County Board - Regular Meeting

Good evening, everybody. I'm going to call the Committee of the Whole to order.

And if the clerk would please call the roll.

Okay. Smith. Smith. Trucios. Trucios absent. Veldren. Veldren. Wegleitner. Here. Wegleitner. Welsh. Here. Welsh here. Yang. Yang absent. Andre. Andre here. Bruchuk. Bruchuk here. Blazewitz. Blazewitz here. Boettcher. Boettcher here. Bollig.

Bollig here.

Bollig here. Brandmeier. Brandmeier here. Brouwer. Brouwer. Chawla. Brouwer here. Brouwer here. Brouwer here. Chawla here. Chawla here. Dansler. Here. Dansler here. Doolin. Dylan's here. Downing is here. Downing here. Eicher here. Eicher here. Engelberger. Engelberger here. Erickson. Erickson here. Freeze. Freeze here. Furman. Furman here. Glazer. Glazer. Gray. Gray. Hueselman.

Hueselman here.

Hueselman here. Jackson.

Jackson here.

Jackson here. Kemp. Kemp. Crowning. Crowning. Larson.

Larson here.

Larson here. Lewis.

Lewis here.

Lewis here. Marin.

Marin here.

Marin here. Obese. Obese here. Obese here. Peterson. Peterson absent. Posler. Posler here. Posler here. Ritt. Ritt. Ritt here. Okay. Ritt here. Rylander. Rylander here. Rylander here. Miles.

Miles here.

Miles here. Smith. Smith here. Smith here. We have a quorum.

Quorum being present, we shall proceed. We just have the one item under special matters and announcements for the Committee of the Whole, and that is a presentation of overview of budget being presented by Controller Hicklin. Thank you, Chuck.

Thank you, Chair Miles. Welcome, everyone. Beautiful night to start talking about the budget. We're going to start our budget journey early, right, this year. It's always a journey. And we're going to talk about some of the process of the budget, some just characteristics, some of the numbers of the budget. We're going to talk about some key terms and definitions. And we're going to talk a little bit about some of the challenges that the county faces, generally trends that we've seen in the budget. AND WE'LL BE TALKING A LITTLE BIT ABOUT THE 27 BUDGET AND KIND OF WHERE WE ARE IN THAT PROCESS SO FAR.

FOR THOSE ONLINE, PLEASE USE THE CHAT. JUST A REMINDER, USE THE CHAT TO LET ME KNOW IF YOU HAVE A QUESTION. SO CHUCK WILL TAKE QUESTIONS ALONG THE WAY AS WE GO. WE'LL TRY TO.

I HAVE NO AGENDA TO GET THROUGH IT ALL BUT WE HAD A LIVELY DISCUSSION AT PERSONNEL AND FINANCE WITH MUCH OF THIS INFORMATION AND FOUND IT VERY HELPFUL. I'M CHUCK HICKELIN. I'M THE COUNTY CONTROLLER AND CFO. I'VE BEEN WITH THE COUNTY FOR JUST UNDER 25 YEARS. um doing this this position so we've been a lot of different budgets they're all a lot of fun and each one's a journey and we always have new faces and we have returning faces and it's one of the really kind of most important parts of county government because there's a lot of policy that's driven by the allocation of resources in a budget and that's really what a budget is it's kind of a plan and an allocation of resources and where those funds are allocated has a big impact on what the results of county services are. There we go, right?

Okay, no, sorry, I hit it twice, so we'll get a little bit.

All right, so the county's budget is divided into two components. There's the operating budget and the capital budget. This is a really important theme. They're very distinct. They come from very different sources and pay for different things. The operating budget funds expenses like staff costs, operating costs, electricity, contractual services for human services, contracts for other kinds of contracts. It pays for the fuel for our vehicles, maintenance on our buildings, leases and subscriptions for our software services and our IT backbone. Now, the operating budget comes from a variety of different sources. Intergovernmental revenues, grants from the federal and state government, fees collected from users, so like the landfill fees, fees from airline passengers and from the airlines at the airport. fees from the register of deeds, recording documents, things like that. And then the biggest components of it are our general purpose revenue, GPR. You hear that all the time in budgeting into county is property. And the main components of GPR are property taxes and sales taxes. The capital budget funds usually one-time items or ongoing large investments that we need to make. So examples of that would be the Jail Consolidation Project, which is one of our biggest ones, capital projects we've ever had, the terminal expansion at the airport, renovation of buildings. So we have a renovation of the district attorney's office going on right now. We have a new 911 center that's about complete at the East District campus. And then other things like highway equipment, so rolling stock, the snow plows, the squad cars, computer equipment, things of that nature. And the capital budget is funded really primarily, almost exclusively, with borrowed funds, funds that we access out of the capital market. We issue debt every year. And we bring that money in, and we pay our bills with that, and then we repay the bondholders over time. Our debt that we issue is generally issued in September of each year, pretty regularly. So that'll be a sale that's coming up on September 10th. The county board will approve the results of that sale. The county's debt is rated presently at AAA. That's the highest rating you can get. So Dean County carries a credit rating that's above the credit of the United States of America. So that's saying something. We have had a AAA most of the time that I've been with the county. We did lose our AAA for a few years as a result of the Great Recession. We struggled to get that back and that really is important. It keeps our interest rates really as low as possible and in two ways. One, just because our debt has a wider subscription base, essentially more people can purchase it in terms of like mutual funds and large institutional investors and sometimes those investors are limited by the credit rating that they can purchase those debt instruments. And so it attracts a lot of bidders and really the more bidders we get, the lower interest we pay. At the end of 2025, we had about $835 million of debt outstanding for various purposes. Now talk about the budget process a little bit. In May and June, the executive distributes budget guidelines to the department. So those went out like the first week of June this year, which is pretty much on schedule. And then during the month of June and July, the departments have the budget data that my office provides to them, all of the detailed line items, cost of every position, and things like that. And they work on meeting those guidelines. The last couple of years, those guidelines have gone out with instructions to make reductions. That, for a long time, we didn't have that. We'll talk a little bit later about why that's the case, what some of those trends are driving that. So, you know, the guidelines this year, the departments were given certain targets that, you know, the guidelines might say no new GPR-funded positions, but you can accommodate contractual increases, so they vary from year to year. And then in the month of July and early August, the Department of Administration and the County Executive review the budget requests that the departments have prepared. In the last couple of years, and I think this year, the board chair and the chair of each of the standing committees are invited to participate in those meetings to get a sense of what may be coming forward. so this is not the exec's budget this is what departments are bringing forward to the executive is their recommendation of how their department can meet the the guidelines that the county executive has has issued And then in August and September, late August, and then all through the month of September, the Department of Administration assists the county executive in compiling the budget. So taking all of those requests and any other resources or lack thereof, and really trying issuing the county executives budget by October 1st. So that October 1st is a deadline that's outlined in county ordinance. So it really has to happen there. And that is the first real compilation of all of these requests and all of our analysis and estimates of resources that are going to be available and how the executives position is in terms of how those resources should be allocated. And then there is at that time to the operating and capital budget resolutions are also introduced to the board. If there are fee increases or fee changes that are part of the budget that the department's budget requests, those ordinance amendments that change those fees also are introduced on October 1st. And then there's a public hearing that's statutorily required in the month of October on the exec's budget. So public comment is taken on her proposal. During the month of October, the various standing committees meet and look at the department, the budgets, the execs release of, or version of the budget for those various departments. So PP&J will be looking at the clerk of courts and the VA and the sheriff's office. The personnel and finance committee will be looking at the department of administration and the treasurer. public works, they'll be looking at the airport and the zoo and so on. And within that, they use that to make recommendations on amendments to the exec's budget. So the exec's budget is complete, but there can be changes that are made through this board process. But the standing committees are really making a recommendation to personnel and finance, because personnel and finance committee is the committee that makes the final recommendation budget recommendation for the board's full consideration. So late October, personnel and finance, and we're really talking late like the last several days of October, sometimes it's on Halloween, but they have the job of taking all of the various amendments, and sometimes there can be 50 or 60 of those, and evaluating all of those based on the resources that we have available and recommending a balanced budget for the entire board to consider. Now that board consideration comes in early October, the first few days of October. And at that meeting, the board adopts the operating budget resolution, the capital budget resolution, and then a resolution that sets the tax levy for the next year. So just looking at some numbers that go along with our budget and kind of to give an idea of sort of how resources are currently allocated across all departments and all funds, we have about $825 million worth of expenditures in the 2026 budget. And as you can see, the largest department in expenditures is health and human services, which includes Badger Prairie and all of our human services operation. Second to that is public safety and criminal justice. So that 175 million, that would be the courts and the sheriff. and the DA, and then other departments are significantly less than that in the 80 to 70 million functional areas of government. It's a graphical representation of all that, but you can see Health and Human Services is the largest at 40%, and Public Safety and Criminal Justice is the next largest, but at only half of that. Now when we look at our revenues, I talked a little bit about those a couple minutes ago. You can see sort of down there, second line from the bottom, at $286 million of intergovernmental revenue. That's our single largest revenue source. That is mostly, there are other departments that get some millions of dollars, but Health and Human Services gets the bulk of that. So Medicaid revenue from Badger Prairie, income-based, administration of income-based benefits, all sorts of different, you know, mental health benefits and services and everything like that. county property tax levy across all departments and all functions is the second largest one and 272 million and sales tax being sort of the third but um source of gpr is 90 million that and then public's charges for services would be like airport landing fees solid waste tipping fees a lot of things like that that go along with uh that are service driven. So this is a graphical representation of that. And so you look at that and say, well, you know, intergovernmental revenues are not insignificant relative to our operation. No, but that was total expenditures we talked about there where the human services was 40%. But when we look at the distribution of general purpose revenue, public safety and criminal justice is the largest category. So that was only 20% of our expenditures. but it's the largest portion of GPR is expended on that. And that is because the sheriff's office operation has very little bit of its operation is funded by intergovernmental revenues. So there's a lot of GPR there. There's a lot of GPR in the clerk of courts and the DA and things like that. Health and Human Services gets the second largest portion of GPR at about 124 million. And then in terms of sort of categories of expenditure, as you would guess, being a service-based organization in government, the largest single group of costs is personnel, so $378 million. But contractual services, is the second largest, which is a lot of the contracts that we have for human services. So if we were providing all of those services internally with our own staff, the contractual would be much lower. And when you look at specific departments, some departments have 90% of their expenditures are personnel. So the clerk's office, veteran services, and many other ones where there isn't There aren't a lot of contracts. It's just the people doing the work. So I would say when you look at this, if you looked at a pie chart of this, it wouldn't be representative of all of the departments because it's really outweighed by the contractual side of human services.

