Loudoun supervisors have finished their work on the next annual county budget—for now.
The county board held their final work session on the budget March 19, and, with plans to cast their final vote on the $3 billion Fiscal Year 2021 spending plan on April 7, they are approving a budget before the tax revenue fallout from the COVID-19 pandemic is known.
That has left both the county’s hiring plans and the school budget somewhat uncertain, despite an unexpected windfall in state education funding.
But for now, they have held to a $1.035 tax rate per $100 of assessed value, a penny cut from the current tax rate but an increase over the most recent estimates of the equalized tax rate—the rate at which the average homeowner sees their tax bill stay the same despite changing property values.
But with businesses closing or slowing down amid the COVID-19 pandemic and a statewide order to close some businesses, some county revenues expected to see an impact—and the county budget staff is taking precautions to make sure their books stay balanced.
County Staff Cautious on Hiring Amid Pandemic Fallout
While county supervisors have added a number of new government positions to the budget, County Administrator Tim Hemstreet has advised that the county should hold off on hiring them until the tax revenue impacts of the COVID-19 pandemic—and associated slowdown in the economy—are known.
“That gives you about $15 million that if those revenues don’t materialize, you don’t have to add those positions if that happens,” Hemstreet said. “It also allows you to make some decisions if you want to use that money and spend it different for support of businesses or other things that may come up in Fiscal Year 2021. Or, if everything turns out to be OK, and this is a short-term disruption and the county finances are fine, go ahead and give us direction to implement what has been approved in the budget.”
And he warned new state funding could be in flux, too.
“When you look at how we make our money, which is primarily through property tax, the commonwealth is heavily dependent on income tax and sales tax,” Hemstreet said. “So, if you look at what’s happening right now, I don’t see how those revenue streams are not impacted adversely.”
Some members of the state legislature have already called on the governor to call a special session of the General Assembly to work on the state budget. That, too, may have to wait for social distancing to relax; state law expressly forbids the General Assembly from holding electronic meetings.
At the same time, Hemstreet and Loudoun Public Schools Superintendent Eric Williams are looking at changing how the county board sends the School Board its budget—currently, as a single billion-dollar disbursement when the fiscal year begins on July 1. That gives the two boards no ability to trim the budget later on, he said.
“If there is an economic impact on the county, we may not know that until November, December, January of the coming year, and at that point we would have to address that 100 percent on the county side,” Hemstreet said. “So, in order to kind of mitigate that, I would like to examine some ways to modify how that appropriation is done, so that provides both the Board of Supervisors and the School Board a way to work through that issue together should it arise.”
County staff members are expected to bring further analysis of COVID-19’s impacts on the economy and county budget to the Board of Supervisors meeting April 7.
Meanwhile, county budget staff members have recommended the county push ahead with its construction projects. Although capital projects are largely debt-funded, the county does put cash into its capital budget—and if the county finds itself cash-strapped, supervisors could cancel or delay some of those projects to free up that money.
“We just don’t have enough information right now to recommend that the board stop any of the planned projects,” said Director of Management and Budget Eric McLellan. “If we get into a difficult situation with our revenues, that is one of the options that’s available to us.”
And, she pointed out, the hundreds of millions the county spends every year on construction projects can help bolster a flagging economy.
“With the difficulty that we’re having in the economy right now, the county continuing with business that creates jobs and puts more money into the economy is probably a good thing for us to be doing right now,” McLellan said.
State Funding Bolsters School Budget
The state’s budget this year includes an anticipated $6.2 million more for Loudoun’s school system than local officials had budgeted for. That was more than enough to close the $2.5 million gap in the School Board’s $1.395 billion requested budget.
The state money will fill that gap while the county withdraws some local funding, about $3.7 million to keep the county’s real estate tax rate steady at $1.035 per $100 of assessed value.
Supervisors pushed both ways on that idea.
Supvervisor Caleb A. Kershner (R-Catoctin) instead pushed to further reduce local funding to schools, allowing a gap to remain in the School Board’s request and pushing the tax rate down another half penny. He pointed out that the gap is a fraction of a percentage of the School Board’s total budget, about 0.002 percent.
“I think the time and season that we are in, we need balances on hand, and if we have that balance on hand we have options, and those options could be to fund shortages if we need them later,” Kershner said.
For a $500,000 property, the difference between a $1.035 and $1.03 tax rate amounts to a $25 cut from an annual tax bill of $5,175.
Meanwhile, Supervisor Juli E. Briskman (D-Algonkian) pushed to keep all planned local funding in the school request, rather than adjusting for the additional state money—giving the schools more than they had asked for.
