County of Ulster, NY


2023 Proposed Budget Analysis & Review


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View 2023 Proposed Budget

Expenditure Introduction

The Proposed Budget of the County for the fiscal year ending December 31, 2023 includes total expenses of $378.6 million.  These expenditures are proposed to be offset with $374.9 million in revenues and approximately $3.6 million in fund balance.

Economic Conditions.  As is the case for budgeting revenues, the current and predicted economic conditions must also be considered when budgeting 2023 expenses.  In particular, items that are directly impacted by the current level of inflation being experienced, and for which the Fed is implementing policies that raise interest rates and increase unemployment (with the probability of recession) must be budgeted appropriately. These items include gasoline, electricity, materials and supplies. CMA reviewed departmental expense lines to assess whether the County’s expenditure estimates for auto fuel, power (gas/electricity) and certain materials and supplies were developed in line with current and predicted economic conditions.

Exhibit EXP-I provides a sampling of aggregate departmental budgets that illustrate the conservative level of proposed spending for 2023.

CMA Finding- Aggregate Departmental Spending.  Overall, departmental spending in the aggregate was found to be conservative.  For example, the Commissioner of Finance total spending proposal for 2023 is the same $2.7 million it was in 2022.

Fuel.  CMA closely reviewed auto fuel lines because gasoline has been the one item most impacted by current economic condition, and is a commodity heavily used by all municipalities. Exhibit EXP-II indicates that the 2023 Proposed Budget properly accounted for auto fuel costs for the most part.  The bigger auto fuel lines, like the Road Machinery line, were increased substantially in the 2023 proposed budget. Some of the smaller lines, however, were not adjusted upwards.

CMA Finding- Departmental Fuel Spending.  Overall, the 2023 Proposed Budget properly accounts for auto fuel costs.
Power.  In addition to auto fuel/gasoline, power is another budget item that is impacted by current and predicted economic conditions.  CMA reviewed budget lines in the 2023 Proposed Budget related to power (gas/electricity).

CMA Finding- Departmental Power Spending.  Exhibit EXP-III, above, indicates that these lines are budgeted in a way that indicate some lines for larger buildings are expected to see substantial increases, but other lines show no increase or actual decreases.

CMA reviewed the cleaning supply lines in the 2023 Executive Budget, focusing on the budgets for the buildings maintained by the County.  For the 15 separate building budgets CMA reviewed, it was found that the cleaning supply budget lines were reduced for 9 of the buildings. Three were increased and three remained the same.  Spending for supplies must be projected within the context of higher costs – at least for a portion of 2023 – until Fed action begins to impact the price of supplies that have already increased over the last several months.

Other supply and equipment lines appear to have been developed with current economic conditions taken into consideration.  For example, in the Road Machinery budget the Stockpile line is increased from $312,500 in 2022 to $517,500 in 2023.  This line pays for items like road materials, pipe, guard rails and signage. All items that would be expected to cost more under current and predicted economic conditions.

CMA Findings – Expense Lines.  Overall, CMA believes the Executive Budget does take into consideration current and predicted economic conditions in budgeting expense lines. However, there are some lines for auto fuel, gas/electric, and cleaning supplies that should be reviewed to ensure that they are fully funded to meet the cost demands of higher prices that the economy has already experienced and could continue to experience moving forward into 2023. An additional review of expense lines, especially those most affected by current inflation and higher costs, is recommended.

Personnel Increases

As is common with most municipal jurisdictions, the services provided by the County are extremely labor intensive, and, as a result, employee wages and benefits account for a great deal of the County’s annual expenditures. 

The County’s 2023 Executive Budget proposes an increase of 42 FTE’s to “reflect the need to hire additional professional staff to address the continued increase in demand for services.”

The increased demand is to be expected (and exacerbated) in the current uncertain economic climate. ABC Business News has reported the Federal Reserve actions will result in unemployment of up to 4.4% and 1.2 million unemployed people, while some are predicting even higher unemployment (see CMA’s section in this report titled Current and Projected Economic Conditions Must Be Considered Page 19). Most importantly, the ABC report stated “Those job losses will disproportionately fall on some of the most vulnerable workers, including minorities and less educated employees according to economists and studies of past downturns.” These effected individuals would turn to local governments, like Ulster County, for assistance in a time of recession and job losses. The County must not ignore the likelihood of increased demand for services. And it does not.