Let me skip that one.

So in terms of our positions and kind of how they're allocated by governmental functions, so these are general government would include the clerk, THE TREASURER, THE COUNTY BOARD, DOA, THE COUNTY EXECUTIVE SORT OF THE GENERAL SORT OF MISCELLANEOUS GOVERNMENT SERVICES NOT, YOU KNOW, IS ABOUT 310, FTE, PUBLIC SAFETY IS IN CRIMINAL JUSTICE, SO THAT'S COURTS AND THE SHERIFF IS JUST UNDER 1,000, HUMAN SERVICES JUST OVER 1,000, AND SO ON. SO WE HAVE ABOUT, IN 2026, OUR Authorized FTE was 2,854.15. And this sort of shows, if you look at 2022 to that, we've had about 200 more positions than we had just a few years ago. A few less in 26 than we did in 25. There were about 40 positions that were eliminated in this current year's budget. So this is a graphical representation of our position allocations. So that's kind of an overview of sort of our general expenditures and revenues and kind of where our resources are allocated. And now we want to talk about some of the challenging specifics about operating county government in the state of Wisconsin and one of the most challenging aspects of that is the state levy limit. So levy is the amount, the dollar amount of property taxes that we collect each year. It's not the rate of the property taxes against your equalizer, it's not like the mill rate, it's a dollar amount. And Through state legislation, the amount of money that we can raise in property taxes can only increase by the percentage increase in our tax base that occurs from new construction. So the fact that everybody's houses and all the buildings in town are worth way more than they were five years ago, if it was just market increase in our equalized value, we couldn't increase our tax levy at all. Only the fact that all of these apartment buildings and everything are going up, and the fact that there was land there, and if something was torn down to put on that, they subtract what was torn down, and then the value of that new building, that has a value. And you take the value of all of that, divided by the total equalized value of the county, which is like $65 billion, and you get a percentage, and that percentage as you can see over all these years, is in the low of single digits. It's only two, if we're lucky, close to 3%. And that's applied on a base number of about $130 million. So it does not really generate a lot of extra money. For 2026, it was only $3.2 million more to cover our additional expenses. This levy limit has been in place since it was, it's been in place in a number of different iterations, but the current iteration was instituted in the Walker administration and hasn't been changed since then. So there are certain items that are exempt from the levy limit. They're pretty limited, but they are important. The first couple, the bridge aid levy is only a few hundred thousand dollars. That's a technical thing with highway. The library levy is and its growth is exempt from the levy limit. And the most important thing for us is payments on our debt are also exempt from the levy limit. So to the extent that our debt costs go up, Those dollars, we can add more, we can levy more than that $3.2 million increase. We can levy for those payments without impacting or competing with revenue for our operating budget. The only other way to increase it is through a referendum approval. So you've seen some communities in the area in the school districts have a different set of finance, but they do have levy limits. And like the city of Madison, we all know, did a $20 million levy limit referendum a couple of years ago. the City of Sun Prairie lost theirs, Fitchburg didn't get theirs passed, Monona got theirs passed. So as this legislation has been in place now for so long, It's become more challenging for governments. I mean, the waste has been cut. The limits are on there. The ability to incorporate additional just basic expenditures is not provided for in this levy limit. And it has put a lot of pressure on local governments across the state. And they've cut where they can cut and everything like that. But eventually, options are limited. The only way you can go beyond that is to go to the voters. So that's been happening now. So... We're going to talk a little bit here about some definitions that are important to our budget process. And some of these came to light. There was the article in the Cap Times a month or so ago that a lot of people were aware of. And some input that I got from the Chair Miles was that it would be helpful to have some common definition and common understanding among the board members on kind of some what are some key terms that were referenced in that in that article and I think that's a really good idea So in county government a lot, you'll hear a lot about the reserve fund. And what is the reserve fund? And there's a lot of different terms, different synonyms that are applied there. Some people call it the reserve fund. Sometimes people call it the general fund. And sometimes people call it the rainy day fund. So it probably would be good if everybody had a common sort of understanding of that. And technically, the reserve fund is a number. It's a figure in our financial statements. It's technically under accounting principles called the unassigned reserve fund. UNASSIGNED BALANCE IN THE COUNTY'S GENERAL FUND. THE COUNTY HAS A FUND CALLED THE GENERAL FUND. IT HAS A HUMAN SERVICES FUND. IT HAS A SOLID WASTE FUND. THERE'S A NUMBER OF DIFFERENT CATEGORIES USED TO DIVIDE OUR EXPENDITURES. BUT THE MOST IMPORTANT ONE TO LOOK AT IS THE GENERAL FUND. THAT'S WHERE MOST OF OUR ACTIVITY OUTSIDE OF HUMAN SERVICES IS ACCOUNTED FOR. where most of our services are paid for. And that is a metric that the credit rating agencies look at very closely. They look at it in a couple of different ways. They look at it as an absolute dollar amount, kind of, But an absolute dollar amount doesn't tell you much if you don't know the size of the government that that figure represents. So it's often measured as a percentage of your expenditures. And I don't like to make a lot of... analogies with personal finance because it doesn't hold up that well. Clearly, county government and government accounting is very different. But when you think about some financial advisor says you should have a six-month emergency fund or a two-month emergency fund or something like that, that's the percentage of our expenditures is kind of how credit rating agencies look at this metric. So it's something that and it's easy to identify at the year end every year because the financial statements state that very clearly. So the county right now has a policy on its reserve fund that at the end of each year, the unassigned fund balance in the general fund should equal a figure that is 10% of the combined budgeted expenditures or the general fund, including the Atlanta Energy Center, the Human Services Fund, and the Badger Prairie Fund. So these are the three big GPR-supported funds, and that's why they're all combined like that. And just as we have sort of an example here of the numbers for 2026, you know, 273 million in general fund expenditures, 277 in the human services. Badger Prairie was 32.6 total. 