Lehigh County Executive Don Cunningham
2012 Budget Address
August 31, 2011
Coca Cola Park, Allentown, PA

As I prepare to deliver my fourth recessionary budget since the start of the national economic downturn in 2008, I think of the comments of the great baseball manager Tommy Lasorda, who said:

“I found out that it’s not good to talk about my troubles. Eighty percent of the people who hear them don’t care and the other twenty percent are glad I’m having trouble.”

In an election year, you can easily double the percentage of people who are glad you are having trouble. With this in mind, I will try to keep the comments about our troubles to a minimum. Of course, if I limit it too much, this may turn out to be only a three or four minute speech. I know you’d like that. The danger of that, of course, is that I’d dispel the age-old maxim that there is no such thing as a free lunch. We can’t let you get out of here without paying in some way, so you’re going to listen to some of my troubles.

There is much wisdom in baseball. Along with that observation from Tommy Lasorda, there are all those gems from Yogi Berra. But, before, we rely upon our baseball greats for too much guidance and wisdom, let’s remember this baseball fact. The first protective device to guard a player’s testicles was worn in 1874 but the first helmet to protect a player’s head wasn’t worn until 1934. It took 60 years for men in baseball to realize the brain is also important.

We may, however, be dealing with an even slower progression in politics. But, as Napoleon said, “In politics, stupidity is not a handicap.”

We’ve certainly seen a summer of that in Washington, D.C. In this era of the perpetual news cycle and partisan warfare, no one ever seems to stop campaigning and start governing. There was a time in America when during a crisis our leaders put country first -- and politics second.  We could cross party lines to solve a problem. Every issue wasn’t an opportunity to score political points. There was a time for politics. There was a time to govern.

I read a piece by Stephen Randal earlier this year in the LA Times that I think gets at the core of the problem. He wrote: “We live in an era in which it is important to have opinions. Not necessarily smart or original ones; almost any opinion will do as long as it’s forcefully expressed. We post them on Facebook; we tweet them; we express them in comments on Huffington Post. It wasn’t that long ago that opinions were something carefully considered and weighed, so that they’d stand the test of time and reflect well on the author. Thinkers were like gourmet chefs laboring over an elaborate meal they wanted to be perfect. But today, opinions are like Big Macs -- thrown together hastily, served by the billions, and not very good for you.”

Results and solutions are more important than endless opinions and political warfare, particularly while average Americans struggle to keep or to find life-sustaining employment, to maintain a home and to raise a family. We could use a little less talk and a lot more action.

This is the sixth time I’ve stood before you as county executive to deliver a budget and to report on the finances and activities of your county government. I thank you for this honor and opportunity -- and I thank you for the partnership we have -- between business and government, between people of both counties in the Lehigh Valley and, yes, between Democrats and Republicans. It is different here. There aren’t too many places you’d see the Chamber of Commerce sponsor the budget address of a Democratic executive.

Most of you may not even realize that for the last six years we’ve had divided government in Lehigh County. A Democratic executive and a Republican Board of Commissioners, our legislative branch. During my first two years, it was 7-2 Republican and for the last four it’s been 5-4. We have a Republican D.A. and a Democratic Sheriff. Our congressman is Republican but during his tenure this county has twice voted for a Democratic president. Divided government has not brought gridlock here.

I say this as I present the proposed 2012 Lehigh County budget because this budget is not just mine. I present a document today that has been developed and agreed to during a long hot summer by nothing short of 15 independently elected officials, of both parties: District Attorney Jim Martin, Sheriff Ron Rossi, Coroner Scott Grim, Controller Tom Slonaker, Clerk of Judicial Records Andrea Naugle, nine judges led by President Judge Carol McGinley -- and me. My name is on it but it is our budget.

And, although, after today -- under our system of home rule government -- our independent legislative body will serve its role as a check and a balance and review and deliberate on this budget for the next 60 days, this budget is also the result of their work, their input and their decisions during a number of years leading up to it.

I’d be remiss if I didn’t single out two of those commissioners who are with us today because their tenures will end with this calendar year: Board Chairman Dean Browning and Commissioner Bill Hansell, chair of the very important administrative and budget committee. Commissioner Andy Roman, who couldn’t join us today, also will retire from the Board this year.

