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BOARD TAKES INITIAL LOOK AT PROPOSED FIVE-YEAR BUDGET STRATEGY

July 12, 2012

The Placer County Board of Supervisors directed staff Tuesday to move forward with implementing a proposed five-year budget strategy that is a centerpiece of the county’s efforts to protect its long-term fiscal health.

The strategy also seeks to ensure the county uses its limited resources to effectively meet public service needs, fulfills board priorities and is positioned to withstand the next economic downturn. Other goals include reducing the use of one-time revenues to fund ongoing operations and bolstering reserve funds now that county revenue is beginning to recover from the recession.

Development of the five-year plan is prompted partly by recognition that the county’s post-recession revenue outlook is improving, but not fast enough to keep pace with likely cost increases.

County Finance and Budget Operations Manager Graham Knaus told the board that property tax revenue is projected to return to 2009-10 levels in five years, but will remain below pre-recession levels. Costs, on the other hand, are expected to continue to escalate above the 2009-10 total five years from now.

In a report to the board, the county budget team emphasized that Placer County has been able to handle the budget challenges created by the economic slowdown and state budget crisis through long-term planning and cost-containment strategies put in place by the board.

“It is Placer County’s deliberate and long-standing conservative fiscal planning that has allowed the county to withstand the impacts of the economy while preserving core services,” County Executive Officer David Boesch explained. “This has also positioned the county to transition from the economic downturn proactively to ensure the long-term fiscal health of county operations.”

He noted that Tuesday’s board actions effectively build on previous steps taken to restore the annual budget to a sustainable, structural balance that is congruent with and furthers adopted board policies that have served the county so well.

The effort to reduce the use of one-time revenue to cover ongoing operations and to bolster county reserves is in keeping with board budget policies initially adopted in 2003 that emphasize conservative budgeting so the county has flexibility to handle revenue and cost fluctuations, the use of one-time revenues for one-time costs and a pay-as-you-go approach whenever feasible so the county maintains a relatively light debt load.

Since 2007, the board has taken a series of proactive cost-cutting actions to offset revenue losses. The cost-cutting moves include a hiring freeze and increased cost sharing with employees for health and pension benefits. The board has also implemented almost 150 cost-savings proposals and expanded the use of cost-effective alternative service-delivery models where appropriate.

At Tuesday’s meeting, Knaus said options for accomplishing the five-year budget strategy’s goals include:

· Setting aside the equivalent of up to 50 percent of any new county department revenues to help eliminate potential budget deficits and better protect the county from a future recession;

· Bolstering county reserves with up to 50 percent of the unspent funds carried over from one fiscal year to the next; and

· Eliminating some county positions that are funded, but vacant because of the hiring freeze.

The five-year budget strategy is intended to provide a framework for approaching the county budget and operations while recognizing the need to maintain high-quality core services to the public. As such, it is not a one-size-fits-all approach, but rather a guide.

Board Chairwoman Jennifer Montgomery and Knaus agreed that some staff positions can be eliminated, but emphasized the county needs to fill some critical positions left vacant because of the economic slowdown and to backfill some of the new vacancies created by retirements.

“Not all funded vacant positions are equal,” Chairwoman Montgomery said.

On June 5, the board adopted a proposed $690.1 million budget to ensure the county had a balanced spending plan in place when the 2012-13 fiscal year began July 1.

Adoption of the proposed budget completed the first phase of the county’s two-phase budget process. The board is scheduled to have budget workshops on Aug. 16-17, hold a public hearing on a proposed final budget Sept. 11 and adopt a final budget Sept. 25. The two-phase approach allows the county to wait until September to adopt a final budget that includes updated revenue and expenditure estimates.

Since 2007, the General Fund budget has dropped $17.8 million or 4.8 percent and the size of the county workforce is down 15.4 percent to approximately 2,150 filled positions as a result of the hiring freeze.

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