Dane County has financially recovered from the Great Recession and built up its reserves as a future precaution, the county’s controller and chief financial officer told an assembled group on Oct. 3.
Charles Hicklin spoke at the City-County building in Madison to a group that included Dane County Board members who are getting set to deliberate the 2020 budget. The session was offered as an educational opportunity as budget negotiations get underway.
Hicklin said the first indication for Dane County of a significant financial downturn came when sales tax revenue dropped 20 percent in the first few months of 2009. Then, a devastating wave of county homeowners stopped paying their property taxes.
“By the time we processed that information it was May of 2009 and we were already headed a bad direction,” Hicklin said.
Property tax delinquencies would ultimately peak in 2010, amounting to $11 million countywide that year.
The County Board had adopted its 2009 budget in the fall of 2008 just weeks after the collapse of global services firm Lehman Brothers.
The full, coming implications “were not immediately apparent,” Hicklin recalls.
The County Board had moved forward with a status-quo budget for 2009, including pay raises for county staff, Hicklin said.
Just a few months later, a projection in May 2009 said the county would likely end the year with a $6.5 million operating deficit.
“Drastic action was required,” Hicklin said.
A quickly implemented plan late that spring delayed the opening of county parks, cancelled grant programs and froze all hiring. Unions representing county employees agreed to a 5 percent wage cut for the rest of 2009 in exchange for no layoffs.
“No layoffs was our number one priority,” Hicklin said, adding, “I hope we never have to put people in that kind of position ever again.”
“Most elected officials also voluntarily returned their salaries,” he recalled.
Wages went back up at the start of 2010 but were later cut again, by 3 percent at the end of that year, when the economy didn’t improve.
A major lesson for the county, Hicklin said, was to never again let its reserves dip so low that it couldn’t sustain its operations through a significant economic downturn.
Prior to 2009, the county had been dipping into its reserves. It ended 2008 with about $4.1 million in general fund reserves, Hicklin said. By the end of 2010, its reserve fund was $5.1 million in the red.
“We had burned through $9.2 million by the end of 2010,” Hicklin said.
The county has spent the past decade coming back financially, Hicklin said.
At the end of 2019, the county is projected to have $43 million in general fund reserves. Some people, Hicklin said, have questioned whether that’s an excessive amount. He said he responds that that is less than 10 percent of the county’s total operating budget, which is proposed to be $592 million in 2020. Some other counties in Wisconsin have built their reserves up to 20 percent, he said.
A healthy amount in reserves protects county operations and county employees in the event of another financial crisis, he said. Hicklin said he would like to see Dane County’s general fund reserves continue to grow relative to the operating budget.
“We need to be well into the double digits,” he said.
Other indicators continue to return to healthy levels, he said.
In 2018, the county took in about $62 million in sales taxes, up from a low of $41 million in 2009, Hicklin said.
And in 2018, delinquent property taxes only amounted to about $3.5 million countywide, lower than $6.6 million in pre-recession 2007, he said.
Since 2009, the county has also taken a hard look at its departments, Hicklin said, to ensure transparent and consistent annual budgeting.
“We’re in a better place today because we more carefully watch those,” he said.
Since 2017, the county has had a separate Human Services reserve fund to ensure those programs are protected in a downturn, Hicklin also said.
And about four years ago, the county’s AAA bond rating was restored, that had been lost in 2009. That allows it to secure better borrowing rates, Hicklin said.