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HomeMy WebLinkAboutMINUTES - 10062009 - D.1RECOMMENDATION(S): ACKNOWLEDGE that the Board of Supervisors adopted a FY 2009/10 Budget on March 31, 2009; 1. ACKNOWLEDGE that property assessments, and the resulting drop in tax revenues on July 1 are due to the housing market meltdown and have a significant impact beyond those already anticipated in the FY 2009/10 Budget; 2. ACKNOWLEDGE that other local changes are occurring that will affect FY 2009/10 appropriations and revenues as well; 3. ADOPT FY 2009/10 departmental funding reductions to adjust for the impact of State and other local revenue losses to rebalance the FY 2009/10 Adopted Budget; 4. DIRECT the County Administrator to return to the Board on October 13, 2009 with associated appropriation and revenue adjustments; 5. ACKNOWLEDGE the sacrifices made by the majority of employees who have agreed to reduced earnings and increased shares of health care premiums; 6. ACKNOWLEDGE that several labor unions have yet to conclude negotiations and that successful negotiations will positively impact the County financially as a whole; and 7. 8. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 10/06/2009 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Gayle B. Uilkema, District II Supervisor Mary N. Piepho, District III Supervisor Susan A. Bonilla, District IV Supervisor Federal D. Glover, District V Supervisor Contact: Lisa Driscoll, County Finance Director, 925-335-1023 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: October 6, 2009 David J. Twa, County Administrator and Clerk of the Board of Supervisors By: , Deputy cc: Lisa Driscoll, County Finance Director, Stephen Ybarra, County Auditor-Controller, Laura Strobel, Budget System Administrator, Ted Cwiek, Human Services Director D. 1 To:Board of Supervisors From:David Twa, County Administrator Date:October 6, 2009 Contra Costa County Subject:Budget Reductions FY 2009/2010 - State and Local Impacts RECOMMENDATION(S): (CONT'D) ACKNOWLEDGE that further State reductions and economic impacts may require subsequent adjustments to the FY 2009/10 Budget. FISCAL IMPACT: The General Fund Budget was reduced in excess of $49 million at adoption. The recommendations presented here, which represent cuts to departments that exceed $11 million in General Fund reductions and $15 million when including the Fire Districts, will rebalance the FY 2009/10 Adopted Budget. BACKGROUND: Like most counties in the United States, Contra Costa County is experiencing a period of dramatic change caused by the severe recession. A large drop in revenues, coupled with large increases in mandatory expenses (e.g., Food Stamps, General Assistance, CalWORKs, Health Care, and future pension contributions) would have led to a projected Fiscal Year 2009/10 deficit of over $64 million or about 20% of the estimated General Fund. As a result, the County had to find immediate ways to restructure while maintaining core services, reduce ongoing expenditures while minimizing the social and economic impacts on employees, and/or increase revenues. In the Recommended 2009/10 Budget, the County Administrator recommended and the Board approved reductions in all departments that balanced the – then known – problem of $49 million. The impacts of the reductions were many and are still being felt by departments and the public. Our County continues to face momentous challenges in FY 2009/10. These challenges are due to three issues with varying levels of significance: 1) declining revenue, including property taxes affected by reduced assessed valuations, Realignment, and Proposition 172; 2) a looming State deficit, which is projected to push significant program cuts down to the County level; and 3) other local issues such as increased costs of unemployment, health care, and demand for services. Property Tax Revenues As has been widely communicated, the total assessed valuation is over 7% less in FY 2009/10 than it was in FY 2008/09. The 5% budgeted reduction was not sufficient to cover the actual decline and another $4.5 million must be eliminated from General Fund net County cost. The Contra Costa County Fire Projection District, East Contra Costa Fire District, and County Library each have property tax reductions as well. State Budget Impacts Consistent with Board policy, when the State cut revenues used for specific County programs, the County Administrator will make recommendations for reductions in those specific program areas. It is clear that Contra Costa is unable to back-fill loss of State and federal funding with County resources. Other Local Issues Reduced Revenues – Several departments including Health Services, the District Attorney, Sheriff-Coroner, and Employment and Human Services are projecting reductions in their revenue streams. Departments have developed plans to absorb these reductions through reduced expenditures and program cuts, which are described below. Unemployment – Due to increased numbers of individuals receiving unemployment, the unemployment rate charged to departments was increased as of September 1, 2009. The rate almost doubled. Departments were asked to consider this increase and reduce expenditures elsewhere to absorb the increased cost. Health Care