State Shared Revenues and Future Budget Projections March 3, 2009

Why are we talking about this? Major economic events have occurred –Pension investment losses –Flat inflation with contractually obligated increases These economic events have a large negative impact on revenues and expenditures Budget shortfalls compound

The impact on the 2010 General Fund

Bottom line impact for 2010 RevenuesExpenditureNet Change in Fund Balance November Estimate $8,538,416$8,646,110($107,694) Changes($197,460)$29,723($227,183) February Estimate $8,340,956$8,675,833($334,877)

The next shoe to drop… IMRF IMRF will release the 2010 rates in April 2008 investment returns of -24.8% Actuarial (rate setting) techniques modified to mitigate rate increases Our 2010 rate will be at least 8.33%, which would be a $12,500 increase to the General Fund over projections If the rate is 10%, General Fund impact would be $38,000

It may not be over… Future investment losses –IMRF –Police Pension State legislation –Reducing or eliminating shared revenues –Possible relief for governments: proposed legislation removing Police Pension and IMRF levies from Tax Cap. Passage is unlikely.

We are fiscally conservative, but realistic Revenues –use verified sources and actual data whenever possible Expenditures –wages are budgeted as actual estimate – no rounding up.

5 Year projections Necessary to gauge the near and long term outlook of Village services Estimates use current (2009) levels of service Revenues and expenditures escalate at known amounts if possible, or historical trends Near years are more reliable than out years

Notable assumptions: Property tax: increase by 0.1% in 2010, 3% thereafter Police Pension contribution increases by 32.3% in 2010, 13% thereafter with positive investment income State shared revenues growing at moderate 3% Recreation is at current expenditure levels with increased revenues from additional fees Museum funding exists at current level Sales and other taxes growing at modest levels, 2% to 3%

Fund balance – our savings account Current Village Policy 25% of expenditures are set aside for cash flow purposes (Cash Flow Reserve) Some dollars are for restricted purposes (Fire insurance, Police forfeitures, etc.) Undesignated reserves are available for any purpose Reviewed every 2 years Projections are based on 2008 unaudited projections and will be adjusted upon completion of the financial statements in June, 2009.

5 Year Revenues, Expenditures and Changes in Fund Balance In millions

Available Reserves (as a % of expenditures)

Cost control measures Continue to review all purchases Contractor/ vendor reselection (per review schedule presented to the board last year) Competitive bids / requests for proposals to secure low cost providers Joint purchasing through WCMC, State and others to achieve economies of scale Strict enforcement of purchasing policies