582, 10% of that is about $58 million. So that's our target. Now, you know, we are operating, it's a moving balance. I mean, the county's transactions are happening all the time, but that is the target that we, that all of the financial activity at the end of the year, that's the number we're driving for. So the reserve fund balance historically has been in this mid 50, low $60 million range for quite a few years. The current policy that I just described was first implemented in 2023. So we've hit that target every one of those years. Prior to that policy, we had really the policy of the county had been to recover the general fund or the reserve fund to a level that would sustain our AAA rating. we had in 2010, 2009 and 11, we had a negative reserve fund. So that's when we lost our AAA rating. And prior to that, we had a policy that's this sort of 3% or 10% policy was only 3%. And we would fail to meet that from time to time because it was so narrow. And when the recession came, The loss in sales tax revenue particularly, and the lack of payment of property taxes from homeowners at the time, REALLY ERODED OUR RESERVE FUND VERY RAPIDLY. THERE WASN'T ENOUGH OF A CUSHION TO THE POINT THAT WE WENT NEGATIVE FROM ONE YEAR TO THE NEXT. WE HAD AT THAT YEAR, WE HAD LIKE A 20% DROP IN SALES TAX, AND BECAUSE SO MANY PEOPLE WERE UNDER WATER ON THEIR HOMES, THEY WEREN'T PAYING THEIR PROPERTY TAXES, AND THAT ENDS UP KIND OF ERODING OUR UNASSIGNED FUND BALANCE. Over time, sort of the challenge was to get to a margin that the county really could comfortably weather through something like that again if it ever happened again. And so there were surpluses that occurred. There was more careful budgeting that helped build that back up to these kind of figures. And then we got to, you know, 2022 and 2023 where the growth had sustained itself to the point where we could set a metric and set a target and sort of level that out. And that's why the 10% policy was implemented. It was well received, I think, by the rating agencies. They always would ask about that, and I'd say, well, our policy is to get our fund balance as big as it needed to be. Well, in that year, if we didn't, we had so much coming in, if we hadn't done that, we would have had a surplus of, you know, or a reserve of like $70-some million. It was just too big. THERE'S A BALANCE THAT ALWAYS HAS TO OCCUR IN GOVERNMENT FINANCE WHERE WE NEED TO HAVE STABILITY. WE NEED TO, WE WANT TO HAVE A STRONG CREDIT RATING. WE NEED TO HAVE ENOUGH IN OUR RESERVE TO SUSTAIN A FISCAL SHOCK. But we also want to provide services. We don't want to deny services to the public. We don't want to deny staff pay increases and things like that. So there's always this balance. hoard this money, but to what purpose if it doesn't make a marginal difference? If we've got a stable AAA rating, if the economy is good, then a 10% margin in our economy is comfortable. And above and beyond that, we can redirect those resources. So what is a surplus and how does that work? So a surplus in our budgeting is defined by an amount, year-end resources that exceed the reserve fund. So if we close the books at the end of the year, and boy, that would be nice, but they were at $70 million and our target was 58. We've got money. We've got a surplus. It's above our policy. Our policy is reasonable. Our policy is rational. Our policy is keeping our AAA rating. It's giving us the cushion that we need. What do you do with those extra funds? And you can call that. Now, those become a resource in the next year's budget. Now, where does a surplus come from? Well, I mean, a surplus arises technically from the receipt of revenues that are more than what we expected or budgeted, or expenditures that are lower than what we budgeted or what we projected. And usually it's a combination of both of those. So, you know, we're talking about, just for example, the next slide, you know, how do we, How do surpluses happen? Well, if we have an expenditure base of over $800 million and a revenue base of $400 million, just a 1% variance is $12 million. So you're doing what I do. If I could project department expenditures at a level of precision below 1%, I probably wouldn't be doing what I'm doing. I'd probably be on Wall Street and I'd be making like 10 times what I make. So it's just, there are so many variables that come and go with that, that we monitor that closely and we do the best we can. But I mean, I just wanna be reasonable that when um that there's just a level of precision that is unachievable to be able you know a half a percent well that would still be six million dollars and when we're talking about gpr and we're in a budget cycle i can tell you six million dollars seems like a gold mine for the services and everything that everyone here is interested in providing so just to have it put it in some perspective So, but the surplus plays an important role in budgeting, and it has, especially in recent years. Oh, I thought I had, dang, sorry. I wonder if I've got, I thought I had, oh, I must have, sorry. I thought I had a slide in here. I did at one point, but it must have fallen out, of the amount of surplus. No, I think it's coming later. I'm sorry. I just got a little distracted. So that's just to kind of get that common definition of sort of what's the reserve or the general fund. You'll hear those. And what is surplus? And we'll talk in a minute how that plays a role. But one more thing to clarify, when we talk about the reserve, the reserve can all sometimes people in government call that the rainy day fund. And there can be differences of opinion clearly on what's a rainy day when it comes to government services. In the rating environment of our credit rating agencies, a rainy day is an unexpected drop in revenue or somehow exorbitant increase in expenditures, which is less likely in our situation. That happens sort of like in the middle of the year, where you can't adjust the budget quickly enough to mitigate that challenge. And so when we had entered the recession, when it really became apparent that the recession was as deep as it was getting, we had mid-year bargaining. We had bargaining units then. And we went back to the employees. And there were wage givebacks. uh temporary ones that were done to try to mitigate that but that process took a couple of months and it wasn't even didn't even start until like late june because it wasn't apparent exactly with such you know so many changes in the economy happening all at once how big of a problem we had and how and how sustained that was going to be and it clearly just cascaded and cascaded so So a rainy day or reserve is really for that kind of a purpose to weather that and be sure that we still have adequate cash flow to make payroll and everything like that. I wouldn't really define a rainy day as we just don't have enough revenue to kind of like in our budget sort of to keep going and do what we would like to be able to do but we can't afford to do. And so the If the rating agencies were looking at us and everybody else is going through a financial storm, and it's not just us, but many other entities that they rate would be experiencing the same thing. And we didn't make our reserve fund target. We're not going to lose our rating for that. If we said, you know what, it's inconvenient to have a 10 percent reserve target because we want to spend money and we want to keep providing services and our revenues can't support that, so let's make it 7 percent so we can throw some more money into the equation. That would be, without a plan to change that in the future that was very specific to explain to them why we were doing, changing that policy, that would be a notch down. So a rainy day isn't just I can't get what I want, it's that it's got to be a crisis type of thing. So