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Not every budget is feeling the pinch

While the City of Houston is $67 million in the hole, the County of Harris has $172 million in cash under its mattress. This, not surprisingly, has led people to grumble that the County takes in too much tax money for its needs:

“The county is so flush with money, it’s unreal. They have way too much money,” says Bob Lemer, the chairman of Citizens for Public Accountability, a local government watchdog and research group of retired accountants. “They’re very flush because they budget like crazy, but then don’t spend it by huge amounts.”

As an example, he cites the county’s fiscal 2002 financial report. According to the report, the county budgeted $114 million for road and bridge work, but spent only $44 million.

“I don’t buy into the idea that Harris County is efficient,” Lemer says. “They’ve got a revenue stream that is grossly more than they need.”

Not surprisingly, county officials disagree. Budget Officer Dick Raycraft and County Judge Robert Eckels point out that Harris County began including a 15 percent reserve in its annual budget in 1998, a goal borne of dismal experience.

“If we were not to budget those reserves, we could do more things, but the reserves are an important part of the fiscal health of the county,” Eckels said.

I can see both sides of this. How big a cushion does an entity need? I wish I could give some kind of answer to that question, but I can’t make heads or tails out of this thing, which claims to be the County Auditor’s Financial Report for Fiscal Year 2002. My non-accountant’s take on it says that the assets and liabilities balance out, and if that’s the case, then where’s the surplus? If this makes any sense to you, feel free to enlighten me in the comments.

Oh, and by the way: It was a bitch finding this thing in the first place. A Google search on +”harris county” +”commissioner’s court” takes you to this totally useless page. There are pages for each individual Commissioner linked on the Harris County home page (and am I the only one who finds it amusing that Robert Eckels’ page looks more like a campaign site than a government site?), but to find this report I had to find the County Auditor first.

As for the city, it’s just all confusing:

Although the city’s revenue over the next 17 months is expected to be $67 million less than projected, the city is not actually in the red. City officials still expect to end this fiscal year June 30 with a balance of about $81 million, slightly exceeding the required reserve of 5 percent of its operating expenses.

But almost all of that $81 million exists only on paper, in the form of revenue expected later in the year.

As for why the city’s finances are a mess compared to the county’s, an old bugaboo is cited as a cause:

To city Councilwoman Annise Parker, the difference between the two governments is largely one of philosophy: The city sees its responsibility as providing the best services it can, while the county provides only those services it can afford under its budget.

“I think there is more long-term thinking at the county,” she says.

Parker is not alone. Almost everyone interviewed for this article cited the county’s long-term outlook as the key to its current fiscal success. Such a philosophy is easier at the county because, without term limits, county elected officials tend to enjoy more stability. Until Sylvia Garcia took office as Precinct 2 commissioner last month, for example, there had been no change in the makeup of Commissioners Court for eight years.

Moreover, Harris County government is less bureaucratic, with elected commissioners having far more control over projects in their districts than do City Council members.

Because of term limits, city budget planners, mayors and council members come and go at least every six years.

Critics say term limits — combined with the city’s “strong mayor” form of government, which all but guarantees an adversarial relationship with council members — result in short-term thinking on long-range issues.

“In the city of Houston, everything is political,” said George Scott, president of the Tax Research Association of Harris County. “If it’s good for politics tomorrow, then it’s good. If it makes sense today, we’ll worry whether it makes sense next month or next year.”

Yes, it’s our friend term limits again. Not a single member of city government was in office the last time there was a roster change on the Commissioner’s Court in 1994. That has to have some effect. To be fair, you really can’t compare how the city works with how the county works. As the articles note, the county is limited by the State Legislature in what it can spend money on. In addition, the individual Commissioners have a lot more direct influence in their precincts, and they operate in a much more collegial environment that’s farther out of the limelight. That’s probably the biggest factor.

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3 Comments

  1. Matt says:

    Chuck writes:

    “My non-accountant’s take on it says that the assets and liabilities balance out, and if that’s the case, then where’s the surplus?”

    Here’s a simplified explanation:

    A balance sheet is a snapshot of an entity’s finacial status at a point in time.

    It basically shows what an entity has of value and how those things were paid for. These go on the two parts of a balance sheet.

    The things of value are called assets. This can include familiar things like cash or buildings, or more complicated things like receivables, which are money owed to an entity – for a county that would include unpaid taxes, for example.

    The ways of paying for things are called financing methods. There are essentially two: taking on debts and other financial obligations – called liabilities – and taking outside investment – called equity.

    The important point is that the value of assets in accounting is essentially defined as what was paid for them – and therefore assets will always equal the sum of liabilites plus equity.

    That’s why it’s called a balance sheet – because the two sides balance.

    The surplus discussed in your referenced article is in cash, listed on the first line of the asset part of the balance sheet. It’s broken up by fund types in the columns, since it’s kept in separate accounts, but shown in total in the last column: $172,339,899.

    There is obviously much more detail to the accounting than I’ve talked about in this simplified explanation. Try:

    InvestorWords Financial Glossary
    http://www.investorwords.com/

    Basic Accounting
    http://www.businesstown.com/accounting/basic.asp

    Basic Accounting: Basic Terms and Concepts
    http://www.businesstown.com/accounting/basic-terms.asp

  2. Bob Lemer says:

    Be glad to elaborate on my comments, if you wish. Incidentally, Enron’s balance sheet balanced, just like the City of Houston’s does. So did WorldCom’s and those of all the rest of the crooks.

  3. Bob Lemer says:

    Be glad to get with you over a cup of coffee and explain the City’s and County’s finances. In the meantime, you might be interested in visiting http://www.citizensforpublicaccountability.com. You might even find of interest the article there on term limits.

    Bob Lemer