Fiscal court votes down payroll tax, for now

A majority of Whitley County magistrates said no to a payroll tax during Tuesday monthly fiscal court meeting, but one left open the possibility that the court might eventually have to implement a tax to balance its budget for the 2005-2006 fiscal year.
Assuming that the Whitley County Jail isn’t forced to close, the only way for the fiscal court to balance the county’s budget for the next fiscal year, which starts July 1, is to implement a payroll tax, eliminate employee health insurance, lay off one ambulance crew, and three courthouse employees.
Sheriff Lawrence Hodge said this version of the budget also calls for cutting fiscal court `funding for the sheriff’s department, which will result in the layoff of three to four deputies.
The county has to find a way through the new budget to pay off a projected $837,978 deficit that will be leftover from this fiscal year, which ends June 30.
This was the word that fiscal court members got from county treasurer Jeff Gray and officials with the governor’s office for local development Tuesday morning. Out of 12 scenarios Gray ran looking at the budget, this was the only one that worked.
However, by a three to two vote, fiscal court members voted down the first reading of an ordinance, which would establish a 1 percent payroll tax.
Whitley County Judge-Executive Mike Patrick and Magistrate Burley Foley voted to approve the payroll tax. Magistrates Nolan Bird, Johnny Lawson, and Wayne Wilson voted for it.
Instead, Wilson made a motion, that the fiscal court look into the possibility of selling the old jail, and other surplus property the county owns in an effort to offset the budget deficit.
Lawson said that it is his understanding that the county has a lot of surplus property, including the old jail.
“We have to look into everything first before we go ahead, and make a fast decision on anything,” Lawson said. “I didn’t feel like today was the day to go ahead and approve nothing until we went ahead and looked into everything.”
“For my part right now, I would vote no on an occupational tax until we can get into further details with it, and see what we can come up with. We have a lot of property, and a lot of things we can do to bring us where we can get a budget. Hopefully, we can get a budget for next year.”
Lawson said he anticipates that there will be several special meetings called over the next few weeks to discuss the budget situation.
Bird said he doesn’t know if the fiscal court can balance the budget without implementing a payroll tax, but he would like to look at a few other things first.
“When it comes down to the end of June, we will have to go quick on it. I know Whitley County has some pretty valuable property,” Bird said. “A payroll tax may be the only way out, but I want to look around a little bit first.”
Bird said if there is no other way, he will vote to implement a payroll tax, but he hopes he doesn’t have to do it.
Bird said he isn’t sure what someone could do with an old jail, other than renovating it, and using it as a private juvenile detention facility.
Patrick said he’s not sure where the county goes from here, since the first reading of the payroll tax was shot down.
“I guess we will have to look at any other avenues that might be open to us,” Patrick said. “I haven’t entirely given up on the idea of a payroll tax either at this point. I think some of the things, which will have to happen, is that we will have to do some laying off. The handwriting is not the greatest right now.”
Patrick said the county may have to look at other ways of increasing revenue, but that it was his and the state’s opinion that the most effective way of doing this is by passing a payroll tax.
“Other counties in our area have recognized this and done it. I believe that we still need to continue to work in that direction. We cannot let the government of Whitley County just go away, that doesn’t do anything,” Patrick said.

Balanced budget must be passed
The fiscal court has little choice but to pass a balanced budget before July 1.
“I cannot sign off an a budget unless it is balanced,” said Lawrence Cordell, Deputy Commissioner of the Governor’s Office for Local Development.
Rich Ornstein, who is general counsel for the Governor’s Office for Local Development, he would have to file papers in circuit court, which would ask for an order requiring the fiscal court to go back into immediate session, and remain in session until it passes a balanced budget.
The department had to get a similar order about 12 years ago in Breathitt County doing the same thing.
“The court granted our injunction, and required the fiscal court to go into session, and they remained in session until they passed a budget that the state finance officer could sign,” Ornstein said. “These aren’t things that we want to do, but they are things that could occur.”
If the state shuts down the jail, the county can’t balance its budget even with an occupational tax, and by eliminating health insurance under any of the budget scenarios that it is currently examining.
Patrick said the county would have to deal with that the best it can.
Gray said this would create an additional deficit of nearly $819,000 assuming that the county had to meet debt payments on the jail, and pay for the housing of 75 inmates in another county.
“With the closure of the jail, we are into a kind of no-man’s land right now. It put a wrench in the balancing of the budget,” said Lonnie Campbell, a Governor’s Office for Local Development official. “It is going to be very expensive to house your prisoners in other places. It is just a new wrinkle in the situation. Right now you can’t balance your budget with the jail closed.”

Payroll tax revenue
The county is currently estimating that a payroll tax will generate about $2.7 million countywide.
Patrick said one estimate from the League of Cities indicates that a payroll tax in Whitley County could generate $3 million annually.
“If that number is a good number, then health insurance could stay,” Patrick said.
The only other way to save health insurance would be if the county could come up with cutbacks in other areas, or additional layoffs.
The county’s equation for balancing the budget calls for it to receive 60 percent of any payroll tax, which is implemented.
This number could be high.
Because Whitley County has a population in excess of 30,000 people, the county is limited in that it can only implement a 1 percent payroll tax. Corbin and Williamsburg could turn around and implement a 1 percent payroll tax, which would then come out of the county’s share of the tax money. City residents would still only pay a 1 percent tax.
Patrick said that if the county doesn’t negotiate an agreement with the cities, then the county wouldn’t be getting as much of the payroll tax revenue.
Estimates are that 80 percent of the jobs in Whitley County are within the corporate limits of the two cities. Patrick said he is hoping to split that revenue 50-50 from portions of the payroll tax paid in cities with those municipalities. The county would then keep 100 percent of the revenue brought in from the taxing people that work outside the cities in Whitley County.
Patrick said he thinks this is a fair rate because roughly 30 percent of the county’s population lies within the Corbin and Williamsburg city limits.
If the tax passed, initially plans were to use the revenue to pay off the county’s deficit.
Patrick said that after this, the tax revenue would be used to aid law enforcement, the ambulance service, 911, industrial development, and emergency services.

Insurance cut not a popular idea
Hodge said the fiscal court currently contributes $107,000 annually to his department, and that without that money he will probably have to cut three to four employees. The cuts will probably start this month.
“We are to the bone already. We will lose manpower by this,” Hodge said. “This pay day will be the last for some of them.”
Hodge said it will be difficult for him to keep employees if the county cuts the health insurance too.
“If they haven’t got health insurance, then they would be crazy to work here,” Hodge said. “Why risk your life for minimum wage. If they had to go out and purchase insurance, they would be making about minimum wage.”
Cutting employee health insurance would save the county about $385,000 a year.
Lawson said magistrates hope to do everything they can to keep from cutting health insurance.
Whitley County resident Phyllis Holmes noted during Tuesday’s meeting that Whitley County isn’t the only county having financial woes.
“There are several others that are too, but there is no quick fix for this, and there is no easy fix. I know nobody wants taxes, but there is something that will have to be done. I don’t like taxes either, but if that is in the best interests of the citizens of Whitley County, then I will pay my part,” Holmes noted.