I just wanted to kind of, because the general fund is sometimes referred to as a rainy day fund. Now, this will advance. Okay, so we're gonna talk some about our trends and some of the challenges that the county government, county budget faces. So, sales tax growth, health insurance expense increases, and reliance on surpluses are some of the ones that we're sort of been challenging the last couple years. Sales tax growth back as we were emerging from COVID, you can see that this isn't the total sales tax collected because that's more like, you know, back then it was like, you know, $78 million. It's about $90 million this year's budget. That's just the increase from 2020 to 2021, $10.7 million. From 21 to 22, $10 million again. And then it drops off. Why does that happen? Well, you know, people had all those aid checks. People were not traveling. They were spending their money on their homes. They were spending money on things and not taking their money outside the area. And there was a lot of benefits, high unemployment, you know, enhanced unemployment benefits, enhanced SNAP benefits, and all sorts of things were kind of moving to do that. It was very unexpected, though, because in 2020, we actually had sales tax go down. um the last several months of that year as covid really really got going so and then you can see in 2024 we only had about a one million dollar increase so um if you so that leveling off you know it's not declining it's just not growing as fast and prior to covid if we looked and we saw we had a three million dollar or so increase in sales tax that would be a pretty normal year two or three million dollars So that's just graphically, you can see the, you know, some people like to look at the numbers, some people like to look at the bars, but the bars show the same thing as the numbers. It's a big drop down. And our health insurance costs at the same time, you know, if you look back in 2021 and 2022, we had a really, you know, we did an extension with Dean. We had a really good deal on health insurance. We only had 300,000 some dollar increase, which is amazing. At the same time, and I have one, and then you have it sort of going up to more moderate at $5 million and now we're in the nine to $7 and $8 million increases over this last few years. Health insurance, two things happened there. We had a good deal, which kept the cost of our premiums down. The cost of claims were also going up as we had a lot of inflation in 2022 and 2023, especially in the service sector. And so the insurance companies got a rematch. They got to rebalance that and we're paying for that now. So you can see how that chart looks. And I think this is kind of a telling graph. So this is if you took the sales tax increase that we have. So it was about $3.4 million. And you took the tax levy increase under the levy limit of like $3.2 million. And you add those together. And then you subtract the increase in health insurance So we are barely getting enough new revenue in GPR each year just to cover health insurance increases right now. In fact, we don't. So 2026 estimate right now is just a little below zero when you combine the growth in the two largest sources of general purpose revenue, and you compare that to the increase in one of our expense lines, and it doesn't even cover that. let alone the cost of steps in longevity, increase in pension contribution, increases in leases and service contracts and everything like that. So that sort of sets the stage of why a big contributor to the challenges we've seen in the last couple of years. And then application of surplus, so we talked a little bit about what the definition of surplus, kind of how it occurs and what leads to it. This is a history going back quite a ways of sort of the amount of money in each annual budget that was, that came from surplus. And you can see that in 2024, we were at 42 million. We peaked in 2025 at 59 and a half million. When we talk about the $30 million deficit that we absorbed in the 2026 budget, you can see that that is mostly the fact that there was less surplus available in that budget. So we went from 59 million to 27 million, and that was a big driver of why we had that. so now when we talk for the 2027 budget our current estimate of the operating budget deficit so that would be new revenues uh and available surplus is about uh 15 million this is down from earlier so we did some uh you know preliminary warnings early in the year that it looked kind of a little more dire. That was, we had an estimate around 30 million. I'm glad that we don't have that. I'm glad that we have more resources so that we in department reductions and things like that don't need to be as drastic. MOST OF THAT REALLY IS NOT SO MUCH A CHANGE IN PROJECTED REVENUES AND EXPENSES BUT IN THE AMOUNT OF SURPLUS THAT WE THINK WILL BE AVAILABLE FOR THE 2027 BUDGET. Some of the drivers of that difference is AEC had a better performance than we expected. They've done a really good job of bringing new events in and not just new events, but also watching their expenses a lot more closely than I think they were in the past. They're not off of GPR, but they're below a million, and I think there's a path where they could get there. Investment income was a little higher than we expected, real estate transfer fees, Medicaid revenue, human services department from different revenues and expenses, and then sort of combined OTHER DEPARTMENTS, SO I END UP BEING LIKE, YOU KNOW, GO AROUND JUST BITS AND PIECES HERE AND THERE OF ALL KINDS OF OPERATING DEPARTMENTS, LAND AND WATER DID BETTER. THE COUNTY EXECUTIVE SMALL DEPARTMENT DID BETTER. SO IT WAS JUST A LOT OF DIFFERENT CONTRIBUTORS TO THAT $4 MILLION NUMBER. AND THEN OTHER GENERAL REVENUES, TAX INCREMENT DISTRICT REVENUES THAT COME FROM OTHER CITIES AND COUNTIES THAT WE CAN'T OR OTHER municipalities when they close out a TIF district, for instance, unclaimed property, just some things that go into the general revenue category. So the process or the stage we are in the budget, a little bit earlier I said the county executive had issued the budget guidelines with some GPR reduction targets. Departments have their budget materials. They are reviewing those. I have a couple of budget analysts on my staff, and they're assigned to each of the departments, so they're fielding questions from departments on costs and performance on their line items. and things like that to get to the details. And then the departments, we have meetings set up with the departments and DOA and, like I said, the board chair and the committee chairs through starting, well, we had the first one with the Register of Deeds this afternoon. It lasted all of four minutes. So it's short and sweet to start with. But there are many more of those on the calendar. I guess it's quite busy here for a little while. So the targets that departments were asked to cut in their budget total, 10 million, they're based on number of factors, the size of the department and their relative amount of GPR and the relative growth in departments FTE, number of FTE over the last five years. So that's kind of a range of sort of where they are. Some of them are, you know, just really small amounts. Some of them, you know, human services is almost 4 million. Sheriff is 1.8. You know, so it goes all... These are the numbers for discussion that we are asking departments to consider. How they meet those targets, it's early in the process. What kinds of proposals will come forward to meet those?

