Lawrence County government received concerning news earlier this summer about its state of finances and economic picture.
A July 20 report from Standard & Poors Global Ratings shows the county's ratings on its general obligation debt had dropped from A-plus to A-minus.
"The outlook is negative," the report states. "The rating action reflects our view of the county's weak budgetary performance, represented by four years of consecutive general fund deficits, which have depleted the county's reserves.
Commissioner Chairman Morgan Boyd reported during a special salary board meeting Tuesday that the amount of money in the county's reserve fund currently is zero.
"The outlook for next year is that the commissioners are considering layoffs and departmental cuts across the board," he said. He presented the S&P report to reinforce his position against granting a law clerk a raise of $18,592.
The bonds are secured by the county's full faith, credit and resources and revenue from property taxes without limitation on the amount, the S&P report said.
Bond ratings are expressed as letters ranging from “AAA”, which is the highest grade, to “D”, which is the lowest grade. An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories, according to S&P's website. However, the obligor's capacity to meet its financial commitments on the obligation is still strong.
Boyd explained that a bond rating is a measure of the county's fiscal health, and Standard & Poors ranks credit among governments and businesses.
"In its analysis, it is a third-party that has done a thorough analysis of the county's financial situation and issued a detailed report that we may have some financial problems if we don't straighten the ship," Boyd said. "In the immediate future, this doesn't do a lot in terms of our operations. However, long term, if S&P continues to downgrade our credit rating, we may have issues in getting financing for any longterm projects for which we might have to get a bond."
Ultimately, if the the bond rating continues to decrease, lenders will be less willing to loan the county money at favorable interest rates, Boyd said.
He pointed out that the report indicates the county's bond rating is still at investment grade, and the changes by the current board were taken well, and that the board is working to better the county's financial position.
"For those reasons, they didn't drop the bond rating more," Boyd said. "But if we are unable to make significant financial corrections, their analysis will remain bleak and the bond rating will continue to drop."
The report states that, "In our view, Lawrence County's economy is very weak, with limited employment opportunities, below-average income and wealth levels, and declining population, the document states. "As a result, the county's tax base has been shrinking, which, combined with rising operating costs, has created a structural imbalance in the county's budget."
The county reported audited deficits in 2016 to 2018 with an ending general fund balance in 2018 of $1.7 million, or 5.5 percent of expenditures. The commissioners at that time were Steve Craig, Dan Vogler and Bob Del Signore. James Gagliano, who retired in January, was the county's chief clerk and administrator.
The existing board of commissioners, who took office in January — Boyd, Vogler and Loretta Spielvogel — reopened the budget and increased taxes and reduced spending to balance the spending plan, as noted in the S&P summary.
The COVID-19 pandemic and associated recession have not yet negatively affected the county budget, the report states, and the county is on track to end the year with a surplus of savings from furloughs imposed during the state's stay-at-home order.
Boyd explained that During COVID-19, the county furloughed an average of 150 people from various departments and agencies, between mid-March and early June. He estimated that savings to the county to be about $430,000.
"Overall, we believe that the county's strong liquidity and recent budget adjustments should help stabilize its financial position," the report states. It warns that if the county is unable to balance operations in fiscal years 2020 and 2021, its bond rating will likely be lowered further, "by multiple notches."
Boyd said that the commissioners, with another budget adoption looming in two months, will continue to scrutinize the budget, cut expenses and improve efficiency, and that his goal is to cut personnel, possibly by 15 positions.
"Our expense increases are largely factors of salary increases and the annual year-over-year increases in the cost of benefits. On top of that, longterm, we have to look at contractual obligations, and lower our expense curve to where it matches our revenues.
"Right now, county expenses are growing at double what our revenues are," he said. " We no longer have population of 120,000 people. We have to shrink the size of government to provide the services we are legally obligated to provide, while shrinking the discretionary finances of the county."