don't know until November or December how much will be collected. Why not wait until January? By then we will know if the mines actually close and when the extra $600 supplement to unemployment stops what actually occurs. It's premature to project this big a decrease in revenues."
Salas said he actually agrees with preparing for the worst, "but I want to protect the employees." He repeated wanting to know how savings can be used.
District 4 Commissioner Billy Billings asked if the county could get answers to Salas' questions.
"I'm not convinced we will know what is in the investment account," Webb said. "Nobody knows. I've been asking for the information for the five years I've been here. I don't know when we can get Mike Stininger from DFA here, but I'll try. I'm not convinced we can do it before January."
Armendariz said he has asked for finance and treasurer to be able to talk between them, but the auditors always say: "Don't worry about it. For a bit of history. We found in the bank records a gap with money not in the Debt Service account. We have since made it whole again. I feel very comfortable when we do the bank reconciliations every month. It works. I guarantee enough revenue until January. If the mines shut down and the tax collections don't pan out, we will know before January. I truly believe there will be no need for an adjustment in January."
Browne said he had no significant problems with the budget, but "I would like to see in future years, if I'm still here, a comparison of the current budget to last year's final actual expenditures. I believe it would look different from the 2020 proposed budget."
Webb said: "I don't like this report any better than you do, but our hands are tied about what we can produce in Encode. When we looked at this year's budget, we actually look at what happened in 2020. The budget we put in front of you is based on what we spent in fiscal year 2020."
Browne said he spent the time to put the numbers into an Excel spreadsheet. "That should be what we see."
Vasquez said she takes the Excel spreadsheet she works with and exports it to Encode for this report.
Browne said he believes the Excel spreadsheet would be the best thing to see. He saw an increase of $240,000 in property taxes that aren't shown in the Encode report. The projection is for a decrease of 16 percent, but it shows up in Encode as a 20 percent decrease.
Browne said he saw in other places revenue that would show no need for furloughs. "I agree with Linda. She is looking at past recessions, when collections dropped to roughly 87 percent. Last year, the collections were at about 96 percent. If you apply the 9 percent drop to the actual 2020 activity of $5.1 million, you will find roughly about $500,000 in difference. I suggest we take that method to project property taxes. They are stable. Gross receipts taxes and copper production are much harder to project, because we don't know what's going to happen."
Ponce said going into investments is a slippery slope and Browne agreed. "I have notes where we can cut," Ponce said.
Edwards noted that there would be no need for cuts.
Ponce noted that last year the Sheriff's Department had 10 vacancies. "I hope we didn't just use those savings."
"Can we not just adjust the budget in that way, cover the furlough days and address the other issues between now and January?" Edwards asked.
Billings said he would like to hear "Linda's and Charlene's responses to that path of action."
Webb replied: "The budget is ultimately your responsibility, and if that is the pleasure of the board, we will make it happen."
Browne said he could put a figure on it. "If we talk about a 9 percent decrease, then our property taxes would see a $577,425 increase in the comparison column."
Browne said that was compared to actual last year numbers.
Webb clarified the motion would require a change to property taxes to $4.7 million.
Browne said that would change the 5 percent cut.
"You can have faith that Linda will make the change and adjustments can be made," Webb said.
Browne noted that most changes would increase the surplus, although he had not looked at all of them.
Edwards said she was not as optimistic as the treasurer, "but I think we can look in January at our positions should all remain equal, but not until things are better known. I would like input on the three positions in the Road Department. I want us to realize that if we start down the path of adding positions, they are a recurring expense."
Clerk Marisa Castrillo said the vacant position in her department is the recording position, "which impacts everything in the department including elections."
Salas asked what would happen if the county applied the $500,000 to the budget but spent only $300,000.
Vasquez said the amount is carried over at the end of the year, but it would be there. "If we need it during the year, we could use it."
Ponce said he would like to see a retreat or an all-day work session for the commissioners on the budget next year, "so when we get here, we know what we have. We could have more accountability and understanding of the budget, so we can justify it to the public."
Billings said it seemed like the direction was not to go with furloughs or what would equal a 5 percent cut. "Does that include the $3,100 for the Extension Office? I would like to make the point that when the extension office agreed to the 5 percent cut, it would also create a 5 percent cut on the state funding and 5 percent on the federal funding. They would have lost $9,300 in total. I think the manager and finance officer are pointing at point A and the commissioners to point B. If the manager and finance officer were right, it will be more difficult down the road to cut things."