Chuck, can I ask a quick question here? I'm just wondering about some of the rationale or logic for the targets. I'm just looking at a small department like Veterans Services that's being asked to reduce by 72,500. versus emergency management, which I would have guessed would be a bigger department?

No, they're not really much bigger. Yeah, so it's, like I said, it's a function of their, it could be, I think there were a number of positions that were added to vet services, so that kind of played on them. I think there were actually like three positions added over that five-year period. Okay.

Medical examiners, being asked about the same, or I guess they were bigger. Oh, sorry, I was saying medical examiner's office is about roughly the same amount, but I would have guessed they were bigger, but maybe they're not.

Yeah, I'm not sure that exactly what factors, you know, I'd have to dig into it.

But the amount of added staff in the last five years.

That's a factor, which is, you know, which is a different one. But, you know, as we looked, we had, you know, at least a couple hundred positions were added during that since, you know, the last four or five years. So that was something the county executive wanted to include in determining these reduction targets.

Go ahead.

Was it just GPR funded positions or any new positions?

Any new positions.

Okay, so here's a new one.

Thank you. So all of this together, would that be, are there any other deductions that need to take place apart from that, or is that just?

Well, this is $10 million of right now what's projected to be a $15 million deficit. Okay. So that's two-thirds of that.

Okay, but if everybody did that, would that, I mean, obviously that's, would that satisfy, like, this year our target, or are we expected to find other places to?

Well, yeah, I mean, well, you know, it's budget craft. It's, you know, it's a journey. So we'll, this is what the county, I can say is this is, the total of this is 10 million, and that's what departments have been ASKED TO DO. THE COUNTY EXECUTIVE HAS BEEN IN CONTACT WITH THE INSURANCE ADVISORY COMMITTEE AND COMMUNICATED WITH THEM, AND THEY'RE LOOKING AT ALTERNATIVES RELATIVE TO THAT BENEFIT, WHICH IS AS SUBSTANTIAL AS I OUTLINED, A BIG PART OF THE EXPENDITURE GROWTH. SO WE'RE HOPEFUL THAT WE CAN FIND SOMETHING THERE. THANK YOU.

Supervisor Baruchek.

Thank you. Thanks for laying it out, helping us understand. When was there a surplus? And during the past few years, we were sort of spending down a previous surplus and each, and do I understand correctly that our ability, the situation we're in now as a result of getting towards the end of spending down a past surplus?

No, not quite like that. So it's not like we had a surplus and we've been like chipping away at it. It's that surpluses, we're fortunate, number one, that surpluses are occurring. So that's a good thing. That was not the case in some previous times in my history with the county where we would close the books and it was worse than, you know, there was no extra money. We were drawing down the reserve fund. And then trying to make that up the next year so these the surpluses that That I had up here Are those occurred in the years in the like in the year in the year prior to The year that budget was adopted so so in other words in in IN CLOSING OUT 2024, WE HAD ALMOST, YOU KNOW, 59, AND THEN ESTIMATES FOR CLOSING OUT 2025, THERE WAS $59 MILLION THERE. IT WAS EITHER ALREADY OCCURRED FROM THE PRIOR FISCAL YEAR OR EXPECTED TO OCCUR BY THE END OF THE CURRENT FISCAL YEAR, AND THAT WAS PUT INTO THE BUDGET EQUATION. AND IF WE, AND SO RIGHT NOW, I GUESS THE The challenge is that as some of the line items that have resulted where these surpluses accrued from. So as those become incorporated into our actual budget, they don't produce a surplus anymore. They become part of the budget that we're balancing. So if you get $10 million of new extra sales tax that we didn't see coming in one year, well, then the next year we're actually going to budget that much and then some more. Well, now that first year, that $10 million helped contribute to a surplus, but the next year, it's already accounted for. And so that's kind of why surplus isn't going to keep on growing, to why we need to kind of wean off of it a little bit like this to get it to a sustainable level. It's never... unless we have some big economic disruption or something like that, it's nothing to have a few million dollars, five, $10 million of surplus incorporated into the budget. That's probably gonna happen unless we go, as long as you have reasonable budget practices. So one of the things that led to old, Problems was we were overestimating like we'd say we're gonna sell land and then it wouldn't sell Well, there's like millions of dollars there in revenue that we didn't realize and if you do that to where you don't budget enough in for Overtime compensation or other expenses that you're pretty sure are gonna happen then you end up with deficits at the end of the year versus surplus and

So is the idea then if we were, instead of incorporating those surpluses into the next budget, if we had just put that into the rainy day of the reserve fund, then we would go above that 10% and it would start to look like we're, say, hoarding the taxpayers' money and we want to avoid it.

Yeah, like if this is a surplus applied, you know, if you add that up, it's like $450 million. So our general fund would be, $512 million or something like that. That would be more than half of our expenditure base. That would be kind of crazy. It wouldn't be fair to the taxpayers or to the people that need our services. So it's a balance of trying to be, yes, you want to plug those back into the equation because you want to be sure that to the extent we can responsibly provide services, we are. Because if you don't, then you're holding it for no good reason. But if you go too far with it and get too optimistic with projections and things like that, then you end up with not achieving that surplus and then you have a big cliff where it falls off and you don't want to be there either.

Understood. Well, okay, one last one. So anecdotally, just living downtown, I think that construction, new construction is kind of slowing down. Do you think, have you seen anything, what do you think about the future of the economy and how things are going with net new construction, sales tax revenue?

Yeah, that's a good question because we are in a good economy, I believe, and it never lasts forever. So one of the big factors in our AAA rating is the just stable and strong economy that Dane County has. So we are historically very low unemployment rate, pretty high household income. When there's a recession and our unemployment rate goes up, it doesn't go up as much as, you know, Marathon County or someplace like that. And when there's a recovery, we get a piece of that recovery quicker than lots of other places. And that is important to... the ability of a government to be able to repay its debt, which is what they're concerned about. But I don't want to editorialize too much, but for all of the things that this federal administration has done to try to ruin our economy, they haven't been successful quite yet. But they're going to keep trying, and I'm not sure that they won't be successful. So that is a little editorial, but you know. I mean it's it's a mystifying in that way because I mean we do have population growth and that helps our sales tax growth but when we have gas prices go up as much as they do every dollar that you and food prices going up as much as they do every dollar that you spend to put gas in your car or to buy food at woodman's that's a dollar you're not spending on a taxable service or good Because we don't get sales tax on those two things. And as that becomes a bigger piece of household spending, and if it doesn't stop, it's going to affect us. And that may outweigh the positive growth in sales tax that occurs from our population growth that we've been experiencing. I think the lowest net new construction that we had during the recession was like 0.9%. Even while, and that was a point where the equal at the total tax base actually grew slower than the net new construction number because the value of properties was going down, but people still building some stuff. But I don't know that yet. I don't know. I have kind of those concerns that, you know, and anybody can look at that and go, well, you know, people feel rich because their portfolios are strong because of the AI boom. And, you know, yeah, you can get me going at 2 o'clock in the morning. I can think that stuff. I can worry myself to death.