The new personnel proposed in the 2023 Proposed Budget include positions that would be able to respond to recession and job loss induced demand for services. Positions in the Office of Aging, Department of Health, Department of Social Services and Department of Emergency Services all would be able to respond to the potential increase in demand caused by economic conditions (budget document Page 9).

CMA Finding – Personnel Increases.  The 2023 Proposed Budget’s proposed increase in personnel appear appropriate to deal with public demand for services, including demand related to a recessionary economic environment with potential job loss.  CMA recommends the County review these positions as they are created and filled to ensure they are adequate to address issues that might arise related to unemployment and the effects of recession.

CMA Recommendation – Strategic Control of Positions and Salary Expenditures (Policy Recommendation).  CMA stated that since salaries and benefits constitute a significant portion of appropriations in its budgets (including the proposed 2023 Proposed Budget), in the event of a recession, instituting a strict hiring freeze allowing only for the replacement of essential positioned employees would lessen the risk of structural financial deficits which could result if key revenues (such as sales tax) do not materialize as planned.

CMA Recommandation – Non-Union Management Positions.  The State provides flexibility to reclassify positions. Nevertheless, the County could improve controls relating to changes in non-union management positions. Practices relating to these changes should be reviewed and internal controls should be developed.

Purchase Orders and Encumbrances

In CMA’s review of the 2023 Proposed Budget, it was noted that the use of purchase orders (“PO”) and encumbrances they create is an important budget monitoring tool.  When a PO is created, the money needed to pay for the items or service being contracted is encumbered (frozen) and thus can only be used for the purpose of the PO.  Use of POs/encumbrances is a valuable tool to ensure budgets are adhered to and not overspent and that budgeted funds are spent on the items that the budget intended them to be spent for.  UCI Accounting and Financial Services at the University of California-Irvine explains “An encumbrance is a type of transaction created on the general ledger when a purchase order (PO)…is finalized…The purpose and main benefit of encumbrance accounting is avoiding budget overspending by showing open commitments as part of projected expenses. Encumbrances are important in determining how much funds are available as a projected planning tool. “The use of encumbrances and purchase orders should be used as much as possible during the budget year to administer and carefully oversee spending.  Some municipal purchasing professionals often refer to the practice of “encumbrance accounting” or an “all PO system.”

Last year, CMA’s budget review highlighted the need to use PO’s and encumbrances more often when monitoring and administering the County’s budget. This year, in its 2023 review, CMA reviewed the use of encumbrances during 2022 when administering the 2022 adopted budget.  The review was on a wide basis and attempted to develop a clear picture of overall encumbrance use.  The below chart shows the extent to which encumbrances have been used though September 2022.  CMA reviewed the year-to-date Budget Performance Report through September 30, 2022 to gauge encumbrance use. The review found that only 3% of all expense lines had some or all of the budget line encumbered.  Of the almost 2,500 expense lines in the budget, only about 250 had some level of encumbered funds (10%).

CMA Finding – Purchase Orders and Encumbrances. CMA’s review of encumbrance use in monitoring and administering the 2022 adopted/amended budget indicates that purchase orders and encumbrances could be used more often to improve the budget monitoring process by (as UC-Irvine states) “avoiding budget overspending by showing open commitments as part of projected expenses.” Use of encumbrances remains important for the remainder of 2022 and moving forward in administering the 2023 County budget, especially in a period of uncertain economic conditions.

Status of Collective Bargaining Agreements

As of October 14, 2022, the County had 1,246 full-time employees and approximately 104 part-time employees as.

Each of the five collective bargaining organizations representing County employees are highlighted in Exhibit EXP-IV:

Workers Compensation Considerations

A new bill, which passed the New York State Senate and Assembly, and is awaiting Governor Hochul’s signature, would amend current workers’ compensation laws by increasing workers compensation for milder injuries and make it easier for injured workers to seek additional benefits during their recovery.

If signed into law, a worker who is partially disabled due to a workplace injury will receive the full benefit awarded employees with a total disability throughout their recovery unless the employer can provide suitable, light-duty work. Workers injured to total disability traditionally get two-thirds of their average weekly wage for a set amount of time. The benefit is often reduced before an employee is cleared to return to work to a percentage of the original benefit depending on the severity of the injury.

If signed, the new law would increase the County’s workers’ compensation expenditures, potentially significantly, and likely result in additional legal costs due to additional litigation efforts.

CMA Finding – Workers Compensation.  As a result of pending State legislation, workers’ compensation should be monitored closely and, if the bill is signed before the adoption of the Budget, should be amended accordingly.

