PRESTONSBURG — State officials pointed to the writing on the wall, Wednesday, as they let members of the Floyd County Fiscal Court know what will happen if they do not get their financial house in order.
Matthew Frolich, a representative of the state Department for Local Government, said the county is facing three very real possibilities that could see the state sue the fiscal court in order to take over the county and remove court members from office. He said that could happen if the county ends the current year in a deficit, fails to pass a balanced budget for the next fiscal year, or spends more than 65 percent of its next budget within the first six months of the next fiscal year.
Frolich’s assessment echoed that of County Treasurer David Layne, who has told the court several times over the last three years that the county was spending more than it was taking in, and of Judge-Executive R.D. “Doc” Marshall, who failed to get the court to pass an occupational tax earlier this year and warned that the county’s current budget was “unrealistic” when magistrates adopted it in May.
“About three years ago, the former state local finance officer, Junior Wright, came to the county, and he made comments at that time that essentially said, ‘At the rate you all are going, you will be broke in a matter of years,’” Frolich said. “Well, since those three years, unfortunately, revenue has not gone up in the county. As a matter of fact, as you are well aware in Eastern Kentucky, coal receipts have gone down. Revenue has gone down.
“Unfortunately, on the other side, expenses have not gotten any less. Health insurance has gone up. Retirement has gone up. Things just cost more. So all that has really done is exacerbate your issue from three years ago and put you on the fast track.”
Frolich said Floyd County will most likely have to implement a combination of additional revenue and spending cuts in order to avoid falling into one of the three traps that could initiate a state takeover.
In order to raise revenue, Frolich said there are really only three options available to the county — raising property taxes or implementing either an insurance tax or an occupational tax. Of those three, he said only the occupational tax would be likely to raise enough money to solve the county’s problems.
As for cutting expenses, Frolich said there were no easy answers, because the county is currently not spending very much more than what it is legally obligated to pay, and cutting any portion of the remainder — through layoffs or cutting money spent on health insurance, or senior citizens centers — would probably prove politically unpopular.
Frolich said he met with Layne and Judge-Executive R.D. “Doc” Marshall last year in order to put together alternative budgets that would help the county out of its mess. Instead, he said, “The fiscal court chose, at that time, essentially to operate more or less the same kind of budget you’ve had in the past.”
“Unfortunately, I’m here to tell you, because of that, after talking to the treasurer and looking over the numbers with him, I’m in complete agreement that, at the rate you are going, if you don’t address this issue, you are going to be somewhere in the range of a $400,000 or $500,000 deficit before the end of this fiscal year,” Frolich said. “That is a true and accurate projection. The problem with that is you are not legally allowed to operate in a deficit. You cannot. If you find yourself getting to a deficit, our office is required legally to step in during the current fiscal year.”
Frolich also noted that some of the court’s current troubles were of its own making.
“I’ll be honest, when the judge and treasurer told us the number of county vehicles you have, I pretty much fell out of my chair,” Frolich said. “I don’t know of a county this size that has a fleet the size you all operate.”
Frolich ended by saying the Department for Local Government would help the county work on its problems, but it would also not hesitate to step in, if it appears the fiscal court cannot do the job.
“We’re talking about things that are not popular,” Frolich said. “We understand that, but we want you to know we’re here to help in any way we possibly can. But our main job is to make sure you all are fiscally solvent and functioning properly, and that’s why we’re here today.”