• Budget Advisory Committee Home
• Committee Members
• Committee Policy
• Meetings
• Subcommittee Material

• Internal Auditor Home
• Budget Advisory Committee
• Audit Committee Charter Workshop

MEETING: BUDGET ADVISORY COMMITTEE

1. WELCOME AND INTRODUCTIONS: March 1, 2007, at 3:34 p.m., in the Palm Beach County Governmental Center, West Palm Beach, Florida.

   MEMBERS AND OFFICERS PRESENT:

   Commissioner Warren H. Newell, Chair
   Arthur Bernstein, Financial Executive and taxpayer
   Robert C. Kneip, Economic Council Chair
   Ken Nielson, Former City of West Palm Beach Assistant Internal Auditor
   Steve Templeton, Templeton & Company, LLP, President
   John A. (Jack) Warner, Financial Executive
   Linda Federico, Deputy Clerk

2. See page 3.
   
   
3. BOARD OF COUNTY COMMISSIONERS' (BCC) RESPONSE TO SPENDING CAP RECOMMENDATION

   Commissioner Newell asked County Administrator Robert Weisman to provide an overview of the board's direction to the Budget Advisory Committee (BAC) at its meeting of February 27, 2007 regarding its spending cap recommendation.

   Mr. Weisman reported that the commissioners had indicated that the BAC should delve more into the details of the budget and suggest specific items requiring attention or reconsideration rather than providing a broad statement about a target goal.

   Robert Kneip expressed his disappointment with the board's reaction, saying he had hoped the commissioners would provide a platform to establish an amicable series of good faith discussions with the BAC, with the anticipated outcome a transparent product for managing difficult fiscal circumstances. Regarding the board's criticism that the committee had not made specific suggestions, Mr. Kneip commented that elected officials and paid staff were responsible for looking at budget line items, and that was not the role of an outside advisory board. The committee's role, he said, was to examine efficiency and to create a transparent and more efficient process. Saying he thought the committee's recommendations were misunderstood, he explained that having met only twice, with the first meeting being primarily organizational and with the budget process already underway, the committee's effort had been to establish a temporary baseline upon which to build a more comprehensive understanding of the budget process.

   Commenting on the lessons he learned from the board's response to the committee's recommendations, Jack Warner said that 1) future recommendations needed to be limited to a single, clear topic and, 2) a voting member of the BAC should be part of the agenda item and the discussion when the recommendation was considered by the board. He explained that this two-part recommendation, to set a spending target each year and set 2008 spending at the 2007 level, was confusing to the commissioners.

   Steve Templeton stated that if the BAC was precluded from its focus on budget process, its usefulness to the county, the taxpayers and the board would be severely limited. The committee's recommendation provided an opportunity for the board to step in front of the budget process and provide specific direction to staff on spending, he said. If the board did not agree with the benchmark, he added, it could have provided other direction to staff. He stated that the BAC intended to encourage the board to establish limits and he was disappointed that the board did not react accordingly.

   Arthur Bernstein addressed two comments made by board members about the BAC, with which he disagreed: 1) the BAC was a waste of time and, 2) politics had infiltrated the committee. He asked for a statement of strong support of the committee's efforts and a rebuttal of the waste-of-time statement from the committee chair. He commented on the restrictions relative to the Sunshine Law and the constricted process under which the committee was working. He suggested reconstituting the group as a shadow BAC, outside the auspices of the BCC, if the board did not want this type of analysis or oversight, adding that he did not advocate that alternative at this time.

   Commissioner Newell responded saying that the issue had a political aspect because the commissioners had received many emails from organizations in the business community regarding the actions of the Economic Council. He said the board anticipated that the committee would examine the details of the budget to determine priorities and make recommendations to eventuate a reduction in the cost of county services. He stated that the committee's recommendations could be extremely helpful, and he had heard from the commissioners that they were not adverse to setting a base and prioritizing from there. He said the board wanted to find ways to help reduce taxes, and the BAC had a great opportunity to do so if they came up with recommendations for reducing the budget.

   Reciting the resolution passed by the board to form the BAC, Mr. Warner stated that in light of the BAC's responsibility as defined by this resolution, the committee at its first meeting had made it clear that its focus would be on procedure. He went on to say that county staff was competent and county programs were continually honed, and it would be a waste of time for the committee to oversee staff.

   Commissioner Newell stated that the board looked for recommendations from the committee for reducing and prioritizing county spending. With a myriad of organizations seeking funding from the BCC, he said, it was very difficult to determine what was most important for the county and its citizens, and the BAC's prioritization recommendations would be very helpful to the board.

