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Fun with budgets

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For the very few of you who are familiar with municipal budgets, with their special code numbers for specific accounts and their dense subgroups that are not particularly intuitive, you wouldn’t think there is a whole lot of fudge room for people preparing them.

Municipal budgets, after all, work on a fairly simple principal: all expenditures must in the end by matched by an exact amount of income. It is supposed to be a zero-sum game, where the combination of local taxes and all other income sources equal the amount of money approved for spending. If it doesn’t, you have an improper budget.

As with all things human, however, the devil is in the details. And, as the old adage goes, figures lie and liars figure. The way most municipal budgets are fudged is by playing fast and loose with either proposed expenditures, or proposed revenues. For example, some municipal budget official who comes to the end of the budget spending $50,000 more than it’s taking in, can either deduct $50,000 in expenses, or add $50,000 in revenues.

If you have a personal budget, you know that cutting expenses is a much more reliable way of getting to zero than adding income. If most of us could add income, we would. Municipalities always can — they can always raise taxes — but few who come to this budget dilemma are willing to add even more to the tax burden. So they do something that would be outright absurd for the rest of us. They play games with revenues to balance their budget.

Last year, Jefferson County added to the amount of sales tax they anticipated as revenue. It seemed like a safe bet; the economy was on the rebound and the Canadian dollar was still strong. Then came the oops moment: after two poor quarters of sales tax income, county officials suddenly realized their bet was going south. Now, the county is behind in revenues and has no other place to pick up more, meaning some of next year’s budget will likely be used, one way or another, to fill that revenue gap.

Fast-forward to this week. The Lewis County General Hospital board of managers voted 6-3 to accept a budget that amazingly shows a surplus of nearly $3.5 million. Earlier this year, it was $5 million in the hole. How can this be, you say?

Well, it probably can’t. While it’s good that the board of managers has a “can-do attitude” about its facility, a little dose of reality would be good medicine. As board member and Lewis County Legislator Phil Hathway pointed out, the hospital really should be prepared to “make hard decisions” about its operations. Especially in this era of the Affordable Care Act, one of the linchpins of which is a steep drop in reimbursement for Medicare and Medicaid.

The hospital’s governing board ignored Mr. Hathway’s good advice, however, and voted to increase the hospital’s spending by 6 percent. That very same budget projects a surplus, a projection that almost no rural hospitals are making. Most rural hospitals, and big city hospitals, and everything in between, would be quite happy to break even. So how is this hospital hiking its spending by a rate three times that of inflation and still having a surplus? By playing slap and tickle with its revenues.

As this budget is being put to bed, Lewis County General is looking for an orthopedic surgeon, but doesn’t have one. Despite this, $1 million of additional expense and $2 million in additional revenue is attributed to the man (or woman) who is not there.

The budget suggests the Affordable Care Act will diminish reimbursements by $500,000, but projects additional revenue of $3 million from a state and federal designation it does not yet have as a critical-access facility, and $1.5 million more in intergovernmental transfers, meant to ease losses incurred by low Medicaid reimbursement and charity care. That includes, by the way, $750,000 from Lewis County, which splits intergovernmental transfer reimbursements with the federal government. No apparent attention was paid, meanwhile, to sequestration and the federal government’s still-looming budget stalemate.

With the uncertainties of federal spending, with Lewis County’s own difficult budget situation and with a general malaise in the outlook for rural hospitals, prudent management dictates reality-based budgeting. Not having fun with numbers.

Yet the hospital’s board of managers has offered up a budget based on possibly unsustainable revenue projections, at least in part because the board is worried about the public perception of the hospital. This is a municipal hospital. If it fails, the county is obligated to cover its debts. This isn’t like Mercy, which eventually resorted to bankruptcy to clear up its financial mess, or E.J. Noble Hospital in Gouverneur, which was forced to merge with Canton-Potsdam Hospital to survive. If Lewis County General comes up woefully short, it’s Lewis County taxpayer stuck with the mess. The hospital’s board of managers would do well to believe that taxpayers will look upon them kindly if the hospital hunkers down and breaks even. Pie in the sky tends to have little flavor and is never filling.

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