Commissioner Browning, a Republican, and Commissioner Hansell, a Democrat, have epitomized the thoughtfulness, toughness and knowledge of county government and public finance that have made Lehigh County great. They both have put their public service above their politics and delivered results by putting hard work, a commitment to their ideals and cooperation above grandstanding -- and Dean paid a dear price for it this year. We all owe both of them a debt of gratitude. I will miss them both. As with several other Commissioners, their input, work and ideas are a big part of this budget.

The county budget for 2012 will be smaller than this year’s budget. This is a trajectory that began with the realization of the national recession in 2009 and the subsequent slowing of growth, loss of jobs and falling home prices in the Lehigh Valley.

In real numbers, next year’s total budget is $388.9 million, down $2.1 million from this year. This year’s budget was $22 million less than the one in 2010. For those who say government only ever gets bigger, send them to Lehigh County.

For the third consecutive year, the number of full time employees in the county will be cut significantly. The budget eliminates 46 positions, some through job losses in human services and general services but the majority through attrition, saving $1.8 million. Last year’s budget eliminated 49 positions. For those who say government work forces only grow, send them to Lehigh County.

The total full-time employment in the county is now 2,078 positions, a workforce smaller than it was 22 years ago in 1990. Tax dollar spending will be down for the second consecutive year. Our total cost of payroll, including benefits, will be lower next year than it is now, the first time that’s happened in county history.

We’ve done this through strategic realignments, not through one-size-fits-all, across-the-board cuts, which I believe is management without thought or focus. During our tenure we’ve cut 201 positions or about 9 percent of the full time workforce. Some of that has come from getting out of businesses that we were not required to be in and couldn’t afford. This year we exited the composting business, turning it over to a partnership of municipalities and a private operator. Next year we will phase out a unit in human services turning it over to outside providers.

Concurrently, however, we have added 55 positions during that time in the area of public safety. Working with District Attorney Jim Martin, we developed a central booking center to take over all criminal bookings in the county, allowing police officers to get back on the beat instead of doing paperwork and fingerprints. Again, partnering with the D.A., we are creating a Regional Crime Data Center with county crime analysts that will collect and distribute data in real-time from all 17 police department in the county and many other law enforcement agencies, allowing us to see crime patterns across municipalities and enhance our investigations and crime busting. We’ve added detectives in the D.A’s office -- this year a proposed position to focus exclusively on domestic violence -- and partnered with Sheriff Ron Rossi to add deputies to serve warrants.

In total, the full time county work force is 5.5 percent smaller than it was in 2006. However, we’ve found new ways to provide the same services, put more police officers on the street, and work with our local governments to regionalize policing efforts and the result has been decreased crime rates and a safer community.

I credit this reinvention of county government and fiscal responsibility to my incredibly gifted Director of Administration Tom Muller and his budget director Brian Kahler. Working with our department heads and managers, with our Courts and the Judges led by President Judge McGinley and her capable administrators Sue Schellenberger and Bill Berndt and all our row officers, they have created a smaller, more focused workforce that is actually meeting more challenges with less people.

In next year’s budget, 64 cents of every Lehigh County tax dollar will go to public safety and the broad area of law and order, which includes operating our courts, our prisons, prosecuting criminals and investigating crimes, probation and parole, domestic relations, criminal defense, coroner investigations and sheriff responsibilities. In the end, keeping you safe and a civil society operating. You want to make county government cheaper and smaller, tell people to stop breaking the law or using the courts to resolve their disputes and differences.

The other major partner in this is our employees and our unions and union leadership. Our unions have stepped to the plate -- as have all our employees -- with concessions on both wages and health care contributions that have made next year’s budget and the previous ones possible. In my view, they should be thanked not criticized. Our public employees in Lehigh County understand that it’s tougher out there and have been doing their part.

Next year, non-union personnel will get a two percent raise or, if eligible, a step increase that amounts to about 3 percent, not both. Starting last year, we eliminated employees getting both a general raise and a step increase. In addition, longevity pay is being eliminated and applied only to those at the top step. All of our new union contracts have comparable wage provisions to our non-union employees.

Conversely, non-union employees pay 20 percent of their health care costs and, except for two unresolved union contracts, union employees pay about the same amount. Even with 122 fewer employees than we inherited in 2006, Lehigh County public employees collectively contribute $2.1 million more to their health care costs than they did then.

That is part of the reason why six years later the county’s total health care spending for employees and eligible retirees -- which will be $22.4 next year -- is lower than it was in the inherited budget in 2006 when it was $24.1 million. Because of the changes we’ve made and employee cost-sharing, county taxpayers spend less today for employee/retiree health care than they did in 2006.Let me also make clear, all county employees contribute 5 percent of their pay to the pension fund. The average county retiree receives less than $900 per month.