Costs – Due to active labor negotiations and anticipated changes to premium sharing, health care premium increases were not budgeted for FY 2009/10. Since the time of budget adoption, the majority of union negotiations have been completed. Depending upon labor representation, employee group insurance and retiree health is projected to increase by approximately 3%. Departments with high numbers of employees represented by the Coalition bargaining group enjoy greater savings (50/50 sharing ratio) and thus less programmatic impact/cuts. Solutions – Furloughs/Wage Increase Deferrals The Coalition bargaining group and unrepresented management will participate in 6 days of Agreed upon Temporary Absences (ATA)/furlough in FY 2009/10 and FY 2010/11, which is anticipated to save 2.31% of base salary. The savings associated with this furlough time have been used by departments to reduce the impact of the local budget issues including loss of property tax revenue. Pending Issues – Current Negotiations Several union negotiations are still underway. Although our fiscal challenges are great, if we are able to reach satisfactory labor agreements they are manageable. These pending labor negotiations may ultimately result in compensation adjustments, furloughs, layoffs, or a combination of these. Summary of Departmental Impacts Many of the recommendations presented are one-time or short-term solutions, including increased reliance on Federal grants and savings associated with furlough days. Contrary to historic practice, and rather than pass-up one-time opportunities, the County Administrator is recommending that all solutions which preserve services to the public be taken advantage of in the current fiscal year. While this approach may make the impact of program cuts larger in the future, it does continue services and County employment for a longer period of time. The economy is changing so rapidly that there is very little historic perspective that can be applied to current projections. Many economists are projecting further property tax losses due to Adjustable Rate Mortgages (ARMs) resetting in the FY 2010/11 and FY 2011/12 which will likely result in new rounds of foreclosures; Sales Tax is projected to recover to 2007 levels sometime in 2014; and the State Budget deficit has recently been projected to be between $7 and $15 billion. The County Administrator will provide an update to the Board at mid-year and we will all hope for relief and improvement rather than additional program reductions. Agriculture - The Agriculture Department will manage phase one reductions in the amount of $25,068 through cost savings from implementation of ATA furlough days. The ATA furlough days will have a direct impact on varying areas of the local economy. Specifically, inspection of quarantined parcel shipments received at shipping terminals and inspection of quarantined parcels being shipped out of state. In addition, response times to pesticide related incidents could be increased on furlough days. Animal Services - The Animal Services Department will manage phase one reductions in the amount of $46,138 through cost savings from current, funded vacancies. In anticipation of additional 2009/10 budget reductions, the Animal Services Department has continuously held positions vacant, resulting in an increased workload to existing staff. The reduction in expenditure appropriations to rebalance the department’s operational budget will result in no additional impact on services or positions that have already been reduced in anticipation of further reductions. Assessor - In order to meet the FY 2009/10 Phase 2 budget cut, the Assessor's Office is proposing to eliminate $209,467 in funding from four vacant funded positions for six months (July thru December of 2009). The salary savings is possible due to three unanticipated retirements and one unanticipated resignation in May and June of 2009. The positions include one Associate Appraiser, one Junior Appraiser, one Senior Auditor-Appraiser and one Clerk-Specialist Level. The short staffing will have to be monitored to avoid a delay in closing the assessment roll, which in turn, may delay the Tax Collector in issuing property tax bills and collecting property tax revenue. Auditor-Controller -The Auditor Controller’s Office share of the assessed value reduction is $42,473. The Auditor will address the reduction by moving from using an outside contractor to provide micro-imagining services to using the General Services Department. This change is projected to save approximately $22,473. Additionally, the department will cancel a Supervising Accountant position and add an Account Clerk Supervisor. The Account Clerk Supervisor position is a less expensive position and will result in a savings of approximately $20,000. The Auditor Controller’s Office has been impacted by other local issues such as increasing unemployment and health care costs, but will be able to meet these increased costs due to the savings from furloughs. Clerk-Recorder - The Clerk-Recorder's share of the property tax revenue loss is $60,087. To offset this loss in FY 2009/10, the department will hold several clerical vacancies open in the Recorder Division to achieve a corresponding salary savings of close to $61,000. Mindful of the need to have a long-term plan in place that will resolve the annual budget challenges, the Clerk-Recorder is pursuing plans to institute electronic recording in the Recorder Division. This is a fee-based system and once implemented, will raise additional revenues for the Modernization fund to allow the Clerk-Recorder Department to permanently move several positions that directly support this program out of the general fund. The department is still working out the details at this time, including the selection of an appropriate contractor for the program. The goal is to have this system in place by January 1, 2010 and begin collecting the fee at the same time. Conservation and Development Department - The Conservation and Development Department has a zero general fund net County cost and receives no property tax revenue. No additional cuts are being imposed. Their ATA savings of approximately $242,000 is anticipated to be more than adequate to cover the additional costs of healthcare and unemployment. County Administrator - The County Administrator’s Agency reduction is $140,870 and includes the County Administrator’s Office, the Department of Information Technology, Clerk of the Board, Risk Management, and the Office of Revenue Collection. The Department of Information Technology is experiencing revenue reductions as a result of departments reducing their plans for services due to their own cuts. These losses cannot be made up with ATA savings as departments are only charged for time worked. At this point it appears that the projected reductions are approximately 5% of revenues overall. The majority of the Agency impacts will be mitigated through ATA furlough days, a decrease in projected employee/retiree benefits, and negotiating reduced contracts to conduct the countywide Single Audit as well as an outside contractor to maintain the county codes and ordinances online. The FY 2009/10 budget anticipated an increase in costs for these services. When the contracts were negotiated, the County was able to achieve a $59,791 reduction in fees. The remaining $7,000 will be taken from office expenses. County Counsel - The County Counsel’s share of the assessed valuations loss is $23,451. The ATA savings of base salary is approximately $121,000 and will cover the additional costs of healthcare and unemployment as well as address the loss in funding due to the assessed valuation loss. Additionally, in 2010/11 it is anticipated that new hires for vacated positions will be hired at a lower step than what was budgeted at in 2009/10. Department of Child Support Services - The Department of Child Support Services has a zero general fund net County cost and receives no property tax revenue. No additional cuts are being imposed. Their ATA savings is anticipated to be more than adequate to cover the additional costs of healthcare and unemployment. District Attorney - No immediate personnel reductions are being recommended at this time in anticipation of a favorable conclusion to labor negotiations with the Deputy District Attorney’s Association similar to those of coalition bargaining units. Savings from Coalition and Unrepresented employee furlough days have mitigated a small portion of the phase one cuts of $170,178. The District Attorney continues to be impacted by significant exposure to the state of the local economy; primarily through reduced Proposition 172 sales tax revenue. Monthly sales tax revenue shortfalls continue, most recently at the level of 15-20% below the same month in the prior fiscal year. Employment and Human Services - The Employment and Human Services Department (EHSD) is facing reductions in funding for the 2009/10 fiscal year totaling approximately $3.9 million. This shortfall is comprised of a net loss of $1.2 million in State funding, an increase of $0.86 million in Federal funding, a loss of $3.3 million in Realignment (sales tax and vehicle license fee) revenue, and a reduction of $266,037 in County General Fund support due to the loss in property tax revenues. In addition to this net reduction in revenue, unanticipated expenditure increases need to be addressed including increased debt service expenses at the Ellinwood office building of $778,000 and increased health and unemployment costs of $154,893. These budget discrepancies are offset by an anticipated $1,673,000 savings from staff furloughs. On August 12, 2009, EHSD informed the Board of Supervisors and the public that anticipated State reductions could total as much as $22.5 million and could result in the elimination of as many as 71 full time equivalent (FTE) positions. Fortunately, the impacts from the State reductions are significantly less than originally anticipated. At this point in time, actual known reductions total only $2.2 million. This amount is offset by an increase of $1 million for non-assistance food stamps, leaving a net reduction in State revenue of $1.2 million. This amount does not include any reductions as a result of the changes in services to In-Home Supportive Services recipients with functional index ratings below 4 and an elimination of all services for those with a rating below 2. At the time this report was prepared, the State’s ability to implement this reduction is