April 28, 2010

The Honorable Bob Ferguson
Chair, King County Council
Room 1200
COURTHOUSE

Dear Councilmember Ferguson:

King County faces an approximate $60 million budget shortfall for 2011 due to an ongoing structural gap between revenues and expenses in the General Fund, which is dedicated primarily to protecting public safety and health. On March 8, 2010, I proposed addressing this and future projected shortfalls through a three-part plan: control costs, let voters decide if they want to increase revenues or reduce services, and save for a rainy day.

The strategy to control year-to-year increases in the cost of providing services is outlined below. I wish to thank the County Council for recently approving my proposal to elevate the labor negotiating function by creating the Office of Labor Relations and I look forward to the confirmation of our first Director of Labor Relations. This week I also will transmit to the Council our proposed Countywide Strategic Plan – a guide to prioritizing and more efficiently delivering services.

State law authorizes counties to approve a local option sales tax of up to 0.3 percent to pay for county and city government services. Today I am sending to the Council a measure to give King County voters the choice of whether to increase the sales tax by 0.2 percent in order to preserve crucial public safety and health programs that would otherwise face elimination in 2011. The measure would appear on the August 17 ballot and would take effect on January 1, 2011. The decision by voters will set the starting point for public safety and health programs in 2011. If voters approve the measure, the County will preserve the critical public safety and public health programs it provided in 2010. If voters do not approve it, they will have chosen a lower level of these services.

I recognize this poses a difficult decision. The economic recovery is now well underway, but many of our residents are continuing to struggle with the recession’s lingering effects. Therefore, I am not proposing that we seek funds to restore the substantial programmatic cuts made over the past two years. I do believe the voters should have a choice about preserving the level of services they receive from their County government. Five other counties have already received voter approval for this tax at levels between 0.1 percent and the full 0.3 percent authorized by State law.

History and context

The need to consider a ballot measure is a result of four major changes in King County’s finances that have developed over the past decade:

• Limited growth in property taxes. In November 2001, the state’s voters approved Initiative 747, which capped the growth in annual property tax revenues at one percent, plus the value of new construction. Even though this initiative was rejected by a majority of voters in King County, it severely limits the largest revenue source for the County’s General Fund. The initiative was eventually ruled unconstitutional by the State Supreme Court, but the Legislature reenacted it in late 2007. This limitation means that the County’s General Fund revenue will typically not keep up with inflation and population growth, leading to an ongoing structural gap. Since 2002, the combined increase in inflation and population growth has been 29.3 percent, while General Fund property tax revenues have grown by only 23.5 percent.
• Impact of annexation on sales taxes. Under terms of the state Growth Management Act, urban areas should be part of cities. Unfortunately, annexations and incorporations have so far occurred mostly in those areas that generate more in revenue than they consume in services, leaving the County government with the cost of serving unincorporated urban areas with small tax bases and large service needs.
• Growth in wage and benefit costs. King County, like most governments, delivers services by employing people: sheriff’s deputies, public health nurses, jail guards, court clerks, and prosecutors, among many others. The number of employees supported by the General Fund has declined by about six percent since 2001, but costs per employee have grown substantially. Health care costs have been the largest factor, with the cost per employee going up by 58 percent since 2004. Much of this growth has been driven by national trends in health care costs, but the County’s cost increases have been higher than the norm due to the higher average age of its workforce and a larger number of family members covered under its plans. King County has started to reduce this growth through its innovative and nationally recognized Healthy Incentives program as well as higher employee contributions for health coverage (equivalent to an additional $70 per employee per month premium share), but large challenges remain.
• Use of reserves, transfers, and one-time measures to preserve services. The structural imbalance between revenue and expenditure growth has led the County to adopt short-term strategies to maintain service levels. This trend accelerated in 2008 when the national economy fell into its deepest recession since the 1930’s. Over the last decade, the County has almost completely eliminated General Fund support for human services and parks. The County’s voters have supported property tax levies that provide $33 million for these programs in 2010. In addition, the County has gradually drawn down reserves and utilized one-time savings to balance budgets. The 2010 budget includes approximately $30 million of non-sustainable items that cannot be used to cover costs in 2011.