   Mr. Warner stated that deciding budget priorities was a policy matter and the committee should not make those determinations; the county administrator and staff would do a better job of advising the BCC in that regard.

   Mr. Templeton remarked that identifying stakeholder concerns, needs and priorities was a primary element of good budgeting, and creating goals and prioritizations with stakeholder input was part of the initial budget development process. He said that long-range planning would identify goals and direction regarding county priorities and make the evaluation of each individual funding request easier. He stated that this was central to the best practices set forth in the Government Finance Officers Association budgeting document which the BAC recommended, and the necessary first steps involved visioning and prioritization by the BCC.

   Mr. Kneip commented that in the absence of a procedural format that stressed efficiency and created a decision-making matrix, it was cavalier and dangerous to make specific recommendations for or against a project.

   Mr. Weisman suggested that the BAC might have made a tactical error with its motion and added the following:

   • The motion's original direction that the county should set a revenue target could have led to a good discussion; however, setting the target without discussion created an adversarial situation.
     
     
   • The public comments about the need for tax reduction completely distracted the board from the technical direction the committee sought to address.
     
     
   • Staff had followed up on the committee's recommendation to address the revenue issue and had prepared a range of revenue numbers for discussion, although that opportunity never arose.
     
     
   • The board liked and was accustomed to the process by which the budget was formulated.
     
     

   Commissioner Newell added that part of the BAC's message was redirected at the meeting because public input wasn't about the process that the committee initiated as its motion. He clarified that it would have been more appropriate to ask the board to set a spending limit rather than setting a limit at the FY2007 budget.

   Mr. Warner remarked that the board focused on only one part of the committee's two-part recommendation and added that the committee should keep trying.

   (CLERK'S NOTE: Discussion of the minutes of the February 1, 2007 meeting took place at this time.)

4. APPROVAL OF MINUTES OF FEBRUARY 1, 2007 MEETING

   Internal Auditor Joe Bergeron reported that he had sent the minutes of the February 1, 2007 meeting to all committee members and had received comments from three. That input, however, was not reflected in the final minutes he had received from Board Services and, therefore, the minutes were not ready to be approved, he said. Commissioner Newell proposed that approval be postponed until the next meeting.

5. UNSCHEDULED ITEM

   PROPOSED STATE CHANGES. DISCUSSED 3-1-2007

   Commissioner Newell asked Mr. Weisman about the availability of an informational document that detailed the effect of the state's proposed changes on the county's ad valorem millage or tax revenue. Mr. Weisman reported that according to that information from the Florida Association of Counties, the county would have a $300 million cut in next year's budget.

   Office of Financial Management and Budget Director Richard Roberts explained that the loss would be in ad valorem dollars and that the House bill would go into effect January 1, 2008. He said the projected $319 million loss in revenue from property taxes would commence in FY2008-2009.

   Commissioner Newell requested that the report be provided to the committee members prior the next meeting.

6. SUBCOMMITTEE REPORTS
   1. OPERATING BUDGET

      Arthur Bernstein presented the Operating Budget Subcommittee report with substantiating documentation. He explained that he developed his review of the county operating budget by requesting the following information from each department, agency and constitutional office:

      • A list of expenditures over the last two years for third-party consulting, advisory and legal fees
        
        
      • A list of any currently planned workforce increases or decreases
        
        
      • A list of the currently anticipated cumulative retiree benefits which must be disclosed pursuant to new government accounting standards rules
        
        
      • A list of actual and anticipated bond issues for FY2007 and FY2008, other than self-supporting revenue bonds that would be paid with taxes
        
        
      • A list of the number of employees being paid in excess of $100,000 annually
        
        

      Mr. Bernstein said he received a substantial amount of detailed information in return, although a couple of constitutional offices had not yet responded. He explained the methodology of his analysis saying he excluded the expenses for fire rescue, the sheriff and the library, the first lines of service in the community. Setting aside those items from an overall budget of $1.1 billion of ad valorem taxes, he said, approximately $400 million in controllable expenses remained. He pointed out that a significant part of the $400 million were direct employee costs and that third-party expenditures over the last two years were estimated at $80 million.

      He suggested that the committee could request justification and analysis of the $400 million of controllable expenses-which required attention-and could suggest cuts without reducing police, fire rescue and other essential services. In addition, he said, possible revenue opportunities should be considered, not in raising non-tax fees, but in evaluating county assets that might be available for sale or use. He recommended integrating this approach with the process approach suggested by other committee members.