pending a decision by the Courts. An oral update will be provided to the Board should the Court reach a decision. The Department has only received 12% of the County Fiscal Letters from the State which provide the amount of funding the County will receive. Therefore, it is not yet possible to know exact funding levels. Because of the uncertainty over State funding levels, the Department proposed and the Board approved a very conservative budget in March, 2009. The following changes are recommended in the indicated program areas: Bureau Federal State Local Net Change Child Welfare Services ($106,154)($1,840,813)($65,874)($2,012,841) Aging and Adult Services 1,170,548 ($1,175,838)($65,874)($71,164) Workforce Services ($201,862)($1,515,422)($65,874)($1,783,158) Community Services 0 0 ($2,540)($2,540) Administration 0 0 ($65,875)($65,874) Grand Total $862,532 ($4,532,073)($266,037)($3,935,577) The Department has submitted a reduction plan to address the current shortfall and plans to introduce a number of savings measures including, but not limited to, combining computer servers with the Department of Information Technology, reducing facility costs, reducing printing costs, holding positions vacant, etc. Due to increases in revenue for Non-Assistance Food Stamps, 23 full time equivalent positions will be redirected from Medi-Cal and Cal-WORKs to process applications, eliminating the need for the Department to layoff employees. The American Recovery and Reinvestment Act will provide just over $673,000 which will offset reductions in other child welfare programs. When the 2009/10 fiscal year budget was approved by the Board of Supervisors, the budget for the Employment and Human Services Department included a $5.5 million salary savings requirement. The Department is managing and redistributing staffing in such a way as to ensure that this salary savings materializes. General Services - The General Services Department’s share of the assessed valuations loss is $170,581. The reduction in funding will be covered by unanticipated revenue to be received from ABAG POWER. AGAB POWER is a consortium of public agencies of which Contra Costa County is a member. ABAG POWER is an aggregator of natural gas accounts for its members. The County purchases natural gas from ABAG POWER not PGE. The unanticipated revenue was received as part of a natural gas litigation settlement. ABAG POWER was one of several public agencies that sued natural gas firms for market manipulation. Additionally, the ATA savings is approximately $200,000 and will cover the additional costs of healthcare and unemployment. Health Services - Due to the significance of State cuts to the Health Services Department and the desire to reduce the impact by spreading the reductions over a longer period of time, Health Services’ cuts were presented and adopted by the Board of Supervisors on September 15. The total budget reduction for Health Services was $3,065,514 including seven positions (6.7 FTE's). It should be noted that impacts to Health Services would have been $3.0 million more over the next two years had the California Nurses Association not agreed to defer their previously contracted wage increase. Human Resources - The Human Resources Department’s share of the assessed valuation loss is $29,481. The ATA savings of base salary is approximately $70,000 and will cover the additional costs of healthcare and unemployment as well as address the loss in funding due to reductions in property tax. Additionally in FY 2010/11, new hires for vacated positions will be hired at a lower class/step than were budgeted in FY 2009/0. Library - The County Library’s share of the assessed valuation loss is $361,560. The ATA savings of base salary is approximately $265,000 and will cover the additional costs of healthcare and unemployment, the remaining $136,352 will be addressed through Branch Operation reserves. Any reductions in revenue for FY 2010/11 will result in further reductions in open hours at community libraries. Probation - No immediate personnel reductions are being recommended at this time in anticipation of sufficient new revenue to re-balance the FY 2009/10 operational budget. Since adopting the FY 2009/10 budget, the Probation Department has been the recipient of new grant revenue and anticipates the receipt of additional ARRA grant revenue. The Probation Department acknowledges that some of these new revenue sources are one-time or short-term, resulting in the potential for future impacts to operations. Additionally, pending labor negotiations with the Probation Peace Officers’ Association may ultimately result in compensation adjustments, furloughs, layoffs, or a combination of these, which will in turn help to offset current and future challenges. Public Defender - The Public Defender’s Office has managed its budget in anticipation of additional budget reductions and personnel reductions to the District Attorney’s Office scheduled for December, 2009. This has been accomplished primarily through attrition over the past six months. Current staffing levels are sufficient to balance the FY 2009/10 budget at the phase one adjusted level. To ensure that appropriate structural reductions are made, two funded positions will be eliminated; one Deputy