Board Of Supervisors Holds First Budget Workshop
February 23, 2011
Placer County’s budget outlook for next fiscal year appears challenging, but manageable based on an estimated deficit of $2.8 million for 2011-12 once achievable adjustments are made. Such adjustments do not include the use of reserves beyond internal service funds.
The county’s outlook could change dramatically, however, depending on what happens to approximately $30 million at risk because of state-funding reductions and increased county responsibilities recommended by Gov. Jerry Brown in his proposed 2011-12 state budget.
The county’s budget outlook and potential state-budget impacts were important topics of discussion on Tues., Feb. 22, 2011, when the Placer County Board of Supervisors held the first in a series of budget workshops for the fiscal year that begins July 1.
“The deficit is primarily the result of an additional projected 5 percent decline in property tax revenue, the county’s largest funding source; the loss of one-time funding; and ongoing cost drivers such as health insurance premiums and increasing CalPERS retirement contribution costs due to lower investment returns,” explains county Finance and Budget Operations Manager Graham Knaus in a report to the board. “Absent significant state impacts, the Placer County budget deficit is resolvable.”
His report notes that county departments have been asked to absorb in their base budgets the higher CalPERS contributions, increased benefit costs, the loss of one-time revenues and related costs. Some departments likely will face significant service and operational impacts as they work to meet base budget targets.
A year ago, Placer County faced a projected $23 million shortfall when it began developing the 2010-11 budget. The board ultimately adopted a balanced budget and took several strategic actions to ensure a sustainable level of services that create a sound footing for 2011-12.
The Board of Supervisors is scheduled to continue holding budget workshops during March and April and to review a proposed 2011-12 county budget during May and June. Board members will hold another series of workshops in August before adopting a final budget in September.
In his report to the board, Knaus says revenues and expenditures at the midpoint of the current fiscal year generally were consistent with expectations.
“Revenues, however, do remain volatile and are below the amounts received in the last few years, in part a reflection of state reductions, as well as the state’s continued delays in making payments,” he explains, emphasizing that the situation is manageable because the Board of Supervisors has acted decisively to control expenditures the last few years.
In his report, Knaus cites several examples of key board actions, including decisions to:
Establish a hiring freeze in December 2007 that has reduced the number of filled county positions by 320 over three years;
Approve a series of business-practice changes recommended by the county Cost Savings Task Force that have cut annual expenditures by approximately $1.1 million; and
Have employees pay larger, but still relatively small shares of their annual pension and health insurance costs.
Knaus emphasizes that rising health insurance premiums and contributions to the CalPERS retirement system are two primary causes of the rising costs facing local governments in California.
The hiring freeze and other actions taken by the Board of Supervisors have helped Placer County avoid the large-scale layoffs experienced by many cities and counties. Over the last three years, Placer County has laid off 17 employees due to reduced workloads or insufficient state funding. Most were land development staff whose workloads dropped significantly in response to the construction industry slowdown.
Knaus indicates in his report that Placer County was well positioned to weather the nation’s economic slowdown and state budget crisis partly because of budget and debt-management policies adopted by the board in 2003 that provided a sound long-range framework for protecting the county’s fiscal stability.
On Jan. 10, the governor proposed a $127.4 billion state budget for the 2011-12 fiscal year that has major ramifications for the state’s 58 counties.
To help close a state budget deficit projected at $25.4 billion for the next 18 months, Brown is proposing reductions in state funding for many county programs and a realignment that would shift many state responsibilities to counties.
In his report to the Board of Supervisors, Knaus says the State Senate and Assembly are in the process of finalizing their initial budget proposals and are scheduled to start reconciling their differences next week.
To help fund the new county responsibilities, Gov. Brown is seeking to hold a statewide special election in June where voters would be asked to extend for five years several tax increases enacted in 2009 that are set to expire June 30.
The governor’s plan raises several concerns for counties, including uncertainty over whether the tax-hike revenue would fully cover new responsibilities and costs proposed to be shifted to counties and what funding would be available to fund those responsibilities after five years when the funding expired.
In his proposed budget, Gov. Brown also proposed dissolving county and city redevelopment agencies throughout California by July 1. His plan would allow local officials to continue making payments on existing redevelopment debts and other obligations.
The governor’s proposed budget could have major impacts on several Placer County departments, including the Sheriff’s Office, Probation Department and District Attorney’s Office. The proposed budget includes major policy, responsibility and funding shifts that would:
Require Placer County to manage an estimated 347 additional offenders per year in jail or on probation if counties must assume responsibility for low-level, nonviolent adult offenders not convicted of sex crimes;
Have the county manage an estimated 620 more adult parolees each year if responsibility for adult parolees is shifted to county probation departments; and
Make the county responsible for housing, treating and supervising about 10 additional juvenile offenders annually if the state eliminates its Division of Juvenile Justice.
The three departments stand to lose about $1.9 million per year if the state’s voters opt not to extend a vehicle license fee increase. The fee increase is one of the tax measures the governor wants to put before the electorate in June.
Gov. Brown’s proposed budget also would have a major impact on the Placer County Health and Human Services Department. The governor is seeking to make counties permanently responsible for several programs: mental health; child welfare, foster care and adoption programs; Adult Protective Services; and substance abuse treatment.
His proposed budget also calls for changes that would leave fewer residents eligible for such programs as CalWORKs, In-Home Support Services and Medi-Cal.
Placer County and local independent fire districts could face higher costs as a result of a proposal by the governor to shift responsibility for fighting fires in many areas from CAL FIRE to local agencies.
The Placer County Library would lose about $84,000 per year under a proposal by Gov. Brown to eliminate all state support for county libraries.
Placer County also would face increased cash-flow challenges because of the governor’s intent to defer $8.5 million in payments to the county.