HomeMy WebLinkAboutMINUTES - 05241994 - 2.2 +'r6y BOARD-OF SUPERVISORS E-.5---.L•
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Costa
FROM:
Phil Batchelor, County Administrator �� . ': :
County
DATE: May 24, 1994
sueJEcr: 1994-1995 BUDGET PROBLEM AND PROCESS
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS:
1. Acknowledge that the State of California has cut $99,426,000 in property tax and
other revenues from the County over the past two fiscal years. As a direct result
of this action the Board of Supervisors has eliminated 753 full-time positions over
this two year period.
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2. Acknowledge that there has been little inclination to date from the Governor and
state legislators to address the serious state budget deficit and that informed
opinion holds that state lawmakers will not resolve the budget issue until after the
November election.
3. Accept this report on the 1994-95 local budget problem and order each County
Department Head to prepare a 10% budget reduction plan, which the Board will
implement to the extent required to reduce appropriations and balance the budget.
The plans will be calculated from the net County cost in the 1994-95 Proposed
Budget and will be submitted to the County Administrator by June 14, 1994.
4. Direct the County Administrator and each Department Head to prepare preliminary
plans to address additional budget shortfalls, in the .event that the state shifts
costs to, or reduces revenues from the County in order to balance the state
budget deficit.
5. Establish June 14, 1994 as the date for adoption of the Proposed Budget for fiscal
year 1994-95, and direct the Clerk of the Board to prepare appropriate notification.
CONTINUED ON ATTACHMENT: YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON May Z4, 1994 APPROVED AS RECOMMENDED X OTHER X
The Board APPROVED the recommendations . of the County Administrator as set
forth above; . REQUES,TED the Finance Committee 'to recommend procedures for
notifying and soliciting input from interested parties and to develop a
policy matrix for -making the reductions .
VOTE OF SUPERVISORS
X _ - 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 May 24, 1994
Contact: Tony Enea, 646-4094 PHIL BATCHELOR,CLERK OF THE BOARD OF
CC: Department Heads SUPERVISORS AND COUNTY ADMINISTRATOR
BY (� Y. DEPUTY
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6. Establish July 13, 14 and 15 as hearing dates for the Budget Committee, July 20-
21 for the Public Hearing, and direct the Clerk to prepare appropriate notification.
7. Direct the County Administrator's Office to keep the Board advised of any actions
which are taken by the State Legislature or Governor's Office to balance the state
budget.
8. Acknowledge the importance of meeting with the Retirement Board on May 31 to
discuss employee retirement rates and retiree benefits in 1994-95.
BACKGROUND:
The staffs from the Administrator's Office and the departments have been preparing and
refining 1994-95 budget figures since early January, 1994. At this date, the components
of the local problem are presented and quantified in this report. The local problem as
identified will require up to a 10% reduction in net County cost from the 1994-95
Proposed Budget level.
The itemization below underestimates the magnitude of the local problem since
departments additionally will be asked to absorb most of the costs for employee salary
and benefit adjustments and revenue shortfalls. Therefore, to resolve the local problem,
it will be necessary for most departments to prepare a reduction plan in excess of 10%
to balance their budgets.
The local problem and recommended budget reduction is separate and apart from what
problem the state may shift to the County. Therefore, it is important for the Board of
Supervisors to act in July to eliminate the known problem with the County budget since
the state may magnify the budget problem in the near future. If the Board acts in July
to reduce expenditures, nearly a full fiscal year's savings can be realized. Ultimately,
a swift reduction will mean saving more jobs and preserving service levels to the public.
The local problem consists of two components. One component involves problems
carried forward from this budget year in the form of non-recurring revenues or one-time
appropriation decreases. The second component consists of normal increases in costs
due to inflation, contractual obligations and costs otherwise not controllable by the
County. What follows is a breakdown of how the local problem is estimated in terms of
net County cost to the General Fund.
ITEM AMOUNT
Non-Recurring Revenue $5,259,000
This category consists of revenues available in 1993-94 which will not be available in
1994-95. The County utilized $3,759,000 in funds from the equipment replacement and
Realignment transition reserve. Another $1.2 million in state transportation revenues
provided to partially mitigate the $58.9 million property tax shift will not be provided to
local governments next fiscal year. Also, the Redevelopment Agency paid off a
$300,000 loan to the General Fund.
General County Revenue <$1,865,000>
General County revenue is estimated to increase a meager 1.1% in 1994-95. The
largest revenue source is property taxes, which is estimated to increase only 1.5% due
to a very small increase in assessed valuation and transfers to redevelopment agencies
and "no and low" property tax cities. Growth in interest earnings, vehicle registration,
sales tax revenues, and most other significant revenue sources are estimated to range
from 0% to 2%.