The result is that King County’s General Fund faces about a $60 million shortfall for 2011, which represents the difference between the latest revenue forecast and the projected cost of providing the current level of services.

A three-part approach to solving the structural gap

As outlined in my “Blueprint for Reform” speech following my first 100 days in office, I am proposing three strategies to close the structural gap in the General Fund in both the short term and the long term:

• Get our costs under control over time. King County’s costs cannot continue to grow at substantially above the rate of inflation and population growth. We must capitalize on productivity gains through the use of technology, better program management, and performance measurement to provide the same level of services at reduced cost. We must pursue the strategies identified in the Countywide Strategic Plan and use them to focus our efforts on programs of most value to our residents. Everything needs to be on the table, including how we purchase goods and services, how we assign and maintain vehicles, and how we can work more effectively as a regional partner with cities and other local governments.

We also need to engage our labor partners in a constructive dialogue about how compensation should be managed in the 21^st century. As noted above, I have already taken steps to strengthen the County’s labor relations function and to propose an improved oversight structure between the County Executive and the County Council. The next step is to start discussions with our labor partners about how we improve County performance. Our employees often have the best ideas about how to make programs more efficient – after all, they are the ones on the front lines of service delivery. We also need to agree that continued compensation growth at well above the rate of inflation is simply not sustainable.

• Let voters decide on revenues that keep up with inflation and population growth. Cost containment alone cannot allow the County to maintain vital services. The County’s revenues need to cover cost increases caused by inflation and population growth.

The measure I am sending to the Council today implements this approach. It lets voters decide on the starting point for County services in 2011. If voters approve, the County will preserve the critical public safety and public health programs we provide in 2010. If voters do not approve, they will have chosen a lower level of these services.

We estimate a 0.2 percent sales tax would generate about $47 million for these critical County programs in 2011. Under State law, cities receive 40% of the revenue collected from the tax, so they would get an additional $32 million next year. Funds would be split among cities based on population. The combined cost to the average resident would be about $40 annually.

• Save in the good times to help during the bad. There is hope that within a few years our economy will recover and there will be years when County revenues grow faster than inflation and population growth. When this happens, we need the discipline to save the surplus to help maintain programs when the economy relapses. I will be proposing financial policies with my budget later in the year to implement this proposal.

Today’s proposal

The ballot measure I am sending to the Council today is the result of extensive discussions I’ve had with County Councilmembers and the County’s other elected officials. In particular, I want to thank Councilmember Julia Patterson, Councilmember Bob Ferguson, other councilmembers, Assessor Lloyd Hara, Superior Court Presiding Judge Bruce Hilyer, Elections Director Sherril Huff, District Court Presiding Judge Barbara Linde, Sheriff Sue Rahr, and Prosecutor Dan Satterberg for their help in developing this proposal. I have worked with these elected officials and the heads of the Executive departments to identify programs that would need to be cut in the absence of this revenue to balance the 2011 budget.

We recognized there are many services the County is required by state law to provide, such as conducting elections, operating the Superior and District courts, prosecuting and providing public defense for individuals accused of crimes, incarcerating misdemeanants and felons, and assessing property values. This means that most budget cuts would of necessity fall on optional or non-mandated programs and those that enhance our systems, but some cuts would also affect the level of service received by the public. For example, the users of County services might experience reduced hours of availability and longer lines for some services. As noted above, the County has almost eliminated General Fund support for parks, recreation, and human services, so cuts inevitably will fall on the 80 percent of our budget devoted to criminal justice (76 percent) and public health (4 percent). The programs and services that we are giving voters the choice to preserve are listed in Attachment A. Some of the most significant include:

