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HomeMy WebLinkAboutMINUTES - 02142006 - D.2 r ContraTO: BOARD OF SUPERVISORS - FROM: John Sweeten, County Administrator g`, 1i# � � Costa DATE: February 14, 2006A caiin County SUBJECT: FY 2006-07 Recommended Budget Development DDO SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMEN DATEONS: 1. DECLARE the Board's intent to adopt a FY 2006/07 General Fund budget that balances annual expenses and revenues, and that strengthens General Fund Reserves. 2. ACKNOWLEDGE that the primary factor affecting growth in baseline costs continues to be the increasing cost of compensation. 3. REAFFIRM the Board's commitment to addressing the structural cost drivers that cause compensation costs to grow faster than revenues. 4. DIRECT Department Heads to work closely with the County Administrator to achieve reduced net County costs while minimizing service delivery cuts. 5. DIRECT Departments, in cooperation with Labor Relations,to begin the meet and confer process with employee representatives regarding the impact of potential program reductions on the terms and conditions of employment for affected employees. 6. DIRECT the County Administrator to return to the Board April 18 with a FY 2006/07 Recommended Budget that meets the above requirements. 7. DESIGNATE Tuesday, April 18 for FY 2006/07 budget hearings (including Bielenson hearings if needed); and Tuesday, April 25 for adoption of the FY 2006/07 County and Special District Budgets. IFRSCAL RMPACT: None. However, the result of the recommendations herein, if implemented, will increase the County's General Fund Reserve and overall fiscal stability. CONTINUED ON ATTACHMENT: _YES SIGNATURE: - -RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDtkT N OF BOARD COMMITTEE APPROVE OTHER SIGNATURE(S): --------------------------------------------------------`-----------�-- ------------------------------------------------------------------------------------------------�- ACTION OF BOARD ON APPROVE AS RECOMMENDED OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN UNANIMOUS(ABSENT� ,1 ) AND ENTERED ON THE MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE AYES: NOES: SHOWN. ABSENT: ABSTAIN: ,- ATTESTED CONTACT: Lisa Driscoll(335-1023) JOHN SWEETEN,CLERK OF THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR CC: All County Departments BY �—{— r `�L' DEPUTY February 14,2006 Page 2 of 2 BACKGROUND: Over the last several years General Fund expenditures have exceeded revenues, necessitating the use of reserves to balance the budget. This reliance on reserves to balance the County's General Fund budget lead to a downgrade in the County's credit rating. On December 20, 2005, the Board of Supervisors adopted a General Fund Reserve Policy. The policy declared the Board's interest in improving the County's long-term financial stability and established goals for minimum unreserved General Fund and total General Fund balances. Additionally, the policy directed that reserves only be drawn below the minimum level if necessary to address an unforeseen emergency, to fund a non-recurring expense, or to fund a one-time capital cost. The Board acknowledged that the County's practice of using fund balances and other reserves to balance its budget over the last three years is not sustainable, and that the County would be better served by adopting a plan of action to reverse the trend. Adopting the General Fund Reserve Policy was the first step in that direction. The recommended actions today will direct the County Administrator to return April 18 with a Recommended Budget that balances expenses with revenues. In so doing, it will avoid reliance on year-end fund balance and other reserves. Combined with the substantive changes in compensation policy under discussion with employee representatives,this approach will minimize service reductions and provide the opportunity to begin rebuilding reserves. Recommended Budget Development Growth in general purpose and program revenues is not expected to be sufficient to fund the baseline cost of services in FY 2006/07. The primary factor affecting growth in baseline costs continues to be the increasing cost of compensation. The Board of Supervisors remains committed to addressing the structural cost drivers that cause compensation to grow faster than revenues. In addition to compensation cost growth,there are many other factors over which the County has no control that will affect the ultimate size of the County's budget challenge. Department Heads have been directed to work closely the County Administrator to achieve reduced net County costs while minimizing service delivery cuts. Wherever possible, categorical/program revenues will be increased to offset increased cost of doing business. However,reductions in net County cost needed to