All right. We got the board lining up with folks with questions. So let's, given that there's a half dozen people or so with questions, let's keep it to one or two questions and let somebody else ask.

Raise your chabla. Thanks, Chair Miles. And thank you, Controller Hicklin. I think it was very helpful to have common definitions and terms, not only for the board, but for the public in general, so we can understand what our budget challenges are, so we can help solve those. One thing I want to focus on is you talked about how much a 1% variance in projections can affect a budget up to $10 to $20 million. We saw a structural deficit that was $30 million, and now we think that structural deficit is $15 million. I think something that would be very helpful, not only to the personnel and finance committee, but to the board, in general, is getting a more regular calculation of what we think that surplus should be so it can help us with those projections. Now we think it's $15 million. It could go up to $20 million, and then we're going to have a much tougher budget, or it could go down to $10 million. What do you think is the most frequent interval that you could provide that information?

Yeah, we do quarterly projections of department expenditures, and that could help. But we really, not very, a couple times a year, really. I mean, we get a good glimpse of sort of what the actual results are when the preliminary audit figures are done. And then later, the meaningful element to it is in like late September before the county exec's budget comes out. And then the next look at it is the end of the year.

Okay, so we will get a new projection.

Yeah, there'll be projections because that's all part of the levy calculation that's contained in the budget resolution.

So I have two more questions, but I'll only ask one of them. One thing that I think will really help, particularly like the people in the city of Madison, is they're seeing their property tax bills go up quite a bit. And the county is responsible for a portion of that, but not for the totality of that. Can you explain how property tax increases from just the county would affect the city of Madison property taxpayer and just how that's looked over the last few years versus other sources of property taxes?

Well, in the city of Madison, my recollection is the county taxes are between 15 and 20% of your total bill. So the school district is the largest, the city is the second, the county is the third, and the tech college is the last, and they're a pretty small portion. So there's a lot of factors that go into an individual property's tax bill because the value of your property relative to the value of other properties in other neighborhoods in the city, for instance, can lessen your personal allocation or increase your personal allocation of the levy that is all the taxes that are raised in the city. But I think it's so opaque to taxpayers, it's kind of crazy in the sense that for even one district like the county, all the variables that go into what my portion of the tax bill that goes to the county is. let alone that the school district is in there too. So they just put a budget with an 8.5% levy increase, MMSD did, and the city too. And then last year, a lot of people were pretty unhappy with their taxes going up, and it wasn't really, I mean, the counties went up, But the school districts went up a lot, even though they, and the cities went up, but the school districts, not even just in Madison, but all around the county and all around the state, because the way that school funding goes is that the district can spend a certain amount of money per pupil. And to the extent that they don't get state aid to cover that, they are authorized to raise property taxes for that. The way that that was structured with the veto pen of Governor Evers is that it allowed that per pupil allocation to go up, but the legislature wouldn't give the money in school aid from the state to pay, so a lot of districts levied for the difference, and of course they did. I feel like the tax bills that people got in the fall of 25 opened up people's eyes to tax increases in a way statewide that I haven't seen in a long time. I think there's a keen awareness of that. I think the city was lucky that they got their referendum passed before that situation happened. And I think that if units go for a referendum now, there's going to be a different perception of that than there would have been three years ago because of that imbalance from the legislature to the schools.

All right. Supervisor Andrew.

Thanks, Chair. Thank you, Controller Hicklin. I really appreciate the slide 33 that breaks down the drivers of the surplus relative to the updated estimates from earlier this spring. So I just want to appreciate the list. I know we've talked a lot about disaggregating a little bit more. Just in a general sense, is that mostly for human services and operating departments, that $7.5 million, is that mostly salary savings? JUST AS A SENSE OF?

WELL, SALARY SAVINGS IS A BIG PORTION. IT WOULD BE A GOOD PORTION. IN HUMAN SERVICES, THERE'S A LOT. THEY HAVE A HUGE BUDGET. SO AGAIN, WE APPLY THAT 1% RULE AND YOU GO THAT'S IT VARIES A LOT. I do think that across departments, the budget climate that we're in, departments were more careful in 25 than they maybe had been. They held more positions open to maintain flexibility. And we were encouraged to do that and took it, I think, seriously. I also saw a little, like, some reductions in some of the spending that departments did. I think some departments were kind of looking at it and go, well, That would be nice, but we're going to try to hold back on that. So there's a lot of decisions that kind of go into all that, but I would say probably the bulk of it was personnel, yeah.

And then I don't want to mince words too much, but we're going to have a lot of debate over the next few months about structural deficit versus one time deficit and how much of maybe the structural deficit remains and how much is resolved, but generally would you agree that our structural deficit challenge is somewhat unresolved at this point?

That's a good question. Maybe if I can answer that, just to sort of, if you could give an explanation of structural, what is structural?

Yeah, now I wish I had that slide. I should have had that slide. My favorite slide, Gus.

Where is your slide? Versus just...

versus just the fact that maybe we just have yeah we're doing deficit spending yeah that's it yeah okay so debt by definition a structural deficit is you're spending more in a year than you're taking it and that that's going to keep on happening because it's you're talking base budget yes right and so Part of our structural deficit right now in the projections, our structural deficit is more than $15 million because we have surpluses that we intend to apply. I don't know what that number is, but it will not be zero. So a structural deficit really is the combination of our current operating deficit, which is 15 million, and the operating deficit plus any surplus that you're applying. Now, there's some comptroller from, you know, like, I don't know, New York somewhere that had this term called recurring, non-recurring revenues. So, you know, and your most, people in my positions, you know, could be like, well, I don't want to use any non-recurring revenue to fund a recurring expense. But my experience has been that there's often, almost always, something comes along in a way from one year to the next. So maybe there was one year where the city closed out a TIF district here in downtown, one that built just a lot of these buildings that we were surrounded by. And we got $3.5 million because there was money left over. And at the end, they couldn't spend it. And it's proportionally allocated back to all the underlying taxing districts. So we got $3 million. The school district got $8. So well, that came into our budget. We knew ahead of time it was coming. They gave us a heads up. We knew it. So we had it in our budget. Well, that wasn't there the next year. But there was some other thing that, by the time we were doing the budget the next year, So that's not part of our structural deficit, but that is the structural part of it and then the operating. So when we talk about our $15 million, that's our operating deficit. Because there's usually, almost always, I hope until I'm gone, that there's some kind of surplus that we're able to apply. Otherwise, we would be looking at a much bigger problem. If we tried to make some policy that said, We're not going to use surplus. except for one-time things, we would be cutting pretty deep for why. But no matter what, budgeting is an annual exercise. It's an annual journey that even the best laid five-year plan can't really reveal enough that is meaningful enough to sort of be able to decide something that's four years from now today, because there are just so many dynamics that happen. in terms of economic activity, sales tax growth, or decline in sales tax because we have some kind of recession, or some change in government aid. There's always something. But those things are kind of on the margin. When we look at things in our world here with the legislative, the county executive, and the legislative body of the county, we're always looking at things like a million or two million here or there. That's a lot of money. $825 million is our whole budget. So again, we're playing, we're in that percentage game.