Use of Contingency

Designated contingency is an important part of all municipal budgets. Contingency represents a budgeted amount that can be used in case of unforeseen expenses and costs because it is not designated for any specific purpose.  It is a budgeted rainy-day commitment of funding.

As described earlier, the economic forecast is very uncertain as we move into 2023. High inflation, possible recession, rising unemployment, potential shortfalls in non-property tax revenues, increased demand for public assistance, and even possible cutbacks in State and Federal Aid are all potential occurrences to be aware of when budgeting.

The 2023 Executive Budget contains $300,000 for contingency spending.  This represents far, far less than 1% of the $378.5 million 2023 Executive Budget.

CMA Finding – Use of Contingency. In uncertain economic times, where many things like the potential for rising costs of fuel and supplies, increased demand for municipal services due to the potential of recession and unemployment, shortfalls in certain revenues and aid, among other impacts, are possible, the contingency line should be funded adequately to ensure greater than expected costs and shortfalls in revenue, if they occur, can be properly addressed.  CMA recommends that the County consider increasing the contingency line.

CMA Finding – Overall Contingency Planning.   In light of revenues and expenditures being negatively impacted by a recession during 2023, a contingency plan or a budget strategy to prioritize expenses and gracefully reduce the budget based on explicit criteria if needed is recommended.

General Expenditure Benchmark Analysis

The benchmark analysis evaluates various categories of County expenditures against those of other counties in the Mid-Hudson Region of the State.  Such statistics will provide a baseline for measuring the cost of County operations and services. To align costs across each of the measured counties, each component was converted to a per capita cost. 

Data for this section was obtained from New York State and the Empire Center and is portrayed directly as it was reported.

General Government Spending.  According to the New York Office of the State Comptroller, general government supports are those services provided by the jurisdiction for the benefit of the public or governmental body as a whole.  Exhibit EXP-V provides a per capita classification of general government support expenditures for each of the Mid-Hudson counties.

Relative to general government support, the County posted the fourth highest expenditures of the Mid-Hudson counties for 2020, the most recent year for which such information is available. 

Public Safety.  According to the New York Office of the State Comptroller, public safety expenditures relate to costs for the protection of persons and property.  Exhibit EXP-VI provides a per capita classification of public safety expenditures for each of the Mid-Hudson counties.

Relative to public safety, the County posted the fifth highest expenditures on a per capita basis of the Mid-Hudson counties for 2020, the most recent year for which such information is available.  As discussed, services provided were not considered as part of this benchmark analysis.

Public Health.  According to the New York Office of the State Comptroller, health expenditures relate to costs for the conservation and improvement of health.  Exhibit EXP-VII provides a per capita classification of public health expenditures for each of the Mid-Hudson counties.

Relative to public health, at $83 per capita, the County posted the 6th lowest expenditure of the Mid-Hudson counties for 2020, the most recent year for which such information is available. 

Transportation.  According to the New York Office of the State Comptroller, transportation expenditures relate to costs for services to ensure the safe and adequate flow of vehicles and pedestrians.  Exhibit EXP-VIII provides a per capita classification of transportation expenditures for each of the Mid-Hudson counties.

Per capita transportation costs ranked the 6th lowest among Mid-Hudson counties. 

Cultural and Recreational.  According to the New York Office of the State Comptroller, this form of expenditure relates to cultural and recreational activities which benefit both residents and visitors to the County.  Exhibit EXP-IX provides a per capita classification of cultural and recreational expenditures for each of the Mid-Hudson counties.

Relative to cultural and recreational activities, at $6 per capita, the County posted the 2nd lowest expenditure of the Mid-Hudson counties for 2020, the most recent year for which such information is available. 

Community Services.  According to the New York Office of the State Comptroller, Community Service expenditures relate to services provided to the community, as a whole.  Exhibit EXP-X provides a per capita classification of community services expenditures for each of the Mid-Hudson counties.

Relative to community services, at $23 per capita, the County posted the 4th highest expenditure of the Mid-Hudson counties for 2020, the most recent year for which such information is available.  It is important to note, State aid and/or grants is sometimes received by the County as a means to offset staffing costs for certain community services.
Expenditure Analysis – Conclusion

As result of a pending recession, there exists significant and unknown factors outside of the direct control of the County which could severely and significantly impact key revenue sources.  Since expenditures can more easily be controlled and/or increased to match favorable revenue results, the workforce, union contracts and benefits will need to be carefully monitored during 2023.   Doing so will greatly assist the County in its ability to reduce the risk of developing long-term structurally imbalanced finances.