      Mr. Bernstein remarked that the committee had more control over third-party expenditures and employee costs-controllable costs--than over public safety items that were related to county growth. He said that from the information he had received, he was not convinced that all the items were absolutely essential for safe and efficient operation of the county and for providing public services.

      Jack Warner recommended that the committee use caution in focusing on the sources of cost, commenting that external contractors often provided services that were not available or were more costly in-house. Instead, he said, focus should be on the necessity of services.

      Mr. Bernstein reiterated that with the exclusions he suggested, $400 million of expenditures remained, of which $40 million represented third-party costs and over $350 million were employee expenses. He said that if the committee found even a small percentage to cut, the cuts would be from this slice of the budget; and although the dollar savings may not be huge, the committee should identify where they believed savings could be accomplished.

      Mr. Warner replied that cuts on a large percentage basis would be necessary to realize significant savings, and he cautioned that the committee should not constrain the scope of its analysis earlier than necessary.

   2. CAPITAL BUDGET

      Robert Kneip reported that he had framed a series of questions to create a format for discussing the capital projects issue and had been provided a myriad of details in response. He explained that his questions were process driven, and the goal was to understand the process by which capital projects were identified, the process for evaluating a project's continuing usefulness for the county, and the process for integrating changes in circumstances into the capital project structure.

      He said he attempted to collectively identify capital projects that were no longer appropriate or operative and to sweep funding for those projects from reserves, to which they were tied, while still maintaining the county's triple-A bond rating. He remarked that the county's bond rating was a significant accomplishment and explained that the reserves were one of 11 items bond-rating agencies examined. He said the reserves should not be put at risk if they materially affected the bond rating.

      Mr. Kneip requested observations and suggestions from other committee members regarding the questions. The objective, he said, was to determine if there were any quantum dollars for projects that could be identified as out of scope or no longer applicable and to mitigate the tax burden by moving that money into general funds.

      Steve Templeton observed that there may be a process issue with prioritization evaluation of inactive projects. In reply, Mr. Kneip pointed out that the first question dealt with the process for reviewing, sunsetting and retiring capital projects. He stated that if there wasn't a process in place for that, the committee could help develop one.

      Commission Newell commented that the commissioners were very interested in the sunsetting process and considered the reserves critical.

   3. BUDGET PROCESS

      John Warner reported that the subcommittee had used, as the basis for its review and recommendations, the framework established by the National Advisory Council on State and Local Budgeting (NACSLB), the group that had reviewed the county's budget for the past 17 years, awarding it the highest rating. He stated that the subcommittee had completed two reports, which were distributed at the meeting and posted on the BAC website, and made recommendations associated with each. He summarized and commented on those recommendations as follows:

      • Based on principles from the NACSLB's recommended best practices, the subcommittee's first recommendation was that the board should establish a multi-year financial plan in which finances, operations and goals were tied together. This plan should include:
        

        1. Total spending targets for each plan year.
        
        2. The board must establish a prioritized list of essential services. Although the BAC could make recommendations, guidance on priorities was a commission function.
        
        3. It was important to develop an understanding of the balance between the money extracted from the economy in the form of taxation and the cost of essential services provided by county government. This requirement was built into the county's Comprehensive Plan, and the subcommittee encouraged the government to do this analysis.
        

      Motion to approve the Budget Advisory Committee's recommendation that the Board of County Commissioners (BCC) establish, publish and periodically update a multi-year financial plan which will include annual total spending targets for each of the plan years, will include BCC guidance on the essential services to be provided by county government, and will balance the benefits of the cost of these essential services against the potential harm of excessive taxation. Motion by Jack Warner.

      In order to effectively support recommendations that may eventually mesh or conflict with others, Ken Nielson suggested that it might be advisable for the committee to progress further in its study and compile its recommendations into a report rather than making them one at a time.

      Steve Templeton remarked that for the BAC to be effective, the BAC, the BCC and county staff needed to agree that fundamental changes to the current budget process were necessary and work together to make the improvements. He suggested that a joint workshop on lessons learned, approach, etc., be conducted by someone from a local government who had adopted the best practices principles as the framework for its budget process.

      Robert Kneip said it might be premature to limit what was included in the prioritization or planning process at this stage. Referring to a question he had asked staff regarding visioning and developing a decision matrix, he suggested that there may be opportunities to expand the scope of the recommendation.