• Retain as many as 82 positions in the King County Sheriff’s Office that are dedicated to protecting our community. By preserving these positions, the Sheriff’s Office will be able to continue to investigate property crimes; provide School Resource Officers to 11 schools; provide storefront deputies who are key points of contact with neighborhoods; participate in regional crime, drug, and homeland security task forces; maintain current levels of investigation for homicides and other major crimes including sexual assaults and domestic violence; and provide specialized services such as the Bomb Squad, Marine Patrol, fire investigation, and animal cruelty investigation.
• Preserve the equivalent of 36 deputy prosecuting attorneys (DPAs) in the Prosecutor’s Office, which represents two-thirds of Civil Division DPAs, or all criminal DPAs assigned to Maleng Regional Justice Center (MRJC), or all DPAs assigned to the Special Assault and Domestic Violence units.
• Retain Superior Court programs designed to reduce recidivism, assist court litigants, help crime victims, and ensure a smoothly functioning justice system. For example, over 75 percent of family law litigants do not have lawyers to help them through their divorce, child support or custody cases, and the Family Court facilitators who would continue to be available if this proposal is approved help people navigate these legal processes.
• Preserve District Court programs, such as Probation Services, that help to reduce the number of people involved in court matters and ensure that those who are sentenced receive appropriate supervision.
• Preserve significant programs in alternatives to detention for both juveniles and adults. These programs assist people in obtaining life skills to reduce recidivism, provide community work crews, assist offenders in meeting their community service hours, and reduce other costs in the criminal justice system.
• Retain the ability of police agencies to book and transfer inmates at the MRJC. Closing the MRJC for intake and transfer would require south county police agencies to drive to Seattle to book inmates, which would reduce the time officers spend patrolling the streets of their communities.
• Preserve seven day a week animal control services by maintaining a second animal control officer in each control district.
• Retain key services Public Health provides to the public. The funding would preserve the current level of therapy to ensure tuberculosis patients take their medicine as scheduled, and would enable the Medical Examiner’s Office to continue to make determinations of the cause and manner of death and conduct autopsies in a timely fashion so as not to unduly delay releasing remains to next of kin.
• Preserve funding for the Children and Family Commission, which provides grants to non-profit organizations that work to ensure safe communities and healthy families.
• Maintain critical support to the county’s public health centers and the services they provide to the public, especially to mothers and children.
• Continue General Fund support to human services such as Domestic Violence Survivor Services, Sexual Assault Victim Services, Senior Centers in unincorporated areas, and programs for youth (including homeless youth) involved in the criminal justice system.

It is also important to understand what this proposal does not include:

• It does not provide money to restore many valuable programs that were reduced or eliminated in recent years. Many citizens and officials asked me to consider such increases, but I believe this package is the most our residents can afford. We are giving voters the choice to preserve vital programs they have in 2010; not roll back the clock to the programs the County funded four or five years ago.
• It does not avoid the need for budget cuts in 2011. We estimate the 0.2% sales tax would add about $47 million in revenue next year. Our General Fund budget shortfall is approximately $10-15 million larger than that. We will fill the difference with productivity improvements and cuts in lower-priority programs, including management and overhead functions.
• It does not solve the structural imbalance between revenues and expenditures in 2012 and beyond. The 0.2% sales tax measure simply sets the starting point for service levels in 2011. The County’s General Fund will still have annual shortfalls estimated at $10-$20 million in future years that will require us to implement the efficiencies and cost-controlling measures I have outlined.

I appreciate the unprecedented collaboration among the County’s elected officials that has led us to this proposal. I urge the Council to give it careful consideration and then give voters a choice to preserve the programs and values that add to our quality of life.

Sincerely,

Dow Constantine
King County Executive
Enclosures

cc: King County Councilmembers

ATTN:

Tom Bristow, Chief of Staff
Anne Noris, Clerk of the Council
The Honorable Bruce Hilyer, Presiding Judge, King County Superior Court
The Honorable Barbara Linde, Presiding Judge, King County District Court
The Honorable Sue Rahr, Sheriff, King County Sheriff’s Office
The Honorable Dan Satterberg, King County Prosecuting Attorney, Prosecuting Attorney’s Office
The Honorable Sherill Huff, Director, King County Elections
The Honorable Lloyd Hara, King County Assessor
Fred Jarrett, Deputy County Executive, King County Executive Office (KCEO)
Rhonda Berry, Assistant Deputy County Executive, KCEO
Dwight Dively, Director, Office of Management and Budget, KCEO
Department Directors
Frank Abe, Director of Communications, KCEO
Patti Cole-Tindall, Labor Relations Manager, KCEO
Lorrie McKay, Customer Service Director, KCEO
Carrie Cihak, Director of Strategic Initiatives, KCEO