For those of you who live in McCracken County, Kentucky, you probably know we are dealing with a bit of a financial situation. It is not yet a crisis, but it will be a crisis if there is no change in the numbers. I thought it might be helpful to some if I shared a few of my thoughts. As you read this, if you have any comments or suggestions, I am in “listening mode.”
1. Kentucky counties are generally funded by an assortment of three (3) different revenue sources:
a. Property Tax
b. Occupational/Wage Tax (1% county cap on this tax)
c. Tax on Insurance Premiums
2. Most of the counties in Kentucky which compare closely to our population are funded by a portion of all three (3) of the above revenue sources. McCracken County has historically been able to avoid using all three (3) sources because the Uranium Enrichment Plant has always been a heavy employer located in the county and not in the City of Paducah. Obviously, that employment is reducing and will continue to decline for the next generations.
3. Kentucky cities are generally funded by the same three (3) revenue sources. However cities are not capped at the one percent (1%) occupational/wage tax. Consequently, there is a “built in” incentive for cities to annex areas of their county which generate employment. (Now you know why the City of Paducah has strange boundary lines). McCracken County and the City of Paducah have some revenue sharing agreements on the Information Age Park and the I-24 Park, but those agreements are set to expire in the next couple of years.
4. Since 2011, McCracken County has been “deficit spending.” The low month of McCracken County’s financial cycle is October. In other words, McCracken County will have the least amount of money in October of any calendar month.
a. In October of 2011, the McCracken County reserve fund had a balance of $5,479,927.00.
b. In October of 2018, the McCracken County reserve fund had a balance of $767,738.00.
c. In October of 2019, the McCracken County reserve fund had a balance of $1,182,133.00
The reserve balance went up approximately $400,000.00 between 2018 and 2019 because we just quit spending money. We deferred $500,000.00 in road maintenance. We did not write checks to some worthy non-profit organizations. In other words, the problem has not necessarily hit bottom; rather, we just quit writing checks.
5. Last month, McCracken County’s “bond rating” (i.e. credit score) was lowered because our reserve fund is inadequate as it compares to our operating budget.
6. So what has caused this situation?
a. Past Loans Without New Revenue
Between 2011 and 2013, McCracken County borrowed $16.5 million dollars for several projects such as the local Murray State Campus, Genova Project, TeleTech Project, and White Hall Project. Some of those projects have worked out great. Some of those projects need more time in the oven. Either way, the debt service payments went up, but the revenue was not adjusted.
b. Cost of the County Jail
Additionally, McCracken County continues to lose money in the operation of its jail. McCracken County operates a 600 bed regional detention center. Contrary to urban legend, the regional detention center does not make money for the county. Quite the opposite. Over the last ten (10) years, the operation of the jail has cost the county between two (2) million and three (3) million dollars every year. There are years in which the jail brings in revenue in the amount of five (5) million dollars. However, in the same year we may spend as much as eight (8) million dollars. It is my personal belief that the jail costs can be lowered with more communication and more illumination to the “incarceration scenarios” which can and cannot be passed on to the Commonwealth of Kentucky for reimbursement. However, that is a long-term culture adjustment we must make and will not solve an immediate problem.
c. Cost of the County Pensions
McCracken County is a designated organization of the Commonwealth of Kentucky. The Commonwealth of Kentucky has designated that our employees will participate in a state pension fund. For years, The Commonwealth of Kentucky failed to adequately fund the pension system. In response to the significant underfunded liability, the Commonwealth of Kentucky has insisted that counties pay additional amounts toward the retirement system. In 2011, McCracken County’s retirement costs were $1,798,367.78. In 2019, McCracken County’s retirement costs were $2,268,409.20. Since 2011, these costs have risen $470,041.42. These costs are projected to continue to go higher.
d. Cost of Health Insurance Benefits
In 2011, the cost of health insurance benefits for McCracken County employees was $1,782,320.73. In 2019, the cost of health insurance benefits for McCracken County employees was $2,401,283.02. Since 2011, these cost have risen $618,962.29.
e. A Very Low Property Tax
McCracken County has one of the lowest property tax rates in the state. In fact, prior to 2019, McCracken County had not raised its property tax rate since 1990 (three (3) decades ago.) Furthermore, the state managed Property Valuation Office (PVA) did not keep assessments current and, in some cases, omitted properties from the tax rolls.
f. The Absence of 9-1-1 “User Free” Funding
In the last three (3) decades, the sophistication and costs of an adequate 9-1-1 Emergency System has dramatically changed. No longer does our community need an “Andy Griffith type” telephone operator helping manage the location of “Barney Fife” but rather our community needs a “Jack Bauer type” emergency service coordinator. Many communities have moved 9-1-1 services to an independent organization with independent “user fee type” funding sources. Neither our City nor County have accomplished this task. We are still attempting to fund perhaps the most critical government service we provide through our general funds.
7. By law, property tax revenue can only be increased by four percent (4%) per year without public approval (an election.) An additional four percent (4%) in property tax for McCracken County only generates an additional $180,000.00 per year for the McCracken County Fiscal Court. Incidentally, most of your county tax bill does not go to McCracken County Fiscal Court for government operations, but rather goes to schools, the library, and special districts such as volunteer fire departments.