balance the budget may result in the loss of federal and State program revenues, and this added loss would cause additional program reductions. Meet and Confer Departmental budget requests are due to the County Administrator's Office on February 24. At that time Department Heads will know which, if any, positions may be affected by reductions necessary to meet their net County cost targets. Departments, in cooperation with Labor Relations, should begin the meet and confer process with employee representatives regarding the impact of potential program reductions on the terms and conditions of employment for affected employees. Early planning will allow Departments a reasonable period of time to meet and confer, and permit them to implement personnel actions prior to July 1, 2006. This will allow the County to achieve a full year of savings in the FY 2006/07 budget. Conclusion The County Administrator will return to the Board on April 18 with a FY 2006/07 Recommended Budget that meets the requirements listed above. Tuesday,April 18 will be reserved for FY 2006/07 budget hearings including Bielenson hearings if needed. Additionally, it is recommended that the County Administrator return to the Board of Supervisors on Tuesday, April 25 for adoption of the FY 2006/07 County and Special District Budgets, including any changes the Board makes on April 18. February 14, 2006 Page 2 of 2 BACKGROUND: Over the last several years General Fund expenditures have exceeded revenues, necessitating the use of reserves to balance the budget. This reliance on reserves to balance the County's General Fund budget lead to a downgrade in the County's credit rating.•On December 20, 2005,the Board of Supervisors adopted a General Fund Reserve Policy. The policy declared the Board's interest in improving the County's long-term financial stability and established goals for minimum unreserved General Fund and total General Fund balances. Additionally, the policy directed that reserves only be drawn below the minimum level if necessary to address an unforeseen emergency, to fund a non-recurring expense, or to fund a one-time capital cost. The Board acknowledged that the County's practice of using fund balances and other reserves to balance its budget over the last three years is not sustainable, and that the County would be better served by adopting a plan of action to reverse the trend. Adopting the General Fund Reserve Policy was the first step in that direction. The recommended actions today will direct the County Administrator to return April 18 with a Recommended Budget that balances expenses with revenues. In so doing, it will avoid reliance on year-end fund balance and other reserves. Combined with the substantive changes in compensation policy under discussion with employee representatives, this approach will minimize service reductions and provide the opportunity to begin rebuilding reserves. Recommended Budget Development Growth in general purpose and program revenues is not expected to be sufficient to fund the baseline cost of services in FY 2006/07. The primary factor affecting growth in baseline costs continues to be the increasing cost of compensation. The Board of Supervisors remains committed to addressing the structural cost drivers that cause compensation to grow faster than revenues. In addition to compensation cost growth,there are many other factors over which the County has no control that will affect the ultimate size of the County's budget challenge. Department Heads have been directed to work closely the County Administrator to achieve reduced net County costs while minimizing service delivery cuts. Wherever possible, categorical/program revenues will be increased to offset increased cost of doing business. However, reductions in net County cost needed to balance the budget may result in the loss of federal and State program revenues, and this added loss would cause additional program reductions. Meet and Confer Departmental budget requests are due to the County Administrator's Office on February 24. At that time Department Heads will know which, if any, positions may be affected by reductions necessary to meet their net County cost targets. Departments, in cooperation with Labor Relations, should begin the meet and confer process with employee representatives regarding the impact of potential program reductions on the terms and conditions of employment for affected employees. Early planning will allow Departments a reasonable period of time to meet and confer, and permit them to implement personnel actions prior to July 1, 2006. This will allow the County to achieve a full year of savings in the FY 2006/07 budget. Conclusion The County Administrator will return to the Board on April 18 with a FY 2006/07 Recommended Budget that meets the requirements listed