For those who say all government workers have overly-generous taxpayer-funded wages and benefits, send them to Lehigh County.

In this era of Tea Party politics and anti-government rhetoric there is a desire by some to paint everyone in the public sector with the same brush. In tough times, people look even more for simple solutions and easy to digest enemies to blame for their woes. This isn’t Washington, D.C., but, unfortunately, it makes for a simple message to make one size fit all. As the old adage goes, you can always be assured of hitting the target, if you shoot first and call whatever you hit the target.

We have made our government smaller and more targeted. The recession made that very necessary.

Projections for next year’s budget include some very difficult revenue and cost numbers. For the first time in 25 years, the total assessed value of property in the county will decline due to a combination of four years of slowed growth and assessment appeals. The days of average annual growth of $2 million in real estate revenue are  gone and with lost assessment appeals tax revenue will drop $1 million next year.

Declining property sales have dropped deed revenue more than 50 percent since 2006 to an estimated $1.2 million next year. The decline in interest rates has caused a loss of investment earnings of more than $6 million from $6.9 million in 2008 to a projected $576,000 next year.

Hotel taxes have followed much the same trajectory, dropping off more than $400,000 per year since 2007.

And, losses in the stock market resulted in our annual contribution to the pension fund nearly tripling from $3.4 million in 2008 to $11 million next year, an increase of $600,000 from this year.

I will stop here from recounting the troubles you are all too aware of in your own lives and businesses. These are, however, some of the core factors why in last year’s budget we could not retain the tax cut of 2006, which resulted in an average tax bill going up $99 this year. People spent hundreds of thousands of election dollars talking about that last spring and I suspect they will again this fall. What they may not tell you, however, is that unlike what has been done in Washington, D.C., it’s been the focused and balanced combination of job cuts, realignment of government, retooling of employee benefits and the restoration of that tax cut that has allowed us to weather the storm of this recession and place Lehigh County on a sound financial footing.
            Here are some financial and 2012  budget specifics:

  1.  Our workforce is the smallest it’s been in 22 years since 1990.
        1. The total budget has gotten smaller for two straight years.
        2. We have structurally changed employee compensation and benefits to reduce payroll costs, better meeting reduced revenues.
        3. The rating agencies S&P and Moody’s both reaffirmed our Aa1 bond rating, making us a rare city or county government and giving us an excellent credit rating.
        4. We’ve taken advantage of our credit rating and falling interest rates to refinance our debt to a blended average of 3 percent. Two major refinances during the last two years have saved the county $5 million. The last public internet auction to refinance drew 15 bidders and 85 bids in 20 minutes that resulted in a winning interest rate of 1 percent and a savings of $4 million.
        5. (SLIDE: Stabilization Fund) Instead of using most of the savings, our budget proposes to save it, adding $4 million to the county’s Stabilization - or Rain Day - Reserve Fund, which would increase it to $25 million next year, a more comfortable amount for a budget and county our size. The fund was $18.6 million when we took office. As we’ve learned last week, it’s wise to expect the unexpected and to have a good rainy day -- or rainy week -- fund.
        6. Once again, we will meet our full requirement and budget $11 million next year for our pension fund, keeping our pension fund very healthy and far better than most municipal and state funds.
        7. We will reinstate our Green Future Fund program putting all of the $2.7 million in proceeds from the recent sale of land to Dorney Park back into the program to preserve farmland and open space and improve parks.
        8. Cedarbrook Nursing Home continues to operate in the black as a self-sustaining operation. The 2012 budgeted subsidy will be $2.1 million, roughly the same as this year’s budgeted number. But, this four-star rated nursing home covers close to $4 million in costs that would otherwise hit the general fund. Anyway you look at Cedarbrook -- financial or otherwise -- it is a county asset.
        9. Capital spending is budgeted at $9.7 million as we embark on the final phase of the largest and most comprehensive capital plan in the county’s history, which has included the renovation and expansion of the Courthouse, construction of a new 9-1-1 communications center, the repair or replacement of nearly 30 bridges, a renovated and expanded Community Corrections Center to house male and female non-violent offenders, a county-owned detox and rehabilitation facility and a new Coroner and emergency management facility in a unique partnership with Cetronia Ambulance.
        10. The 2012 budget retains and does not cut funding for our Quality of Life and community arts and education grants, tourism grants, community and economic development grants, mass transit, the planning commission, LVEDC or the Chamber of Commerce.
        11. We have budgeted for a full review of county-owned lands and existing space to maximize use and potential for any surplus sales. The budget also continues funding for development of a Jordan Greenway that will link Allentown to the Trexler Nature Preserve.
        12. Continuing to keep our government open and accessible, this year the county checkbook went on line where the full county budget has been for a long time. The proposed 2012 budget will be there today. We plan to issue a taxpayer receipt this year to each taxpayer to show people exactly how their county tax dollars are spent.
        13. In 2012, we will continue our American Heroes property tax rebate for any Lehigh County homeowner serving our country during this time of international conflict.