Public Defender IV and one Clerk-Experienced Level vacancies will be cancelled. Additionally, pending labor negotiations with the Contra Costa County Defenders’ Association may ultimately result in compensation adjustments, furloughs, layoffs, or a combination of these, which will in turn help to offset current and future challenges. Public Works - Public Works has a zero general fund net County cost and receives no property tax revenue. No additional cuts are being imposed on them at this time. Their ATA savings of approximately $499,000 is more than adequate to cover the additional costs of healthcare and unemployment. Sheriff-Coroner - No immediate personnel reductions are being recommended at this time in anticipation of a favorable conclusion to labor negotiations with the Deputy Sheriffs’ Association similar to those of coalition bargaining units. Savings from Coalition and Unrepresented employee furlough days have mitigated a small portion of phase one shortfalls. The Office of the Sheriff continues to be impacted by significant exposure to the state of the local economy; primarily through reduced Proposition 172 sales tax revenue. Monthly sales tax revenue shortfalls continue, most recently at the level of 15-20% below the same month in the prior fiscal year. Superior Court Functions/Justice System Programs - Appropriations will be reduced by $203,966 in provisions for outside attorneys and witness fees related to capital case defense. While the number of homicide cases has been steadily increasing, fewer cases are being prosecuted as capital offenses. As such, the proposed reduction can be achieved without immediate operational impacts. However, criminal defense services are mandated to be provided by the County for indigent defendants and, should the reduced budget prove to be insufficient, mid-year adjustments will be necessary. Treasurer-Tax Collector - The Treasurer Tax Collector’s Office share of the property tax reduction is $21,034 and will address the reduction in several ways. The Treasurer-Tax Collector uses an outside contractor to work in conjunction with DOIT to operate the automated business system. The contractor is paid by the month regardless of the amount of work done that month. The Treasurer Tax Collector will shift some activities to the contractor, resulting in a savings of approximately $10,000. Micro-imaging services will be shifted to the General Services Department, which will save approximately $2,000. And finally, specialized printing be reduced by $9,034. Veterans Services - The Veterans Services Department will absorb all of their increased health and unemployment costs and the loss of property tax ($8,819) through a combination of the furlough and service and supply reductions. Special Districts Contra Costa County Fire Protection District - The Contra Costa County Fire Protection District’s projected property tax loss is $2,700,530. The District will have a small ATA savings as less than 10% of their workforce are unrepresented management, Local 1, or Local 2700 employees. In order to achieve the phase 1 budget reduction of $2,700,530, the District will freeze hiring for positions deemed non-essential, thereby reducing salaries and benefits by $2,700,530. The District’s June 30 total fund balances were $21.7 million. It should be noted that impacts to this District would have been $4.72 million more over the next two years had the United Professional Fire Fighters not agreed to defer their previously contracted wage increase. Crockett-Carquinez Fire Protection District - The Crockett-Carquinez Fire Protection District’s projected property tax loss is $2,557. The District will reduce other special departmental expenses by this amount and will have no noticeable impact on services provided. The District’s June 30 total fund balances were $463 thousand. East Contra Costa Fire Protection District - The East Contra Costa Fire Protection District’s (ECCFPD) projected property tax loss is $1,268,229. There are 3 non-represented battalion chiefs, an Acting Fire Chief, and 2 clerks who are participating in the ATA program. However, ECCFPD Local 1230 members are not. In addition, the three battalion chiefs are 24-hour personnel and their ATA furlough time must be covered by another battalion chief on over-time. Therefore, any savings from the ATA furlough program is negated. Due to the existing lean staffing and expenditures in the District, the $1,268,229 will be appropriated from existing fund balance. The District’s June 30 total fund balance were $6.1 million. CONCLUSION With these challenges met, the County Administrator is cautiously optimistic that additional reductions will not be necessary. Unless the State addresses its deficit, it is anticipated that reductions will not be required until spring 2010, when the FY 2010/2011 budget is addressed. Some of the challenges to be addressed in FY 2010/11 are beginning to look familiar: the looming State deficit; rising pension costs due to 2008 Market Losses; and, further reductions in property tax due to reduced assessed valuation and the loss of the Chevron Refinery appeal. CLERK'S ADDENDUM Rollie Katz, representing Public Employees Union Local 1 reminded the Board where budget cuts have been made thus far.