above. Tuesday, April 18 will be reserved for FY 2006/07 budget hearings including Bielenson hearings if needed. Additionally, it is recommended that the County Administrator return to the Board of Supervisors on Tuesday,April 25 for adoption of the FY 2006/07 County and Special District Budgets, including any changes the Board makes on April 18. Addendum to Dot IFebiruuairy ll49 2006 On this day the Board considered adopting the County Administrator's recommendations regarding fiscal year 2006/07 Recommended Budget development; and designating Tuesday, April 18, 2006 for fiscal year 2006/2007 budget hearings (including Bielenson hearings, if needed), and Tuesday, April 25, 2006 for adoption of the fiscal year 2006/07 County and Special District Budgets. County Administrator John Sweeten made the presentation. He asked the Board to adopt all seven recommendations in the Board Order at the end of the discussion. He said he would be approaching the budget with three goals for 2006-2007: o To close the gap between annual expenses and annual revenues in 2006/07; o To strengthen reserves (referring also to Resolution No. 2005/792, recently adopted by the Board to establish a fiscal reserve policy); o To preserve, as much as possible, services to the public. Mr. Sweeten pointed out more than half the County's revenues come from Federal and State government, and noted that in some instances federal and state resources are beginning to curb their reimbursements for the added costs in instances where costs are going up. He noted it is important for the County employees to be appreciative of this. He further noted that a drop of just 1% of federal and state dollars could cost the County eleven and half million dollars in added County costs. He further noted the County's expenses have grown faster than revenues in the last four years. He said that this trend has caused concern among private agencies that look at the operations of County government and has affected our credit rating. He said the County relies on its credit rating to borrow funds annually on a short-term basis to cover the period between the collections of property taxes. Mr. Sweeten noted that the recommendations in the Board Order propose to balance the budget in 2006/07 rather than over several years because no matter what the County does, we can expect another downgrade because the rating agencies will see the actuals that continue the current picture; downgrades, he said, mean the County will have to rely on reserves, and that trend of relying on reserves will be seen by the reporting agencies. He said the recommendations propose to balance the budget in one year because we can't afford another downgrade after that. Chair Gioia asked Mr. Sweeten to point out that in 2005-06 if the County continues to spend the reserve at the current level in terms of closing that budget gap then the County would be down to zero in about two years approximately. He said aside from the credit rating issue and if the County continues the status quo of how the expenditures occur the County would be down to that level in a couple of years. Mr. Sweeten said he would like to remind the Board that all seven recommendations in the Board Order are important but wished to highlight four major ones. He pointed out that he convened a budget cabinet comprising of, in addition to himself, John Cullen, Incoming County February 14, 2006 Agenda Item D.2 Page 2 of 4 Administrator; William Pollacek, Treasurer-Tax-Collector; Steve Ybarra, Auditor-Controller; Patrick Godley, Chief Financial Officer Health Services Department; Sheriff-Coroner, Warren Rupf; and Dennis Barry, Director of the Community Development Department, all of whom are experts in budgeting. He noted unanimous conclusion of this budget cabinet recommending the Board balance the budget in 2006-07, not over a two or three year period. Recapping his recommendations, Mr. Sweeten said he recommends directing department heads to work closely with the County Administrator's office to achieve targeted net County cost savings while minimizing service reductions. Mr. Sweeten recommended that the Board direct the County Administrator to return on April 18, 2006 with a recommended 2006-07 budget and designate April 18, 2006 for the 2006-07 budget hearings, including Bielenson hearings that may be required, and further designate April 25, 2006 for adoption of the 2006-07 County and Special District Budgets. Mr. Sweeten noted if the proposed recommendations are implemented there would be a slight increase in the Reserves, assuming the Board implements its recently adopted reserve policy. Chair Gioia asked, assuming there will be one further downgrade, if this budget would prevent any further downgrades. Lisa Driscoll, Senior Deputy County Administrator responded that was a possibility. Mr. Sweeten