State could take control of broke counties
If Jackson County or others across the state became insolvent, a House bill proposes allowing the governor to declare an emergency and levy new taxes to pay for police or other services.
Gov. John Kitzhaber and the Legislature are considering House Bill 3453 as a tool to deal with the potentially dire financial trends of eight counties — including Jackson — identified in a watch list by the Oregon Secretary of State's Office.
"What happens if they become insolvent?" asked Rep. Dennis Richardson, R-Central Point. "How do you deal with requirements people expect from government, such as public safety, collecting fees, issuing permits or voting?"
A 2012 audit by the Secretary of State's Office identified eight counties racked by acute financial pressures. The counties are Coos, Curry, Douglas, Jackson, Josephine, Klamath, Lane and Polk.
Gary Blackmer, the state auditor who prepared the report, said Jackson County appeared to be in the best financial shape of the eight.
His report suggested the state take a proactive stance in case a county did become insolvent.
"We saw Oregon as not having the toolkit to deal with these situations as other states do," he said.
According to the audit, Jackson County has been devouring reserves to the tune of $6 million annually. This coming fiscal year, the county anticipates using $7.1 million in reserves to pay for ongoing expenses, not counting projects.
In addition to paying for libraries and other ongoing expenses, the county has also used reserves to undertake projects such as a new 911 dispatch center; new lights and air-conditioning system in the county office building; a new sheriff's headquarters; a remodeling of the jail to increase capacity; and consolidating Health and Human Services into the old post office site in downtown Medford.
The county has recommended spending $18 million for a new Health and Human Services building and another $8.26 million for a new six-story parking garage. The county is also buying a new $1.5 million phone system to replace the current outdated system. Installing the remainder of a new software system for the Assessor's Office will cost $1.8 million.
Paying for projects and operating expenses will deplete the county's rainy-day fund, operating reserves and general fund reserves to $25.8 million in the 2013-14 budget.
Jackson County anticipates its reserves will be fully depleted in 2015-16 at the current rate of spending. The Jackson County Budget Committee is wrestling with some of these issues as it puts together its 2013-14 budget.
"As a last resort, the County could close libraries or raise fees if needed to decrease the operating deficit," Blackmer's audit suggests.
Closing libraries could save the county roughly $5 million annually in expenses.
Blackmer pointed out that other counties are in far worse shape than Jackson, with Curry and Josephine counties struggling to maintain sheriff patrols.
Under the House bill, the governor, the president and minority leader of both the Senate and House would be required to agree that a state of fiscal emergency has occurred.
After declaring a state of emergency, the governor could enter into an agreement with a local government to take over all or some services, depending on its needs.
Richardson said rural Oregon counties have been hit hard by the recession, a decline in timber revenues from the federal government and increased expenses for the Public Employee Retirement System.
"It's a combination that has become toxic," he said.
It's only a matter of time before one of the counties becomes insolvent, which will force the state to step in, Richardson said.
He said the House bill is a mechanism that would give the governor flexibility in handling a fiscal emergency.
"You need to anticipate problems before they arise," Richardson said.
Rep. Sal Esquivel, R-Medford, said he generally supports the idea of the state interceding in case of a fiscal emergency.
"I don't really have much heartburn with the bill," he said. "It seems that there is enough checks and balances in place."
Esquivel said he thought Jackson County should come up with other solutions to its financial troubles other than closing libraries.
"I don't think that that's the answer," he said.
Reach reporter Damian Mann at 541-776-4476, or email firstname.lastname@example.org.