Supervisor Velden.

Thank you Mr. Chair. Chuck, just a couple of quick ones. Actually, I mean, you brought up a, you answered a question that I had in my head about gas and food, that we don't have that, because I figured, I mean, I knew we didn't, because with gas, that would have been increasing our sales tax exponentially. But, okay. Is the reserve fund 10%? How is that looked at? by the bond fund, by the markets? Is that, I mean, we created it, the chair created it. Is it a gold standard? I mean, is there a standard or they just want to see something consistent?

Yeah, that's a good question. So the, A percentage is a good way to express that. That's something that they can identify with. It's kind of common. And if I worked for a mutual fund and I was gonna recommend to my boss, we buy like $10 million worth of some government's debt, I'm gonna have a bunch of different options of government debt to buy. And I'm gonna have... a bunch of spreadsheets open with all their financial results next to each other, and I'm going to look at those. And that's going to be a factor that I look at, and I'm going to look at there. Because if I just look at our reserve by a dollar amount, if we had $2 billion worth of expenses, $58 million doesn't do it, right? So that's why the percentage comes in. Now, the height of a percentage is only... You can be strategic about that in the sense that if you have a lot of other good factors on your credit profile with the rating agencies, you can have a lower percentage. If you don't have some of those things, you probably need a higher percentage. And then there's some threshold of other credit profile factors that's never gonna get you a triple A, no matter what your percentage is. So what are those factors? Fiscal management is a part of our profile. Keeping things steady is what they like to see. You don't want to see that number bouncing around all over the place. You don't want to see an unexplained decline in that number. You don't want to see that number go down without a plan to try to change it to show that you are using fiscal discipline to meet your target. The underlying economy, as I mentioned before, is a part of our credit profile. If you're in a slow growing area, Harrisburg, Pennsylvania, or something like that, you've got higher unemployment, you've got vacancy in housing, you've got a slow growing tax base, you've got employers that are at risk, employers that are in cyclical sectors like manufacturing where employment can fluctuate. that's a huge thing for us in our credit profile that allows us to have a 10% reserve versus a higher one. And if you have an economy like that, you may never get a AAA because you just can't get it.

And then just, so is the surplus, is that how you were able to calculate from 30 to 15?

Yeah, that's what I said.

Those ones are like, okay, what happened? Where did it come from? Okay, thank you. Supervisor Kemp?

Oh, okay. You've accidentally pressed a button. Supervisor Wegleitner.

Thank you, Chair Miles. Chuck, can you explain how... Well, let me start with a little history. So, I don't know, about 10 years ago or so in the budget, we had an amendment to basically create a human services reserve fund because... over the prior decade a lot of money that was revenue that was generated in the human services department went back to the general fund and went for all sorts of different uses not human services and then after maybe a few years it was just incorporated into the budget resolution for introduction so it didn't need county board amendment but there is human services reserve applied to reduce the levy. Can you talk a little bit about how that works and if it is still working and if it is doing the intended purpose of preserving human services revenue for the critical needs in the community?

The change in that policy, what was happening before was if there was a surplus in human services, and they often did because it can be kind of volatile, that would just go in and go into the general fund reserve. So that helped it build up, but when we implemented that policy, it became segregated. It still remains that. The amounts of application of surplus that are up here include application of various amounts of human services reserve fund. Sometimes it's, there are some years where only part of that reserve that had accrued was used and some of it was retained for following years and sometimes all of it has been applied. So it's not like it has accumulated every year since that policy was included in the budget resolution.

Okay, because then who and how determines how it's applied?

It's done in the budget.

What's that?

It's in part of the budget that's adopted.

From the year before?

Yeah.

Thanks.

So, I mean, just say the end of 2025, that figure was like $30 million.

The end of 2025, $30 million of Human Services Fund.

Yeah, it was retained in the Human Services Fund. Retained.

Yeah.

under the old policy, that would have gone in to the general fund reserve.

Mayor Weilliams.

Thank you, Chair Miles. My question is, I was looking at all the places we spend money, and one of them is debt service on the capital budget. So if you look at it, $837 million in debt, and we are spending 87,632. That's like a 10 and 1 half percent rate on your debt. Have we ever given any consideration, like we give out loans, you know, good term loans, 40 years, zero interest, because we want affordable housing and they want the prices to be low and you incentivize the builders to build these buildings, you know, because it's very favorable terms. But they could take, like, you know, I mean, it's my understanding that it's not a monthly payment back. They could wait 40 years and do a balloon payment on that debt. And so here's my question. What if you incentivize it? Because money always talks. Like if you're paying 10.5% on that debt, what if you incentivize the people that you loaned it to to pay it back sooner? Like, hey, if you pay back this much instead of 40 years, pay it back in 20 years, we'll give you like 2% on your money or something. It's still a win-win, you know, like. 10% minus 2%, see what I'm saying?

Well, so the debt service where we spend money is us paying back money that we borrowed. Okay. So we issued debt on the world credit market, and now we have an IOU that we owe somebody in New York or something like that. We don't pay 10% interest on that. No. We're tax exempt. Some of the stuff we had that we issued back before interest rates started climbing, it was at like less than 2%, sometimes less than 1%. So I just want to be clear.

We're not paying 10% on our money.

And it's money going out to people that have loaned us money. That's not money that we're not collecting money from people that we loan money to. Oh. Yeah. All right. The other way around. So when we need to build a road that's $5 million, we go borrow that money, and then we have 10 years. We pay that back over 10 years, and it's not in monthly installments like your mortgage. It's semiannual payments and one-of-payments interest, only one-of-payments principal, and we pay it back over 10 years. The key thing there, though, is because we, as I said a minute ago on a levy limit, those payments are exempt from the levy limit. So we can, theoretically, we can tax a lot to repay the debt that we need to repay without that interfering with the money we can raise for our operations to pay our staff and pay our contractors and things like that. What I've observed is more and more, even counties in more conservative areas of the state that are more on the Dave Ramsey kind of finance situation are actually borrowing money for their roads when they used to pay cash for them because they're like, hey, we need to pay our deputies, we need to pay our social workers, and if we are paying $500,000 to repave a road, that money we could use to pay those people's debt. So let's go borrow the money and we'll pay somebody else back and then we can get that $500,000 and pay it off over time. So governments issue lots of debt and that's why, because we have a large outstanding and we do need to access credit markets every year for a million, like the debt. We'll probably issue $147 million worth of debt in September. That's why our credit rating is an important factor for us because we need access to that, those markets.

But it wouldn't help the budget to pay down the capital budget?

No.

No, okay.

No.

Thank you.

No.

Supervisor Butcher? Well, back to the levy limit. Looking at your slide on the state levy limit last year, it said based on that new construction, we could go to almost 2.4%. We went to 1.6%. And that would have included any capital increase.

No, we did not. No, it's a complicated formula.

Maybe that would be best to explain that because that's publicly what went out was that it was a 1.6% levy increase.