      Mr. Warner withdrew his motion saying it was a multi-year plan which he did not expect to be established now and said he was trying to frame a second recommendation which had the potential to affect the 2008 budget. That recommendation, he said, involved the method by which the budget was put together, from the department level, through the required reviews, to eventual approval by the board. He explained that each department prepared a two-part budget which indicated the current services and activities expenses and what was important for the next year. This resulted, he said, in a budget proposal that reflected the sum of departmental funding requests and when prepared this way, it was difficult to determine what could be eliminated if money wasn't available.

      He suggested that the county administrator consider a budget based instead on a prioritized list of essential services to be provided by senior county staff or by the BCC. That way, he elaborated, the budget could be presented as a) a total cost for essential services and, b) opportunities for non-essential programs that would be beneficial to the county. This process, he said, would be more understandable by the general public, would be easier to review, would make identifying cuts easier, and discussion would be about programs rather than about funding by department.

      In conclusion, he said that this method had the potential to improve information, dialogue, and the end result and was important for the committee to discuss and push forward.

      In response, County Administrator Robert Weisman offered to select a couple of departments to target as examples and expressed that it was difficult prioritizing because everything seemed reasonably necessary. He said that the lowest priority might be public information, clarifying later in the meeting that by public information he specifically meant promotional information items such as preparing websites and materials advising the public of available services. When evaluating priorities on the basis of direct, hands-on service, promotional information would rank lower.

      Rather than the recommendation to cut line items completely, Arthur Bernstein suggested that staff might select areas of expenditure and determine if a job could be accomplished with a percentage less than currently budgeted, using the suggested budget approach. In other words, he said, they would create two categories with one being essential services and the second being all others.

      Mr. Warner replied with the following comments:

      • It was likely that entire activities would be determined to be unaffordable, and decisions would have to be made regarding what was necessary and what could not be done due to lack of money.
        
        
      • Priorities must be set, and although staff could make recommendations, ultimately that was a policy decision.
        
        
      • It was difficult to recommend a sensible budget process if it was structured according to current expenses and anticipated annual increases.
        
        
      • The budget must be based on a set of decisions that dictated what functions were essential.
        
        
      • The subcommittee's second recommendation was that the county develop an approach to do this, similar to Mr. Weisman's suggestion of a trial in several departments.
        
        
      • The deficiency in the overall budget process was at the policy level where it must be decided what could be done, what could be done differently, and what could not be done.
        
        
   4. PERFORMANCE MEASURES

      Ken Nielson distributed copies of the Portland, Oregon Service Efforts and Accomplishments Report and encouraged committee members to read the summary regarding performance tracking. He explained the method by which performance was measured saying that goals were set, performance criteria were established, and achievement of goals was measured through that measurement criteria. He said in his opinion the budgeting process entailed allocating resources, money, people, equipment and buildings to achieve goals set by the Board of County Commissioners (BCC), with performance measures prominent in the budget.

      He remarked that the performance measures in the latest county budget were weak because performance outcomes were not being measured. He said performance measures were an effective tool in creating efficiency and in measuring outcomes that were compatible with established goals. Furthermore, he said, performance measures provided knowledge about performance drivers, making it possible to tweak current practices to enhance efficiency, effectiveness and productivity.

      Mr. Nielson cited several performance measures defined in the county budget document, commenting that some were uncontrollable and, therefore, should not be included; others were not true measures of performance. He recommended that the people who were creating the budget should be encouraged to examine and determine if the established performance measures would be effective in evaluating whether goals for which money was allocated were achieved.

7. MEMBER COMMENTS

   (CLERK'S NOTE: Committee members agreed to hear public comments prior to members' comments.)

   PUBLIC COMMENT:

   Sherri Lee (ph) said it appeared that two budget processes were going on simultaneously, and the Budget Advisory Committee (BAC) should consider coordinating with the Board of County Commissioners (BCC), which was already going forward with the process of creating a budget. She also suggested that the committee include fire rescue and law enforcement when considering the operating budget and check for duplication of services because the 37 municipalities in the county had their own public safety services. Finally, she stated that taxpayers needed immediate relief, and a major rollback should be considered rather than just holding the line at last year's budget.

   John Parsons of Jupiter, a member of a former budget advisory committee, thanked the committee for serving and encouraged them to stay on course.

   Commissioner Newell expressed his appreciation of the talents and efforts of the committee members and encouraged them not to become disheartened.

   Robert Kneip asked if members of the BAC had the authority to speak with commissioners on the budget issue without violating the Sunshine Law. Mr. Weisman responded saying that the members could speak about the issue with any commissioner except Commissioner Newell, the committee chair.