As I say every year when I release a new budget book, a government’s budget is not made during the days it is committed to paper. It is made every day by the decisions we make, the priorities we set and how we manage and control other people’s money every day of the year. Just because there is money in a line item doesn’t mean that our managers have permission to spend it. Jobs that come open are kept open. Supplies that aren’t needed are not bought. Savings are generated. Every year we budget conservatively and every year we beat our projections because we don’t spend down every last nickel.

In 2010 our manager’s held the line on spending and beat our budget by $5 million. By some, we were criticized for this. That could be rectified quite easily -- and I suppose I could look like a genius by getting the budget exactly right -- by spending every last nickel in a line item. I won’t do that. I learned early in politics that there are very few good deeds that go unpunished.

Saving that money in 2010 allowed us not to spend the $4.3 million in Tax Relief Fund money that was budgeted as part of this year’s budget. Therefore, in 2012 we propose to eliminate the Tax Relief Fund and give the full remaining $4.37 million back to the taxpayers in the form of a one-time credit.

The Tax Relief Fund, put in place before I arrived, was scheduled to be gone by 2009. It was created as a way to fill the shortfall between revenues and expenditures caused by the tax cut of 2006. We closed a lot of that gap with spending controls, employee compensation changes and pre-recession economic growth -- allowing us every year to beat our budget projections through a conservative approach.

The net result is that next year we can give some tax relief by closing out the tax relief fund. The average property tax bill in Lehigh County is $714. The average tax credit will be $30. This will reduce next year’s average tax bill from $714 to $684. This is an average number based on a home assessed at $60,000. The credit amount will change based on the value of the property and the amount of the tax bill.

I know $30 is not going to change anyone’s balance sheet but the point is that fund was created to provide tax relief and we couldn’t think of a better way to close that line item than by giving it back to the people who put the money in it.

The ultimate form of tax relief, however, comes from economic growth. A growing property base is the best tool to keep the tax rate in check. The last four years have been tough. Housing starts have been slow at best as has new commercial and industrial development. That has begun to change this year. This year, five large businesses have announced relocations to the county and at least three current businesses have announced expansions for a total gain of at least 1,300 jobs, many in manufacturing.

  1. Ocean Spray -- relocating beverage manufacturing operations from New Jersey -- 200 jobs
  2. Avantor Performance Materials -- relocating corporate headquarters from New Jersey -- 200 jobs
  3. A.L. Bazzini, Inc. -- Yankee Stadium peanut supplier -- moving 100 manufacturing jobs from New York
  4. United Bank Card, Inc. -- moving credit and debt payment operations from New Jersey  -- 175 jobs
  5. Windkits, LLC -- manufacturer of wind power turbines -- moving 50 jobs from New Jersey
  6. Mack Trucks -- long-time Lehigh County truck-maker -- adding an additional 300-360 workers
  7. Amazon.com -- expanding existing operations in the county  -- by at least 200 jobs
  8. Palram Industries -- thermoplastic sheet manufacturer expanding -- addition of 40 jobs

As we continue to work our way through challenging economic times, we welcome these new and expanding companies to Lehigh County. We realize that growth in the private sector is the key to our region maintaining its great quality of life and community. We also realize this alone isn’t enough to turn the corner on the recession. But, every positive step helps. We will continue to work on growing our economy and creating jobs in Lehigh County. Our work is far from done. Your partnership and support is critical. We are in this together.

Henry Ford said it well: “Coming together is a beginning. Keeping together is progress. Working together is success.” It’s been through working together in Lehigh County we have weathered this economic storm and stayed successful. I thank you for the opportunity that I’ve been given and am proud to present this budget for 2012. I look forward to working with the Commissioners the next 60 days to complete it and to continue to build on the success that we’ve created by working together. Much has been accomplished but there is much more to do.