There's a lot of factors that go into that. It's a different metric. There's a specific formula for the levy limit. There's a specific worksheet with a DOR. And I could walk you through it. I did it with Supervisor Erickson. It takes a little time to go through it.

I just think it's something we should figure out a way to explain to people because I've more than once publicly been said, oh, you guys wanted 2.4, but it was 1.6, but it was, and you can't explain those two different numbers very easily. And I think that's something we do need to be able to explain as we go forward. Yeah. Going back, so maybe if there's a way we could figure that out before.

Well, I mean, our levy will go up. I mean, so that amount is only on a portion of our levy. You have to take the last year's levy. You have to retake out. I can walk you through it, but I don't think we have time. But you remove the library levy because that's exempt. You remove the bridge aid because that's exempt. You also remove all the amount that we levied from the prior year's debt service, and you come to a number. That number is the one that you apply the net new construction percentage to that results in the $3.2 million. Then you go add back in your debt service payments and your library levy for the following, for the next fiscal year, and that comes up with a gross number. Now that number might only go up by 1.6%. But the operating levy increase as defined by DOR went up. I can guarantee you that we accessed it every dime that we could under the levy limit.

So then basically what we're saying is that the items like on the capital budget were actually going lower than 2%. Because they'd had to balance out. So the areas where we could have gone to whatever number we wanted to, we actually went below what the new construction number could have been.

Net new construction has only to do with one portion of our levy. And it comes out to about half of our total levy is affected by that. There could come a time. No, you're right. There could come a time where we max out the levy limit and our levy that we actually levy goes down. And that way that would happen is if our debt payments from one year to the next went down by a significant amount. So our debt payments must have... We didn't have a lot of increase in our debt. The prior year, we had our first tranche of debt increase for the jail, like the biggest chunk of borrowing. We're going to borrow a little more now, but that was a big chunk. And so the levy went up a lot. We didn't borrow as much and our payments did not go up nearly as much for 2026. We didn't borrow as much. And so we had a lower overall percentage. And if we went down to $500 million in debt, the levy would go down a lot.

So basically to be rough on the numbers, if we were at roughly 2.4% on the net new construction, and we ended up with at 1.6, if that was half, then really we were almost about 1% on all those optional ones.

I'd have to look at the numbers. I can't just wing it. The concept is that only about half of our levy is related to the levy limit and the other half is mostly debt or exempt portions of the levy.

All right. So that at least gets to how we get to that number. My second question is doing that, no matter what, we're looking at a tax increase. So we're obviously trying to keep that as small as possible. When we look at capital expenditures and saying that it's kind of like, well, it's exempt so we can do whatever we want. when we're looking at, let's just take the last thing we just did, $6.4 million. Roughly how much, when we borrow that, roughly how much does that affect the debt service payment per year?

In other words, how much would we have to pay on that? On average, about $100,000 to $110,000 per million.

$100,000 per million, roughly?

Yeah. Okay. Now, if we didn't issue any new debt right now, our debt levy would be going down every year because we pay it back pretty rapidly. but we tend to add it. In the last few years, there were years where it was pretty stable. It was like 300 million, just like if, I don't have a chart here, but if we went back seven years, it was pretty stable at about 330 million, and it's been going up a lot. we we did the jail we do we've done a lot of affordable housing borrowing um just to know that those are some of our biggest affordable housing over time has been a consistent single capital item in our budget all right thanks we spend almost more on that right now than we do on highway construction supervisor chavala did you have a okay um

Let me, Supervisor Erickson is the last person on the board, but I'm going to interject something real quick. Just to, I guess, get your thoughts, Chuck, on thinking about this application of surplus and how, you know, just taking this year as an example, you tried to do a projection back in February. Things were very blurry. And so as time goes on through the year, it gets more clear what those assumptions, how those assumptions are playing out. So that when we get to the 27 budget process, we're going to have a solid projection of what that is now. Yeah. With that in mind, though, as we start tackling that and thinking about, okay, yeah, it's ending up better than we had anticipated earlier this year by half, but as we start making decisions in the 27 budget process, something that's giving me some angst is what does that mean for 28, though, when we don't know what that amount of, You know, when we look at this history of surplus, it's really, there isn't a pattern where you can say, okay, let's take the last five years, take an average, and we can estimate that in 2028. Even if you consider 24 and 25, I think it is as outliers, take those out. And we estimate that then in 28, there'll be a 25 million, say the average is or something. Is that something that maybe we should, well, I guess I'm getting as, can and should we start thinking about that in the equation as we're making decisions in the 2027 budget? because we really focus on what room do we have under the levy limit. I'm concerned that if that's our only focus, that we're setting ourselves up for potential deficit in the subsequent year. That's significant.

Yeah, no, that's a good question. I think that... I wish that there was a way to be able to see further in the future, but that's not, maybe in five years and there's AI and we can dump all this stuff in there and they can turn it back and make my job obsolete, but I don't think so. But I think there's room for some consideration of that potentially. I mean, you know, What if, as part of the budget, and this is, I mean, total hypothetical, but what if there was more money than we needed to close the gap in surplus when we get to October? Would it be wise to, expand programs and or something like that and use that or would it be wise to retain some of that as a hedge for 2028 right that's the one thing i was thinking was you know maybe something like rather than uh undesignated reserves and designated reserve of some sort yeah i mean it but in the end it's designated by everybody here and you can change that designation. So, you know, there, I mean, there were times where in this history where, you know, Maybe there was $20 million at the end of the year in the Human Services Reserve Fund and only 10 of it was applied in the next year's budget. Maybe, you know, if that were an option, maybe that's to be, you know, if that emerges as an option in the future, it's not a bad idea. And part of the reason was, of doing that was, hey, YEAH, THERE WAS ALREADY, THERE WAS GROWTH ALREADY. THERE WERE WAGE INCREASES ALREADY IN THERE AND WE HAD OTHER THINGS. SO IT WASN'T LIKE BY RETAINING THAT, WE WERE You know, it wasn't the pressure to, say, take that and use it to restore a cut. It wasn't there because there weren't cuts. There was that. There was growth, plus there was enough money to hold a reserve. We're not quite there. So those would be tough. It's always tough balancing, you know, like protecting the future versus spending the money today.

All right. Last person on the board, and then we've got to adjourn. Supervisor Erickson.

Thank you, Mr. Chair. So thank you, Chuck, for the presentation. It's really helpful. But what I wanted to stress to everyone is at the first slide, you saw Chuck's email and you saw his phone number. And if you have more questions, he put it in there. He put it in there. And it's at the end, too. Oh, at the end, too. Great. We got it. So Supervisor Boettcher's question is really interesting. And that would warrant, I think, a meeting to go over that or any other questions. If there's something you're not sure of, I would highly encourage you either call Chuck up, schedule a meeting with him. And that's what I've always done all the time to try and understand things. So, you know, please do that. I think this was very informative, very helpful. So thank you for being here and presenting this. And thank you, Chair Miles for organizing it. And with that, I hope we can wrap up.

I'll take that as a motion to adjourn. Is there a second? Seconded by Truesillos. All in favor of adjournment of the Committee of the Whole, say aye. Aye. Opposed? Thank you. We are adjourned.