said he believes very strongly this is what the County needs to do in order to position itself to be able to move forward in future years and climb out of the present situation. Mr. Sweeten said Departmental budget are due on February 24, 2006, and at the time those are submitted the Departmental Heads will know which positions within their Department, if any, are at risk and should begin to schedule "meet and confer" sessions with Employee representatives regarding the impact of anticipated reductions on terms and conditions of employment for affected employees. He said those meetings should commence very quickly and not wait until the Board's final budget determination to make it possible for changes to take effect prior to July 1, 2006,allowing the County to achieve a full year of financial reporting at that level. In regards to a potential downgrade that may come after the one now already foreseen, Supervisor Piepho asked Mr. Sweeten to clarify what it means to the County in dollars and cents. Mr. Sweeten said the downgrade would increase the cost of bond insurance significantly. Ms. Driscoll said that additionally, the rate of borrowing will be much higher, which may make the County uninsurable. She said the real issue is not the cost of insurance but the cost of the borrowing. Supervisor Piepho asked Ms. Driscoll if there were a way to quantity what interest the County would pay under that category. Ms. Driscoll said she could come back with that figure. February 14, 2006 Agenda Item D.2 Page 3 of 4 Supervisor Piepho responded that it was important to get that figure. She noted in her meetings with Labor there have been some comments about trends improving particularly the stock market and asked if this directly impacts the annual budget. Chair Gioia responding, saying it is fair to say over time it could affect the employer contribution rate but the stock market alone would not close the structural gap. Supervisor Glover requested Mr. Sweeten get this information out to the County employees, saying employees need to understand this and personally needed to see the decline and the impact of the decline and rating. He also requested changing the dates for the adoption of the budget as he would be away from April 18 to April 26, 2006. Chair Gioia said that cuts will come in Management and rank and file and said it is important to note that even if every single Management position were cut the structural gap would not close. He noted the cuts will be in a way that provides the least impact on the way we provide services, which could be a combination of management and rank and file. The Chair asked for public comment on this item. The following people provided testimony: o Rollie Katz, Public Employees Union Local 1, requesting the Board look at how much general fund money they have and at how much of that needs to be spent on mandated services in order to then prioritize based on what is left. He urged the Board to make their priorities based on policy decisions and to inform Labor as to what gets cut; o Dajenya Kafele, Richmond resident, encouraged the Board to find a way to raise revenues to make sure that needs is met. She also said the Board needs to demand from the legislature that money be justly brought to the County instead of wasted thousands of miles away on war. Supervisor DeSaulnier responded to say for the record: "Some of us are doing that." o Roberta Kayser-Stange, Pacheco resident, reminded the Board that there are people behind these cuts; o Chuck Egbert, suggested dealing with the real issues—County revenues have been cut and the County needs to deal with that by going to the community and saying—if you want theses services you have got to pay the taxes; o Kris Hunt, Taxpayers Association said she was pleased with what she heard today and that the Board is —dealing with realities. Because there was a conflict with Supervisor Glover's schedule Chair Gioia suggested changing the date of adoption to May 2, 2006. By a unanimous vote with none absent the Board of Supervisors took the following action: February 14, 2006 Agenda Item D.2 Page 4 of 4 ADOPTED the recommendations of the County Administrator regarding fiscal year 2006/07 budget development; DESIGNATED, April 18, 2006 for fiscal year 2006/07 Budget Hearings,to include Bielenson hearings if necessary, and DESIGNATED May 2, 2006 for adoption of the fiscal year 2006/07 County and Special District Budgets. REQUEST TO SPEAK FORM � o (THREE (3) MINUTE LIMIT) Complete this form and place it in the box near the speakers' rostrum be fore addressing the Board. Name: �?AeAa,` e - r� � Phone: � o.o /,7 m \ J r Address: 2,7 r"a City: AO-hero am speaking for myself V e, gorganization: lim p ixzY ' CHECK ONE: wish to speak on Agenda Item # Date: My comments will be: ❑ General ❑ For ❑ Against ❑ I wish to speak on the subject of: ❑ I do not wish to speak but would like to leave these comments for the Board to conside.r: Please see reverse for instructions and important information REQUEST TO SPEAK FORM (THREE (3) MINUTE LIMIT) Complete this form and place it .n the box near the speakers' rostrum before addressing the Board. Name: g�Az r,,v C / Phone: Address: �' l%6� City: Please note that if you choose to provide your address and phone number, this information will become a public record kept on file with the Clerk of the Board along with the minutesforthis meeting 1 am speaking for myself or organization: CHECK ONE: wish to speak on Agenda Item #t �� x— Date: My comments will be: ❑ General ❑ For ❑ Against ❑ I wish to speak on the subject of: ❑ I do not wish to speak but would like to leave these comments for the Board to consider: Please see reverse for instructions and important information REQUEST TO SPEAK FORM (THREE (3) MINUTE LIMIT) Complete this form and place it in the box near the speakers' rostrum before addressing the Board. Name: Phone: Address: City: Please note that if you choose to provide your address and phone number, this information will become a public record kept on file with the Clerk of the Board along with the minutes for this meeting I am speaking for myself or organization: CHECK ONE: I wish to speak on Agenda Item # Date: M o ments will be: ❑ General ❑ For ❑ Against �V❑ 1 wish to speak on the subject of: 7 I d not wish to speak but would like to leave these comments for the Board toop nsider: ('Aorklic, b�� M Am,6v)/-A �—A ` 1 S �: Please see reverse F4 instructions a�4 important information REQUEST TO SPEAK FORM ,p6 etq � Kc3eJ (THREE2 (3) MINUTE LIMIT) Complete this form and place it in the box near the speakers' rostrum before addressing the Board. P Name: .::DO. Phone: Address: 722 9e- �q City: 9 (a VL ',� CJ Please note that if you choose to provide your address and phone number, this information will become a public record kept on file with the Clerk of the Board along with the minutes for this meeting am speaking for myself�or organization: CHECK ONE: wish to speak on Agenda Item # Date: My comments will be: L I General ❑ For ❑ Against ❑ I wish to speak on the subject of: � - V ❑ I do not wish to speak but would like to leave these comments for the Board to consider: Please see reverse for instructions and important information REQUEST O SPEAK FORM �t (THREE (3) MINUTE LIMIT) Complete this form and place it in the box near the speakers' rostrum before addressing the Board. Name: `TI fT f!/-� � Z Phone: Z Z `Ik) Address: i � ��''" City: RA( -f XeZ I am speaking for myself or organization: f V LO(4 �l CHECK ONE: I wish to speak on Agenda Item # '� Z Date: My comments will be: KI General ❑ For ❑ Against ❑ I wish to speak on the subject of: ❑ I do not wish to speak but would like to leave these comments for the Board to consider: Please see reverse for instructions and important information REQUEST TO SPEAK FORM a P (THREE (3) MINUTE LIMIT) Z-1 Complete this form and place it in the box near the speakers' rostrum before addressing the Board. Name: /<R 1 S N Phone: 9:7,s-- �z a ti=-,t`�i© Address: l'J C es-c of3,gR s.: City: z- Please note that if you choose to provide your address and phone number, this information will become a public record kept on file with the Clerk of the Board along with the minutes for this meeting am speaking for myself or organization: con17-a.y4 cosTra 196�s-cc CHECK ONE: wish to speak on Agenda Item # - Z Date: My comments will be: ❑ General ❑ For ❑ Against ❑ I wish to speak on the subject of: ❑ I do not wish to speak but would like to leave these comments for the Board to consider: Please see reverse for instructions and important information m � a0o0 7,006107 Gooffik DY a o Classe, the gap between =ual expenses enses Oct reveMe0 m FY 2006/07 El Begm to stongffien r000rv00 o presef ve 0000 ReveRs 0 OC�00���OC�OC�O�Oo 0 0 t0 b a a 00 Mud o am0s omd revmues, and smagffien Geamd Fmd res o o s, the FY 2006/07 Geaud, Fund °U* 0 IDRMCT. dcpu=afmt heads to voA doh W�ffi the Cho t7 Ad6lmastmtor to i(cMeve to tod oat Cho y (cost slvmgs w h ° o 1 �1 1i ��C�Oo�oC�o,C�o��Oo 0 0 a MM= the (County A a o 0 =mtof to fe= to the o oud A o A 10 v/ h a FY 2006/07 Recommended Mudgct that moots the above 0 foc0000 � a 1, 1� D 039MGM&T3 Tuesdi��9 A o °R 10, for FY 2006/0`77 budgethe,° s� cmrRUdkg .3i9kxTox haw&ags ff imea& - and TuesdzyI9 Ap °1 25, for adoption (of Vic, FY 2006/077 Camtyi and S o a W D =Ct a o10 11 LZ ,1 I ix c ssets CA e � �r .....F Ali Sala!' ie 8 §c B ne f ISS A9 � fly illIII 11 � G'k' �: Y �v u�llll y '� ' ;�$£ i b Servi ten SLIpplieS +i j. ;i 1' f 1'. �I it it t1 I i' All Other Propetty Taxes 4 18%r� Ir= r �; S €4, g 1 a ,m fn .. ........ 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