Conclusion for Today
I realize this collection of thoughts is a bit random but I want the citizens of McCracken County to have relevant information sooner than later on this matter. I am interested in your thoughts. The easy answer is to say spend less. I am certain there are additional adjustments we can and will make on spending. However we have been deficit spending at the rate of a million dollars a year. More Later.
Eddie Jones
Thank you be much for the thoughtful and informative article. I appreciate your time and effort to explain the state of the County. My only suggestion is to operate the county as much like a small business as you can. Spend less. Save more. Lower the cost of labor. (Healthcare and pension). Extend equipment and vehicle service life before replacing. Cushy healthcare plans and pensions maxed after unrealistic work requirements are not a sustainable business model for anyone anymore. Furthermore, no small business can just pass a law and raise revenue. Please don’t take that short sighted and authoritarian approach.
Thanks again for the information.
I gave up at 4(b).
Eddie
Thanks for the wealth of information. It is hard to believe we spend $8,000,000 per year on 600 inmates at our county jail producing a$2,000,000 to $3,000,000 deficit. That’s about $13,000 a year per inmate. How much of the health care cost is actually Shared by the employees? When entering the Court house there at least 4 to 5 individuals operating a scanner which seems more than necessary. All our Deputies drive the cruisers home at tax payers expense. What about the Sherriff’s department. I’m all for law enforcement but I’m sure that price tag is Staggering? What happens to drug bust money and property that is ceased? Can the department use that to defray department expenses? Thanks for your service and shedding some Much need light on this issue.
Excellent comment Mr. Martin! If you take care of little deficiencies, they add up over time and help fill that leak in that “general fund bucket”. All employees driving official vehicles should adhere to the speed limits posted except in emergencies. This needs to include the sheriff’s department unless responding to a call. The fuel savings will add up quickly.
Mr. Jones stated that spending has been curtailed nut that is not accurate. Recently the fiscal court ordered an estimated $15,000 study to help with a personnel selection. Totally unneeded. Same goes for paying for legal advice when county attorney is available and part of their duties. Pension problem was not the match that lit this current financial fire but helped it grow into a bonfire. But it will turn into an inferno in the budget year of 2024 and how will the fiscal court put it out then?
The fiscal court is in violation of one aspect of open meeting requirements; written meeting minutes are not available immediately following the completion of the next fiscal court meeting. A phone call to judge executive office made and answer received that they are not available online. Questioned about how to obtain a hard copy of the minutes and was told a return call would be made with this information. Still waiting! (KRS 61.835)
I am against adopting the premium insurance tax ordinance by the fiscal court. The language on the first page of the ordinance is self-serving and absolves current fiscal court of contributing to the shortfall. McCracken county residents didn’t cause it either but now we are expected to solve it by more financial contributions. Not acceptable.
Mr. Jones I certainly hope to hear some of these blog comments addressed at tomorrow’s meeting.
Thank you, Paulette Stokes (McCracken resident since 1968)
Thank you Ms. Stokes. The 15,000.00 came from PACRO funds which are designated for economic development. I hope you have seen the report. I think all who are trying to make decisions on sports tourism considered it a helpful report in guiding them as to how to approach the addition of sports fields with the funds from the Hotel Tax which have been designated for that purpose and “by law” cannot be used to run the “day to day” expenses of the county government.
I did read the report but not impressed with content. Several glaring errors like Evansville is not 33 miles from Paducah. McCracken county public school system not listed as a larger employer but Paducah public school was on the list!
Pinnacle did not seem to grasp that Mccracken county not city of Paducah authorized the study. Most of report was “filler information” easily obtained by the public.
Pacro funding of $15,000 for economic development should have been used differently. Of course this is only one opinion from a McCracken county resident. Thank you for your previous reply.
Looks like the jail is an unsustainable entity. As you know, any business endeavor that loses money is a drain on all the other departments. Our jail is a regional jail so is the cost shared by other counties or the state? It may be time to take a long, hard look at what role McCracken County wants to continue to play in housing inmates. The elimination of the jail deficit would put the county in the black for the foreseeable future. Raising taxes is not the answer because the impact is minimal. Additionally, economic growth is already a challenge in our community and higher taxes will not help. I’m all for progress and growth but I think you have to ask some serious questions about what our community can support from a financial perspective. New sports parks, recreation centers, etc. are all fantastic but not at the expense of addressing more pressing and present issues. Thanks for the information and I hope the commission will address the real issues rather than just addressing the symptoms.
Mr. Jones
I am not in favor of any “new” tax, but I understand that the county is in a financial situation. I don’t understand or agree with the amount of Insurance tax that was approved. There were too many unknowns (what the county residents premiums are and how much revenue would be generated). There is something that can be done immediately, somebody HAS to get control over the other taxing districts within the county. In my opinion they are out of control. The Judge appoints these boards and ultimately the responsibility for fiscal control falls on him and the Commissioners. I sent a letter to the Judge and every Commissioner on the research that I did on the Library. Their taxing and Financial control is totally ridiculous. I cant help but believe that the other taxing districts are similar. These taxing districts need to be held accountable for their tax rates (not automatically levying the 4% ) and their expenditures. If you are serious about the financial condition of the County (which I believe you are) these other taxing districts must be called on the carpet to explain their actions and new appointments need to be made to their board with fiscally responsible citizens. My suggestion would be to start with the Library!!!
Ronnie Goode