   In response to the public comment regarding essential services, Arthur Bernstein said that nothing was off the table, and his intention was to highlight gross numbers in controllable expenditures.

   Mr. Bernstein stated that he wanted to hear from the BCC that they were interested in the recommendations of the BAC subcommittees. He asked Commissioner Newell to report back to the committee as to whether his colleagues on the board understood that the BAC was not taking a line-item approach to the budget.

   Commissioner Newell said he would provide the commissioners with an update on the committee's efforts before the next board meeting.

   Steve Templeton reiterated his recommendation that a joint meeting be held with a presentation on the importance of the process and remarked that the board needed to work together with the BAC. Commissioner Newell explained that typically an advisory committee generated a report of recommendations, presented it to the board in a joint workshop, and following the presentation a question and answer session developed.

   Mr. Templeton stated that the board should adopt the principles and get up to speed on the recommended budget practices as set forth by the National Advisory Council on State and Local Budgeting and said the board should be aware that this was the direction the BAC was going. He commented that the county's current budget process was lacking some of the principles and elements contained in that document.

   Jack Warner reiterated that the deficiencies were at the policy level, adding that the BCC was responsible for policy decisions, and the process as managed by staff was being done as well as possible within the policy framework established by the board. He said the message to be delivered to the board was that the problems in the county's process were at the commission level.

   Mr. Templeton remarked that the critical elements of the best practices document were not staff-led, and what was missing was the engagement and direction of the BCC up front. He pointed out that the recommended first steps were policy, prioritization, setting goals, setting direction and looking at the budget on a multi-year basis. He said he would like to see an educational process by which everyone could be informed by someone who had adopted the best practices recommendations. He also said there should be forums or other methods to gather timely input from stakeholders.

   Commissioner Newell commented that although it was not structured under those guidelines, the suggested process did occur. He explained that the board heard representation from the community regarding its wants through meetings, organizations and public hearings and said the difficulty instead was in establishing a better way to process that information for the purpose of prioritization.

   Mr. Warner made a recommendation that staff attempt to examine the base budget based on essential services rather than on current service levels if they had enough guidance on the ranking of services to do that.

   County Administrator Robert Weisman offered to prepare a list of priorities and examples for the board to consider including some old capital items. He commented that past attempts to do this had been less than successful, and it may be difficult having the board agree on priorities.

   Commissioner Newell suggested that the BAC put together a full list of recommendations and bring it to the BCC, saying that piecemeal recommendations were more difficult for the board to accept. Mr. Weisman added that staff could react and adjust quickly to board direction and would work with changes as necessary. He noted that the board was looking for specific guidance from the BAC.

   Mr. Kneip said it was important to achieve a sense of engagement and commitment from the BCC indicating that they were open to process changes that included performance measurement and development of a prioritization budgeting strategy. He requested that Commissioner Newell relay that information to his colleagues on the board and clarified that the committee was not asking them to develop a priority list but to give the BAC their support and commitment.

   Commissioner Newell restated his understanding of the committee's direction saying that he would engage the board in conversation on the recommendations of the subcommittee reports at the next board meeting to garner additional support and direction for the committee.

   Mr. Weisman advised that the committee create a position paper stating what they wanted to present to the board and suggested that a committee member take primary responsibility for writing it while other members commented on the website. He said that this would ensure that the committee's request would be very clearly stated and presented to the board exactly as they intended.

   Mr. Bernstein suggested that Mr. Warner draft a memo consolidating the items presented by the subcommittees, which in turn could be modified to reflect member comments via the BAC website. Mr. Warner agreed to prepare the memo.

   In a brief discussion it was decided that it would be most efficient if all committee members were invited to attend the next BCC meeting, scheduled for March 13, 2007, to present the committee's views and recommendations.

   Mr. Warner agreed to prepare something with which to frame the discussion, and Internal Auditor Joe Bergeron stated that he would consult with the County Attorney's Office regarding potential violation of the Sunshine Law in posting the draft on the website and having members respond with comments and suggestions.*

8. SET TIME AND DATE FOR NEXT MEETING

   In keeping with the committee's desire to meet on Thursday afternoons at 3:30 p.m., Mr. Bergeron announced that the next available time for them to meet was April 12, 2007, at 3:30 p.m., in the Board of County Commission chambers.

9. ADJOURNMENT

The Chair declared the meeting adjourned at 5:25 p.m.

*Subsequent to the meeting, the County Attorney's office advised that joint drafting of a memo likely would be a violation of the Sunshine Law.