The $62 million answer

Drowning in money problems just three years ago, Jackson County lately has been breathing a lot easier than many of its neighbors in Southern Oregon.

Because of steps such as outsourcing library management, county officials predict they will reduce spending by almost $62 million over the next five years.

A rainy-day fund that now sits at $70 million should grow to about $100 million in the next two years at a time when the state is considering billions in cuts, and the economy grinds on through one of the toughest recessions in years. In addition, surrounding counties are considering major cuts in service as they see federal timber money dry up.

Even longtime observers who have been critical of county government have noticed how it pulled itself out of a $23 million financial hole when the federal government temporarily cut off timber payments three years ago.

"I do think they have done a pretty good job," said Sams Valley resident Walt Fitzgerald, who credits in particular the leadership of County Administrator Danny Jordan.

Fitzgerald, who attends most county commissioner meetings and ran for commissioner previously, said many of the problems started years ago when county government grew faster than the revenues needed to sustain it.

"I was critical of too much county growth from the get-go," said Fitzgerald. "They had to take a hatchet to the whole system to keep it solvent."

Fitzgerald said he fears the severity of the cuts will mean the county won't adapt fast enough when the economy recovers, citing in particular the development services department.

Getting the county finances in order hasn't been easy, officials said.

The number of full-time employees stood at 1,089 two years ago, but is expected to drop to 894, resulting in an 18 percent reduction. The budget for next fiscal year of almost $300 million will be discussed on April 21 and 23 by county commissioners and staff.

When the library system closed for six months in 2007, it generated significant controversy in the community. Then, the system reopened under management of a private company, a move the county expects will generate a total savings of $23 million in the next five years.

The county's legal obligation to fund the local historical societies has ended, which will generate savings of almost $3.5 million through 2012.

The way the county manages prisoners has changed, helping to save almost $18 million for the sheriff's department in the next five years.

"There have been some job losses, certainly," Jordan said. "But a good portion got hired back."

As an example, Jordan said many of the former county library workers were rehired by the private company. Other job reductions were achieved through attrition, he said.

In an annual budget of $300 million, the county has about $160 million for operating expenses and the remainder for debt service such as bonds to build new libraries and a new airport terminal.

Most of the operating revenues come from the state or federal government and are required to be spent on such things as health services and transportation.

About $30 million is in the general fund, over which the county commissioners have the most discretion on how they spend the money.

Jordan, who noted the county is now planning ahead 10 or 15 years in some cases, said it has found many other savings, but also has improved revenues at the same time.

On any given day, the county has nearly $185 million in investments earning 3.68 percent, a higher rate than most government entities in this economy, he said.

Even though the county's budget has improved, there could be problems in the near future.

Commissioner C.W. Smith said the county has decided it will not use its own reserves to make up the difference after the state cuts health services and other programs.

"Every time a county agency backfills for the state, it winds up permanently maintaining that segment that has been backfilled," he said.

The state is preparing its own budget that will cut about $4 billion out of human services and other programs, which could result in lost jobs and poorer treatment for many Jackson County residents.

Smith said the state makes sure it funds its own departments first, then whatever is left over is sent to the county, which runs the state-mandated programs.

He said counties need to stand firm to make sure the state doesn't push the expense of these programs on them.

Some controversy has surrounded decisions the county has made, particularly with the libraries, but Smith said by and large the cuts have been made with little fanfare.

"We didn't do it with massive layoffs," he said. "We did it incrementally. We proved it could be done without a lot of drama."

Commissioner Dave Gilmour said the county began taking steps to build up reserves about seven years ago when the prospect of losing federal timber dollars became apparent.

The federal government has paid $23 million to the county annually to make up for reductions in timber harvests on federal land, but plans to phase that program out in a few years.

Gilmour said the county should stand firm in not tapping into reserves, but added it will be a difficult position to maintain if health services and alcohol and drug programs are slashed by the state.

"If the economy goes completely south, we have to rethink things," he said. "We are not going to be so hard-hearted that if we had dire needs, we'd still put it all in the bank."

Commissioner Jack Walker said he would like to stop calling the reserve money a rainy-day fund. Instead, he would like to turn it into an endowment that would create interest income annually that would help the county avoid raising taxes in the future.

Walker said he's surprised that all three commissioners, with such different points of view, have seen the need for fiscal restraint, particularly in creating a financial cushion for the county.

"It is kind of interesting that we have come to the conclusion we don't have to spend every dime every year and wonder if there will be anything left for next year," he said.

He suggested that other counties and state government as well consider the lesson that this county has learned.

"Is there anything that says the county has to be an employment agency?" he said. "Why can't we be as efficient as we can to provide that service?"