Hon. David B. Donaldson, Chairman and Members of the Ulster County Legislature Ulster County Office Building PO Box 1800 Kingston, New York 12402-1800   Dear Chairman Donaldson and Legislators: As you know, our county, our state and our nation are facing unprecedented financial challenges.  Revenues are down, the need for services is up and the State of New York continues to shift significant burdens onto local governments.  The solution to the problem is actually quite simple: all levels of government must change.  Governments must change and make the same hard choices American families are making every single day.  Here in Ulster County, the government is changing. We are streamlining, cutting costs and facing difficult problems head on.  In the end, our county will emerge better positioned to face the global economy and most importantly we will have created a brighter future for the people of Ulster County. Going into this national recession, we have fought to keep Ulster County better insulated than many New York counties and we have done so, as evidenced by our continued strong bond rating.  That said, the national financial crisis has pushed all local governments near the breaking point.  In New York State, the situation is particularly acute because for decades the state government has avoided the tough decisions by simply shifting burden to local governments. We should not forget that New York is the only state that pushes a significant amount of Medicaid expense down to the counties.  An expense, by the way, county governments have virtually no authority to control.  In Ulster County, the Medicaid expense is expected to be $30.5 million dollars in 2010, and that is after receiving $4.5 million dollars of temporary assistance from the federal government. The key word in that sentence is “temporary.”  The federal funds go away in 2011. This highlights the need for long-term solutions and immediate action. In fact, ongoing cost shifts and mandates have resulted in the Ulster County legislature unanimously adopting a resolution imploring State lawmakers to end these crippling practices.  Similar bi-partisan resolutions are being adopted all across the state. Though there are countless forms of cost shifting, the newly expanded state fee on healthcare premiums really illustrates this problem.  Ulster County and every employee who pays employee healthcare premiums in our county, must now pay a huge, increased state fee for the privilege of paying their own healthcare premiums.  New York State will be collecting over $570,000 more from the people of Ulster County in 2010.  The State gets the money but the county is forced to raise the taxes. I amextremely concernedthat when Albany goes back into session, more cost shifting will occur as they look to close the $2.1 to $3 billion dollar 2009 state budgetgap, or even worse, the State’s $4.6 billion dollar 2010 budget gap.  At a recent meeting of county executives, the New York State Budget Director Robert Megnaopenly acknowledged that the state is significantly behind in paying counties for many services we have already delivered.  If this continues, cash flow problems are likely all across the state. In addition, like virtually all New York counties, Ulster County has had a significant drop in sales tax revenue. Current trending predicts a $7.8 million dollar shortfall in 2009.  That amount comes directly out of the county’s general fund balance.  Currently, the 2010 sales tax projection is $79,521,173.  This amount is actually below 2005 levels.  Also in the budget is a $4.3M increase in mandatory New York State retirement system payments, an increase the State Comptroller has linked to the 30% stock market drop in 2008.  This not only affects the county, but every town, city and taxpayer as well. We must do more because the economy, the state and so many other factors are having a direct impact on the county’s fund balance.  At the end of 2008 we had an un-appropriated, unreserved general fund balance of $23.7 million dollars.  Sales tax shortfalls, an over $1 million dollar increase in county contribution to the Department of Social Services coupled with reductions in state aid, additional state cost shifts and a decrease in earned interest have cut that figure by $10 million dollars.  Fortunately, the hiring freeze we have implemented and mid year spending cuts have replenished over $5.9 million dollars to the general fund.  What all this means is, for 2010, the general fund balance estimate is $19.7 million dollars.  Using a portion of this fund balance to protect taxpayers is essential and we have done that.  But using the fund balance requires a delicate balancing act.   The fund balance is now at the base 5% and additional use will jeopardize both the county’s bond rating and severely damage our long term financial stability.  Make no mistake, over spending the fund balance is not the answer.  Our county, our state and our nation must make incredibly hard choices to protect taxpayers and here in Ulster County we are doing exactly that. We must restructure and reduce the size of the County workforce.  This is without question the hardest area of all, but the fact remains, approximately 40% of the county’s entire expenses are in personnel.  Our first efforts were through attrition and then through retirement incentives.  In this budget we have eliminated 48 vacant positions, positions we were able to keep vacant through extremely active position management during 2009.   But ultimately it has come to layoffs.  As painful as it is, we in the executive branch of government, will absorb all personnel reductions.  There are no layoffs in the Legislative offices and the Comptroller’s office.  And with my deep commitment to law enforcement, there have been no layoffs in the Sheriff’s Office. A list of all 30 positions slated for layoffs and the affected departments are included in the 2010 budget summary.   The workforce reduction breakdowns are as follows.

• 22 early retirements positions left unfilled
• 48 vacant positions eliminated
• 30 layoffs

The total reduction of 100 positions amounts to approximately 4.5% of the county’s workforce.  This number will result in a first year savings of approximately $2 million and it will grow to $3.1 million dollars by 2011.  This savings, combined with the other cost-cutting measures, has averted a massive tax increase.   It is important to note that with growing contractual obligations and state cost shifts, plus a significant increase in the need for services, there is enormous upward pressure on this budget.  With major revenue shortfalls a fact, deep cuts were needed to shield taxpayers.. With all of these challenges, the 2010 proposed tax levy is as follows: $76,944,960 or a 3.49% increase over 2009. I know this is a sobering message but, this budget begins that transition to a new economic reality.  With FMAP and stimulus funding ending in 2011, a failure to act would result in enormous budget gaps, now and in the future. The demand for services continues to grow.  Unfortunately, some services in Ulster County may be scaled back as we respond to the fiscal realities and growing state mandates. Delivering these services is a monumental undertaking, especially as we transition to a new economic reality.  But in Ulster County we are blessed.  We have a hard working and committed workforce.  That is what makes these layoffs so painful.  They are both gut wrenching and an absolute last resort.  They followed the use of massive cost cutting measures. all in an effort to save jobs.  But layoffs were necessary; necessary to avoid a major tax increase. I am calling upon all elected officials to set aside partisan politics and focus on protecting the people we all serve. Ulster County will move forward.  As we move forward we will become more streamlined and ultimately we will have a transformed economy.  It will not happen over night, but it will happen.  So as I deliver this budget, I urge the Ulster County Legislature to show the courage and wisdom I know they possess.  And to help, I will gladly make my entire staff and all department heads available as we face these serious challenges together.  Working together we can, we must and we will prevail. Thank you. Respectfully,   Michael P. Hein County Executive