Ponce said he would like to see the commissioners review the budget at least quarterly, so the projections and adjustments can be done.
Edwards said she came into the meeting convinced she would vote for the budget as presented. "I am inclined to err on the side of extreme caution. I think quarterly seems too far away. We may be going to be faced with extreme challenges. Everybody is talking about the $8 million in the investment fund, but that is only three-quarters of our annual budget. The investment fund has to be our last resort and we need to understand what's in it."
Salas agreed the investment fund should be the last resort.
Ponce said he liked Browne's idea with "his idea that we can look at it again in January."
Browne said and asked: "You have to present a quarterly report to DFA. How much more work would it be to do it monthly?"
Vasquez said: "We won't have much more information until December."
Webb said: "We can run a monthly report and then when it's the quarterly report, we can have more discussion."
Ponce said he wanted the budget discussions to include the departments, too.
Edwards suggested the commissioners receive an electronic report monthly and then the full report quarterly.
The next business item was a resolution for the final budget adjustments to the 2020 fiscal year budget. Vasquez read off a number of adjustments and explained the report had to be sent to DFA by July 31.
Ponce asked what the county does with Lodger's Tax. Webb said it is mainly used for advertising the county for tourists. "We also provide funding for the Tour of the Gila, Wild, Wild West Pro Rodeo, Fort Bayard Historic Preservation Society, the One Million Bones project and such events. We are working on an ordinance that will come to you."
The final 2020 budget adjustment resolution was approved.
Vasquez also presented the final 2020 budget quarterly report, which DFA requires. "We had a $2.1 million surplus, with a beginning year balance of $23 million, revenues of $31 million, expenditures of 34 million, $19 million in cash and the $2.5 million in reserves. We had $17 million left.
Browne said the report "looks like an answer to where the investments are and where they came from."
The commissioners approved the quarterly report.
The next item of business was the approval of the fiscal year 2021 final budget. Browne moved it be approved with the elimination of the 5 percent cut due to furloughs. Vasquez noted the ag agent would keep the same budget and the budget also included an increase of $25,000 to the Clerk's Office for elections. The budget was approved with adjustments.
The last item was a resolution that would have needed to be passed if elected officials were to take the 5 percent cut. The item died for lack of a motion as no adjustments were required.
In commissioners' reports, Billings said he had nothing.
Salas apologized for his knowledge not being as fluent as others.
Edwards thanked the treasurer for his information. "I also thank Charlene, Linda and Randy (Hernandez, chief procurement officer) for their hard work on the budget and letting us pick it to death. I acknowledge what Billy said about the Extension Officer. She said 'yes, we're part of the team,' but we have to remember that what we set is part of matching funds. I also thank Harry for the creative thinking."
Browne in his report apologized for not being available the previous week. "My wife and I went backpacking and camping. We came across others also backpacking. All of us stopped, with one exception, pulled out our masks and continued on our way. In Taos and Santa Fe most people were complying with the masks. Waiting in line at a market, everyone was protecting one another. It was a good feeling. I know I'm still an outsider, I've only been here 30 years, but I see Chief Wahoo as offensive. A caricature of another race is not respectful, but I would like to hear feedback."
Salas said he never has had ill feeling about the mascot. "It brings pride to Cobre, but maybe because of sentiments today. All of us Hispanics are European and Indian or some combination."
Billings said he didn't have an opinion on the mascot, "because I'm a fighting Colt. Mascots are usually goofy. Look at Cliff's cowboy. Doesn't look like any cowboy I know. I've been to games at Cobre and I have felt their pride and spirit. I think it's up to Cobre to make the decision."
Edwards said she had no comment.
Ponce said he can see the passion. "My wife graduated from Cobre. It should be leaving it up to them in the Mining District. There's always been a great rivalry. As a fighting Colt we were taught to leave everything on the field, in the right way. It's up to the school board and people in the Mining District."
He thanked everyone for their involvement in the budget discussion. "It's been a hard discussion. I think the county commission has to take a more active role. I thank you for the time and effort you put in. To me investments are investments. I enjoyed the passion around it and around taking care of our employees. I commend the Extension Office for doing what they did. We will revisit the issue and go from there."
The meeting adjourned.