There are no easy answers to Liberty’s financial crisis

If there is a silver lining in the bleak financial future of Liberty Township, it is that state officials will get an up-close look at how state budget decisions made in Columbus are affecting local governments.

Republican Gov. John Kasich and the Republican-controlled General Assembly insist that reductions in state funding for counties, cities, townships and villages aren’t causing undue hardship. They say the loss in revenue represents just a small percentage of a local government’s budget.

Kasich also has argued that the cuts in the Local Government Fund in the 2012-13 and 2013-14 biennium budgets should be viewed as an incentive for decision-makers to find new and cheaper ways of delivering services to the taxpayers.

Indeed, in his first biennium budget, Kasich set aside $40 million to reward local public entities that come up with plans on consolidation of services and other cost-cutting programs.

But as the financial situation in Liberty Township clearly illustrates, not all communities are the same and for the ones operating on the edge of the fiscal cliff, the reduction in state funding has been devastating.

Here’s what Liberty Township’s fiscal officer, John Fusco, had to say in the wake of a state audit that has raised “substantial doubt” about government’s “ability to continue as a going concern”:

“We get through our bills and our payroll, but that’s about it. There’s no extra to do roads or to do anything else.”

Liberty’s general-fund budget for this year is $854,000; its operating budget in 2011 was $1.1 million.

The state audit’s conclusion about the dire condition of Liberty’s finances stems from the fact that township government had to move money out of the police and fire funds into the general operating fund. State law prohibits such reprogramming of money.

Brittany Halpin, spokeswoman for the Ohio Auditor’s Office, didn’t mince words when she offered an assessment of the situation.

“Yes, it is serious, and it is reported as serious,” Halpin said.

So serious, in fact, that officials from the state’s Local Government Services section will be sent to Liberty to offer financial advice and evaluate the budget.

But as Trustee Stan Nudell noted, “Talk is cheap. How can we spend the money differently? Unless we have more money coming in, we’re going to spend it the same way.”

Therein lies the problem. Liberty Township does not have any sources of revenue to replace the money lost through the state’s reduction in the Local Government Fund, the elimination of estate taxes and a reduction in the property-tax base.

Liberty lost $389,000 in LGF allocation in the 2012-13 biennium budget. A total of $1 billion was cut statewide.

As for the estate-tax income, the township has had to absorb a major cut: $300,000 in such tax revenue in 2011 to $32,000 this year.

But even with these challenges, the township is debt-free today; four years ago, the budget was dripping red ink to the tune of $800,000.

Making progress

Administrator Pat Ungaro insists that while the state audit paints a bleak picture of what’s going on, state officials should be acknowledging the progress the township has made in stabilizing its finances.

There are only two ways for government to deal with a budget crisis: increase revenue or reduce spending.

A tax increase will bolster income, but taxpayers have made it clear that they aren’t in any mood to pay more for the services they receive.

A reduction in spending, on the other hand, means layoffs, since at least 80 percent of an operating budget goes for employee salaries and benefits.

Thus, it will be interesting to see what solutions state officials come up with to address Liberty Township’s fiscal crisis.