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HomeMy WebLinkAboutMINUTES - 05101994 - 2.1 TO: BOARD OF SUPERVISORS 5........ _ Contra ; .. FROM: Z., Costa Phil Batchelor, County Administrator County DATE: May 10, 1994 e6u.. SUBJECT: THIRD QUARTER BUDGET REPORT SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATION: 1. Accept this report and direct the County Administrator to continue to monitor the budget and implement corrective plans, where necessary. BACKGROUND: Since 1984, the County Administrator's Office has prepared quarterly reports which analyze the status of the budget and highlight the budget units which deviate from the budget plan in terms of revenues and expenditures. Actions which are necessary to ensure a healthy budget by the end of the year are recommended as part of the quarterly reporting process. Other items which have major fiscal impacts are also reviewed as part of this quarterly report process. General County Revenue General County revenues have been significantly reduced by the state raid of property taxes over the last two fiscal years. In fiscal year 1991-92, the County received $246 million in General County revenue while this fiscal year a total of $170 million is budgeted. CONTINUED ON ATTACHMENT: YES SIGNATURE: J07%-'' l RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURE (S): ACTION OF BOARD ON O /9 APPROVED AS RECOMMENDED OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE UNANIMOUS(ABSENT ) AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. ATTESTED 0 1 Contact: Tony. Hnea, 6-4094 PHIL BATCH OR.CLERK OF THE BOARD OF CC. Sheriff SUPERVISORS AND COUNTY ADMINISTRATOR Health Services Social Services Auditor-Controller BY DEPUTY County Administrator i Page 2 At the three quarter point it appears that General County revenues will slightly exceed the budget target. Property tax revenues should be slightly above budgeted levels, after adjusting for city redevelopment agency and no and low city revenue losses, state mandated transfers to school districts and anticipated adjustments for property assessment appeals. Conversely, as reported in February, interest earnings should be below the budgeted level because of the record low yields on required investments over most of the fiscal year. A review of other revenue sources indicate a mixed performance. Vehicle registration and property transfer tax revenues are projected to be on budget, sales tax and transient occupancy tax revenues are estimated to be below budget and business license and cable television franchise fees will be above budget. A recent proposal by the Governor would cost the County $6.1 million in property tax revenue this fiscal year and push the County budget in a serious deficit position. Several weeks ago, Governor Wilson proposed that counties make up $300 million in property tax revenues owed by the state to the schools. The problem arose from the state assuming that redevelopment agencies would contribute to the $2.6 billion property tax shift to the schools, which was later refuted by a legal opinion. Currently, the legislative leadership is reviewing the Governor's proposal. Health Services Department Currently, the Health Services' budget is projected to be balanced by year-end. Both the Mental Health state hospital diversion and the $11 million revenue goals appear achievable. Of the $11 million revenue goal, $8 million is confirmed from a number of sources, including prior year Medicare cost settlements, realignment, SLIAG (state legalization and immigration assistance grant), and Title XIX Rehab Option for Mental Health. The outstanding $3 million is budgeted in the SB 910 and SB 1255 programs. SB 910 is budgeted at $2 million. Claims have been submitted to the state and a revised state contract has been received; cash payment is anticipated by year-end. For SB 1255, the California Medi-Cal Assistance Commission formally called for another round of voluntary intergovernmental transfers as provided for under regulation. The department has made the required transfer and will receive at least the $1 million budgeted. Social Service Department Overall the Social Service department is within budget targets for third quarter fiscal year 1993-94. Deficits in Budget Unit 0500 (Administration) are offset by surpluses in BU0515 (Aid) and BU0532 (General Assistance). The projected deficit in Budget Unit 0500, Administration, is due to two factors: chronic underfunding by the state of entitlement programs and increased staffing for Personal Care Services Programs (PCSP). The County Services Block Grant (CSBG) allocation from the state which funds adult protective services and the residual In-Home Supportive Services (IHSS) program accounts for nearly one-half of the deficit. CSBG has not received a cost of living increase from the state in the past nine years. Additional net county costs for administration of PCSP are offset by net county cost savings in categorical aid due to shifting of costs to the federal government. Fund balances in Budget Unit 0532 (General Assistance) have been allocated by the Board to fund the General Assistance automation program. Phase One of automation will automate business functionality processes in work programs, GAADDS, SSI advocacy and the GA hearing process. Phase Two will automate General Assistance intake and field operations. Phase One of the project is expected to be completed in fall 1994 and Phase Two in spring 1995. GA automation is expected to improve accuracy in applying program requirements, reduce payments to ineligible clients and eliminate time consuming manual tasks currently performed by staff. bo3rdgtr.594 disk#1 Page 3 Sheriff-Coroner The Sheriff-Coroner Agency is within acceptable expenditure levels for the third quarter of fiscal year 1993-94. In Budget Unit 0255 (Patrol and Operations) gross expenditures were approximately 75% and Detention's (BU0300) gross expenditures were 70%. The Coroner Division (BU0359) experienced 82% gross expenditures for the reporting period and 95% revenue generation. Expenditures for the Agency are expected to be well within budget. Actual