MOUNT VERNON — A recent budget shortfall in the Knox County general fund has drawn attention to the budget forecasting process, not to mention a lot of finger-pointing by local officials. An examination of the budget process, however, spreads the blame evenly to three process points where a faulty number should be caught.
The number which has proven troublesome is the budget forecast for interest income from the county’s investments. When interest rates were higher, this line item returned a substantial amount to the county budget. With the foundering of the economy in the last year, interest rates have plummeted to an almost negligible low. The problem for Knox County’s 2009 budget was that a forecast for an investment return even higher than what was received in 2008 was entered into the budget, causing the commissioners to think they had more money to appropriate than was really there. In 2008, $800,000 came to the county in investment income; this year looks likely to return $400,000. The projected return for this line item was $1.4 million.
The forecast number appears to stick out, in retrospect, as a number carried over from a past budget. This number is provided by the county auditor, who at the time was Margaret Ann Ruhl, and is given to the county budget commission.
The county budget commission is comprised of the county auditor, county prosecutor and county treasurer. At the time the 2009 figures were being created and certified, the members were Ruhl, Prosecutor John C. Thatcher and Treasurer Sandra Mizer.
The duties of the budget commission are to approve distribution of local government funds based on locally approved formulas; the commission also sets tax rates based on budgetary requests, and approves and issues amended certificates of estimated revenue. The commission approved the investment income estimate, along with hundreds of other estimates, to meet a Sept. 1 deadline.
After the budget shortfall became evident, Commissioner Allen Stockberger remarked in a number of meetings that he was unhappy that the previous auditor and the budget commission had approved this number, considering the economy has been steadily worsening and the Federal Reserve has been lowering interest rates to fight it. Those rates made it impossible for the county’s investments to return the amount of interest forecast.
Thatcher pointed out in an e-mail to the News that although the budget commission certifies estimates, the final authority for accepting those figures is the county commissioners. Thatcher said the commissioners have the authority to pass temporary appropriation measures for meeting the county’s expenses through March of the new year, and pass an annual appropriation measure based on actual figures, not estimations, by April 1.
Stockberger said such a maneuver would not have made any difference, as the actual figures for the first interest installment of the year do not come in until halfway through the year. Stockberger said that, in the end, what it ultimately comes down to is that no one involved in the process caught the unrealistic figure, including the commissioners.
“Sometimes, with the vast amount of paperwork that crosses our desks for a signature, we don’t take the time to perform the due diligence that we ought to,” Stockberger said, adding that as far as he could tell, the budget commission members and the previous auditor made the same error the commissioners did, of failing to perform due diligence in comparing the forecast to current economic trends.