Good Evening, everyone!

Mayor Peterson, Mr. President, Members of the City-County Council, Citizens of Marion County:

Let me start by stating the obvious. The reforms that have been outlined by the Mayor this evening are very intriguing — and in the eyes of some people they might be perceived as controversial. But, simply because they are challenging proposals does not diminish the need to look at all options as we seek to improve the delivery of government services in a time of increasingly scarce resources. I pledge to Mayor Peterson and to all of the members of the Council that my office is ready and willing to assist in any way we can.

As I now turn to the 2005 county budget, I must admit that I have really struggled to prepare my remarks for this evening. In the past, I have always devoted a significant portion of my speech to what could be called the "county year in review". In my review I would focus on the accomplishments and contributions of various county agencies. This last year is no exception as our county agencies have continued to provide exemplary services in times of increased budget constraints. However, given the severity of our current fiscal situation, I will limit my comments to the revenue picture and the 2005 base-line budget.

My guess is that all of you are thinking the same thing – just how did we get into the shape we are in? Unfortunately, the answer to the question is relatively complex and would take much longer to answer than the time allotted to me this evening. However, let me just point out some of the reasons for our fiscal distress. First, our expenditures for public safety have exceeded our growth in revenues over the last several budgets. When I refer to public safety, I am doing so in the broadest sense. This includes the Courts, the Sheriff’s office, the Prosecutor’s office and most recently the Public Defender’s office. This expenditure growth (averaging more than 11% in recent years) has not been discretionary but rather it is expenditure growth that has been due to mandates from the federal courts and the state legislature. The federal court order in 2003 will cost us $9.7 million alone in 2005.

Second, our General Fund revenue growth has declined over the same time that our mandated public safety expenditures have been growing. Historically, the city and county could count on three (3) to four (4) percent annual growth in our assessed valuation. This meant 3 to 4% growth in revenues without raising tax rates. More recently this growth has declined to below 2% and we only anticipate about 1½% growth for 2005. This growth has been insufficient to support this inflation in our public safety expenditures and as a result we have had to increasingly rely on our reserves to get by. As you are all aware, we have now exhausted our reserves.

Third, our County Option Income Tax (COIT) revenues have declined in each of the last three years. In 2002, the county’s certified share for all recipients exceeded $122 million, and just last week we were told our certified distribution for 2005 would be $102 million, an $8 million reduction over 2004.

Fourth, the recent statutory changes passed by the 2003 General Assembly in Senate Bill 1 (SB1) coupled with the levy reduction imposed on the county last year resulted in a loss of nearly $5 million, an amount from which the county can never recover. Finally, the recent reassessment has resulted in an increased number of appeals and as a result refunds must now be paid from our general operating funds. This, too, is a change attributable to SB 1.

As a result of our deteriorating revenue picture, I found myself between the proverbial "rock and a hard place" when we sat down to prepare the budget. I could have proposed raising taxes, but I could not have legally proposed enough new taxes to cover all of the requests for new spending. Additionally, I know that a county tax increase would only further exacerbate the tax differences between Marion County and the surrounding counties. Higher taxes relative to our surrounding counties is not the answer to our fiscal problems. We all know that we must do all we can to encourage families to live and work in Marion County and private business to invest here. Unfortunately, the current trend seems to be favoring the surrounding communities like Carmel, Fishers, Zionsville, Greenwood and Brownsburg where tax rates are lower than ours.

Because of the foregoing reasons, I have chosen to submit to you what I will call a base-line budget for 2005. This budget balances expenditures and revenues for 2005, but it is not a truly balanced budget because it does not propose any funding to pay down our juvenile corrections debt that is owed to the state.

While I am referencing the debt for juvenile incarcerations, I want to point out that new legislation identified funding for children’s psychiatric residential treatment through Welfare funding. Any funding that is not utilized from that fund will be turned over to the Department of Correction (DOC) toward the payment of our debt. At this time, we anticipate $2.1 million will go to the DOC with a similar amount in 2005.

The budget I am submitting tonight recommends reductions in all agencies of county government. These are not across the board reductions, but rather reductions based on actual spending from January 1, 2004 through June 30, 2004. The same methodology has been applied to each agency. By proposing to eliminate the "under-spending", we have treated all agencies fairly and equally. And most important to me, because we have based our reductions on actual spending through June 30, 2004, no individual on the county payroll on that date should lose his or her job because of these recommendations. Admittedly, there is no room for growth, but we should not need to lay off anyone either.

Unfortunately, our recommendations only include funding for those agencies that have traditionally been considered a part of county government. As a result, I have not recommended funding for the following:

• Noble of Indiana
• Marion County Fair Board
• Cooperative Extension Agency

In addition, this budget includes the following recommendations for your consideration:

• No salary increases for 2005
• Privatization of Jail 1

I appreciate that many of these are controversial recommendations and I am open and will be receptive to any proposals, which this Council may make to improve upon the base-line budget I have submitted to you this evening.

Let me close by simply re-emphasizing how important it is to re-think our local government structure. As you know, there have not been any major structural changes in the way government operates since the inception of Unigov in the early 1970’s. I think it is time to consider changes. We have reached this fiscal crisis together, and we must all work together to find innovative ways to do things better. I look forward to working with you and the Mayor in order to see that happen.

Thank you for your attention.