Fund Balance $3,700,000
The amount of General Fund monies not expended or obligated this fiscal year and
available next fiscal year will probably decline by $3.7 million, owing to the effects of
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budget reductions this fiscal year. The margin between appropriation limits and actual
expenditures has been narrowing over the nine month period this fiscal year compared
to last fiscal year.
Liability Insurance $500,000
The County's self insurance fund for liability claims handling requires financing in 1994-
95 at a level that is in accordance with the recommendation of the actuary's audits.
Retiree Health Benefits $650,000
The cost to continue health plan benefits to retirees is estimated to increase about 9%
over this year's estimated cost. Most of this increase is due to the rise in health
premium costs with the remainder due to an increase in the number of retirees.
Designation for Audit Exceptions $450,000
.This year, $454,000 will be paid to the state for audits of the Social Services Department
dating back to 1982-1985, leaving $597,000 available to cover pending audits in Social
Services, Health Services and Community Services. Given the aggressiveness of recent
state and federal auditors, this designation needs to be restored to the 1993-94 level of
$1,051,000.
Retirement Plan Rates $4,234,000
Last year, the Retirement Board transferred monies from its undistributed earnings and
contingency reserve to reduce retirement rates for employers and employees in 1993-94.
The Retirement Board action reduced the budgeted retirement costs for County
Departments by $14.3 million and Fire Districts by $2.4 million. The impact on the
General Fund translated to $10.4 million when adjusted for federal, state and other
revenue sources which finance retirement costs. The salary and benefit forecast for
1994-95 assumes the County will receive a minimum of$4.2 million in transfers from the
Retirement Board. The Retirement Board has not indicated what the amount of subsidy
will be for next fiscal year.
Sales Tax for Public Safety $1,000,000
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 voters' passage of Proposition 172. Six months through the fiscal year,
the State Department of Finance revised the estimate of County revenue to $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 April are projected at a $1 million shortfall.
This $1,000,000 reduction represents a significant reduction of a permanent revenue
source dedicated for public safety activities in the Sheriffs Department and the District
Attorney's Office.
Contractual Obligations/Department Revenues $4,000,000 - 7,000,000
The description of the budget problem above underestimates the budget shortfall since
departments will be asked to absorb employee salary and benefit adjustments and one-
time revenue received in 1993-94. This $4 to $7 million figure represents an estimate
of the cost for salary and benefit adjustments and revenue shortfalls which departments
will not be able to absorb within their budget. A precise figure will be known after final
review of the current year budget experience, further review of the 1994-95 department
budget requests and the 10% budget reduction plan.
Contractual obligations include the cost of living adjustments granted employees in 1994-
95, anticipated merit and step increases, pay equity adjustments and associated benefit
increases for social security and medicare, retirement plans and worker's compensation.
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Three departments have relied upon significant amounts of one-time revenues this
budget year. These departments are Health Services, which must make-up $4.6 million
in revenues, Social Services at $2.6 million and the Sheriff at $1.9 million. Under the
10% reduction plan, these departments would be asked to absorb or make-up these
revenue shortfalls.
POTENTIAL BUDGET PROBLEMS FROM THE STATE
In addition to the local budget problem described above, the County potentially faces
a much greater problem from cost shifts and revenue reductions from the state. As
noted in the May 10 budget report, it appears that resolution of the state budget deficit
will be postponed until January. However, we will identify any cost shifts or revenue
reductions caused by the 1994-95 state budget and address them at the July budget
hearings.
What follows are just two potential budget problems which could be transferred to the
County.
Additional Property Tax Shift $0 - 12,400,000
As reported on May 10, the Governor's proposal to make-up a $300 million statewide
shortfall in property tax revenue owed to the Schools would cost Contra Costa County
$6.2 million this fiscal year. If the state imposes the shift this year, it will cost the County
$6.2 million in 1993-94 and $6.2 million in 1994-95.
Realignment II $0 - 39,800,000
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 increase in the county share of cost for Aid to Families with
Dependent Children, Medi-Cal, and full financial responsibility for certain other social
services programs.
A preliminary costing of the restructuring plan is presented below.
CHANGES IN COST
DEPARTMENT LOCAL SHARE (MILLIONS)
Social Services
AFDC Grants 5% to 50% $24.7
Social Services Administration 30% to 50% 6.2
In-Home Supportive Services 35% to 100% 9.7
Foster Care 60% to 100% 7.8
Serious Emotionally Disturbed Children 60% to 100% 1.0
$49.4
Health Services
Medi-Cal 0 to 11.5% 6.7
Justice
Trial Court Funding 60% to 35% -16.3
TOTAL $39.8
While the Governor's plan is presented as revenue neutral, the County would need an
additional $56.1 million in revenue to finance the cost shifts proposed for programs within
the Social Services and Health Departments.
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