County officials and staff are determined they will meet the challenge of a state budget shortfall.

The county's reserves came up during an afternoon discussion of 2003 budget reductions and options and projections for 2004 spending. County officials and staff gathered for a day-long retreat Wednesday at the Ruby Rupner Auditorium at the Jay C. Hormel Nature Center.

The discussion came up spontaneously and not since the campaign of the November 2002 elections has the subject of reserves been discussed publicly.

A department head, Tom Neilon, director of Mower County Correctional Services, asked about the $34 million in reserves.

Neilon wanted to know in the course of discussing how to meet the shortfall in state spending. Donna Welsh, the county's finance director, put the figure at $34 million.

"We're trying to wean ourselves of that," said Ray Tucker, 2nd District county commissioner and member of the finance and budget committees. "We're trying to intermingle reserves with revenues."

Craig Oscarson, county coordinator and member of the budget committee, quickly pointed out some of the reserves were designated and some were not.

When Tucker said the county had between $15 and $17 million in undesignated reserves, he didn't sound convincing enough for 4th district county commissioner Dick Lang.

"We're not playing games here," Lang said, "I know how much I owe and how much I got in the bank. What are the county's reserves? I think our department heads deserve to know."

David Hillier, 3rd District county commissioner and member of the finance and budget committees, tried to placate Lang. "It's not a 30-second answer," said Hillier, adding some of the $34 million in reserves is designated for specific spending

purposes and the rest is not.

The five-member county board heard presentations from department heads and discussed ranking programs and services by priority.

The rest of the retreat's schedule was spent examining the hard facts of the anticipated state spending shortfall.

Most immediate is the $1,100,706 shortfall coming this year. When a "fudge" or miscalculation factor, revenue overage and less-than-anticipated expenses are calculated, the deficit is reduced to $616,456.

"It's a mosquito bite this year and an elephant bite next year," Tucker said.

Afterward everyone -- DHS representatives, in particular -- called the budget deficit numbers "sobering." The county DHS's Bruce Henricks, Todd Lysne and Brent Gunderson all said the department could not continue to deliver its current level of programs and services without the county's financial support.

Thus, the state budget shortfall's "people" toll could include both people delivering social services and those families -- over 2,500 -- receiving them.

Fully 92 percent of the county highway department budget goes to salaries and employees fringe benefits. Eighty-two percent of the county coordinator's budget goes to personnel costs.

If hearing the county's reserves discussed after a long hiatus from commissioners' conversation, the subject of county employee overtime pay took the longest Wednesday afternoon.

It appears overtime pay could be curtailed -- except for emergency services -- and, maybe, eliminated entirely as Stearns County did to help balance its budget.

The most-watched -- by taxpayers, at least -- revenue source is the tax levy and while the commissioners could approve a higher levy, the finance committee is expected to recommend a 3 percent hike in the levy.

"That won't cover our losses," Oscarson said.

Lee Bonorden can be contacted at 434-2232 or by e-mail at lee.bonorden@austindailyherald.com