But the majority of supervisors supported Supervisor Michael R. Turner (D-Ashburn)’s motion to fill the gap and keep the rest in reserve, which he said “gives us options down the road.”
Supervisor Matthew F. Letourneau (R-Dulles) pointed out that the schools typically return far more than $2.5 million to the county in unspent funding at the end of the fiscal year—“any time we’ve had these gaps in the less than 1 or 2 percent range, it’s essentially a rounding error.”
But this year, he said, the schools may face new challenges as they adapt to long-term closures and the fallout from COVID-19—which could mean buying more technology for remote learning, or keeping teachers past their contracts into the summer.
“I’m OK with closing the gap this year because I think they probably will need more money, and I also want to send the message that we’re going to partner with them in what we’re trying to do, which is get through this,” Letourneau said.
County Chairwoman Phyllis J. Randall (D-At Large) pointed out the School Board had already cut millions from Williams’ proposed budget before sending their request to the county board.
“This year we had a School Board that cut $16 million out the budget already, we have a school year that is in flux, we have teachers that may work past their contract date, and we have this COVID-19 situation,” Randall said.
Supervisors passed the budget adjustment 7-2, with Briskman and Kershner opposed.
The next night, the School Board amended its budget, pushing supervisors to provide the entire amount of state funding. Members want to use that extra money to pay higher teacher raises, after scaling back the administration’s proposed pay package because of a projected funding shortfall.
Biberaj Sacrifices Office Space to Save New Positions
Faced with the possibility of losing one of the new positions requested for her office, Commonwealth’s Attorney Buta Biberaj has negotiated allowing her attorneys to work in offices that are below the county’s established standards for space and furniture.
“The space allocation that we were talking about is something I can work around,” Biberaj said. “The concern that I had was the delay in providing the positions.”
An earlier attempt to cut two new attorneys from her office’s budget narrowly failed with a vote of 4-4, with Supervisor Matthew F. Letourneau (R-Dulles) absent for the vote. He said he had been ready to bring a motion to reconsider that vote—almost certainly dooming those two new positions—before meeting with Biberaj. And, he said, although hiring for those positions could theoretically begin July 1, in practice it takes a lot longer.
“We’re in a lot different world anyway when it comes to workspace,” Letourneau said. “I don’t know how many people are going back to work, when they’re going back to work, and where they’re going to be working from.”
“I am supporting this addition simply because you were willing to meet and work around and reduce your budget a little bit because of a very tight year that we have,” Kershner said.
Allowing those offices to fall below established standards for furnishing and space trimmed $150,000 in one-time costs from the county budget. When the new Leesburg courthouse complex is ready, Biberaj’s office will be moved into newer, larger space with room for all of her staff.
Supervisors supported the change 8-1, with Briskman opposed.
Supervisors Wrap Budget Work
Supervisors sent their budget straw poll votes to a formal vote April 7 by an 8-1 vote, with only Kershner opposed. Ultimately, they made only minor changes to Hemstreet’s proposed $3.024 billion budget, including $1.395 billion for the school system. They made even fewer changes to the $2.9 billion, six-year Capital Improvement Program.
“Especially in the middle of the coronavirus update, for us to keep Loudoun County government moving so we could take care of our citizens is so important,” Randall said. “More than once, all of us have been asked, ‘why don’t you just shut down county government?’ Because we can’t shut down county government. That’s just absolutely not how it works.”
“A very smart person who’s in the room once said to me that need is a function of how much you have, because we all view things through the prisms by which we live, and the things that we think we need sometimes are different depending on how much you actually have,” Letourneau said, pointing out that the standard of living is high in Loudoun for most people.
The board’s “hands were tied” this year, he said, in large part because of the costs of a classification and compensation study, a years-long effort to bring payscales for county employees in line with the rest of the region and which this year ate up $37.2 million in the budget.
“That said, I do think it’s worth pointing out that no other jurisdiction has continually reduced the actual dollar amount of the tax rate as long as I’ve been on the board,” Letourneau said, admitting the county went above the equalized tax rate two times in his eight years on the board. “… Even the Corey Stewart Republican majority in Prince William County did not, as a real dollar amount, reduce the tax rate as we have been able to do in Loudoun County.”
“Taxation pays for civilization,” said Vice Chairman Koran T. Saines (D-Sterling). “So when people ask, well, how do we pay our teachers, or how are we fixing this project, or how are we building the new fire station in your district, or how are we going to fix Rt. 15 or Rt. 50, et cetera, taxes pay for all of that.”
Kershner said he would have preferred to keep the tax rate at the equalized rate.
“My concern is going forward as we enter into the budget process next year, because I just think we don’t know what next year’s going to bring,” Kershner said. “We don’t know what our revenue’s going to look like next year.”