revenues received for the third quarter of fiscal year 1993-94 were $18,075,777 in Budget Unit 0255 and $9,622,165 in Budget Unit 0300, 61% and 56% of budget respectfully. Sales-Tax Public Protection revenues was budgeted in the Sheriff-Coroner Agency in the amount of $31,555,072 ($17,670,840 in BU0255 and $13,884,232 in BU0300). The Sheriff-Coroner's share of the first nine months of sales tax was $17,697,186 or 56% of budget. It is estimated that these revenues will not meet the budgeted level (please see write-up of Public Safety Sales Tax). Contract City revenues, which historically lag, generate 26% of the Sheriffs $29,866,505 budgeted for department BU0255. These budgeted revenues, which are currently at 67%, are expected to be met by year-end. Care of Prisoner revenue rates were unilaterally lowered by the state after the budget was adopted, from $94 and $74 per day to a flat $59 per day. These revenues, budgeted at $1,702,945, are currently at 46% ($780,674) collection and are not likely to meet the budgeted level. The department has done a good job in controlling expenditures, but under realization in revenue particularly due to the state's failure to make up the loss of the property tax revenue previously allocated to Sheriff patrol services (Special Police District P6), will result in an overall departmental deficit. Public Safely Sales Tax Revenue A total of $38.2 million of sales tax revenue has been budgeted for public safety purposes as a result of the state's action to extend the one-half cent sales tax for six months and the voter's passage of Proposition 172. The State Department of Finance established the estimate of 1993-94 revenue for the state at $1.4 billion, with the County's share of revenue at 2.8% of the .total - which represents the percentage of sales tax revenue for the County and cities within the County, relative to all cities and counties in the state. Six months through the fiscal year, the state's revised estimate of County revenue is $37.1 million or $1.1 million less than the original estimate. It appears the revised estimate will be very close to the mark as revenues through March are projected at a $1 million shortfall. Staff has been working on options to resolve this problem and will keep the Board apprised of the situation. State Budget We reported on the broad outlines of the state budget in February. Since then, there appears to be general agreement from the Department of Finance and the Legislative Analyst that the state's deficit is approximately $5 billion. The state's "May Revise" budget report later this month will probably adjust this deficit figure. The Administration's plan for eliminating the deficit and the status of each plan component is presented below. • Recovery of immigration costs from the Federal Government. (The President has agreed to request some $300 million nationally for corrections costs of illegal immigrants. No evidence that the Federal Administration will even request more than that). bo-3rdgtr.594 disk#1 Page 4 • Increase in the Federal sharing ratio for welfare and health programs. (No evidence that the Congress will go along with this request). • Winning the Barclay's unitary tax lawsuit. (Unclear when the decision will come down. Range is from a savings of $600 million to a loss of $4 billion if the state loses). • Various savings from welfare program cuts, etc. (The Legislature has no intention of granting most of these reductions. Various budget subcommittees have already voted to oppose several of these proposals. The Budget assumed it would be enacted by April 1, 1994 and in effect by July 1, 1994. AFDC grant cuts would require a federal waiver). There appears to be an increasing inclination to postpone the deficit until January so a new Legislature and possibly a new Governor will have to deal with the problem in mid- year. This can be done by continuing to make optimistic revenue estimates until the Congress actually enacts the federal budget. Realignment II A component of the Governor's Budget proposes a major restructuring of the state-local fiscal relationship, including transfer of a portion of the state sales tax to counties along with a shift of $1.1 billion in property taxes back to counties. This transfer would be accompanied by an increased county share of cost for AFDC and Medi-Cal and full financial responsibility for certain other social services programs. The Governor's Budget sets forth five objectives it seeks to achieve in the proposed restructuring or expansion of the existing Realignment Program: • Fiscal Neutrality • Promotion of Economic Development • Promotion of Local Control and Responsibility • Establishment of Fiscal Incentives for Performance • Reduction of Bureaucracy and Administrative Oversight The Realignment Program provides some promising opportunities, but some serious concerns must be resolved, such as those presented below. • Fiscal neutrality assumes the state will be successful in increasing the federal sharing ratio for the welfare reforms included in the state budget. To the extent that the federal government does not agree to assume a higher cost share, fiscal neutrality becomes an additional cost shift to the counties. • Sales tax revenues are earmarked to pay for County increases in AFDC sharing ratios. However, sales tax revenue is relatively volatile, and decreases during a recession when welfare costs increase - thereby leaving the counties at risk to finance the shortfall. • State estimates of sales tax revenues have been generally optimistic, and have required that the County reduce programs to balance budgets, such as the case of the first Realignment Program in 1991. A more recent example of optimistic sales tax revenue estimates is Proposition 172 revenues, where the County must now absorb a $1 million shortfall this fiscal year. Finally, the state has recently estimated a $3.2 million increase in Proposition 172 revenues for the County in 1994-95, which represents a 9% increase. This latest estimate is highly optimistic, and given the current California economy, a 0%to 2% increase is more probable. bo3rdgtr.594 disk#1