Report on the 2009-10 County Budget

January 27, 2009

Introduction

Thanks to the Auditor Controller Report :

– significant economic problems facing the County over the next several years

– Continuing State problems Big Questions:

– How long? – How deep?

Projected County Deficit

• The report identifies a 2009-10 projected deficit of $25 million or 21% of county costs; and

The report examines options to address the deficit

Why a $25 million deficit

Reduced revenues resulting from the collapse of the real estate market causing:– Reduced property taxes,– Reduced deed transfer taxes, and – Significantly reduced building and planning

revenues.

Why a $25 million deficit

Reduced interest earnings One time funds financing the 2008-09 budget Decreases in Proposition 172 revenue Decreases in sales tax Reduced salary savings, and Increased costs

Breakdown of the $25 million deficit

Decreased Fund Balance: $12.3 million Decreased general purpose revenue and

Proposition 172 revenue $6.6 million Increased costs for salaries and benefits:

$6.3 million, and The deficit could worsen

The State’s Problems

The State budget is in crisis The State will have a significant cash crisis in

March 2009 Registered warrants? Deferred payments to the County

Deferred State Payments

Gas tax and Proposition 42 Funds in DPW Medi-Cal payments in Health Services

Agency Social Services payment in Human Services

Department State mandate payments to local

governments

Deferred State Payments

The County is ill equipped to serve as the bank for the State of California

Net County Cost

2008-09 Net County Cost by Area of Government

General Government $ 19,335,152 16.0% Public Protection 60,028,300 49.6% Health 15,439,716 12.8% Public Assistance 13,522,188 11.2% Recreation and Culture 4,081,178 3.4% Debt Service 4,592,248 3.8% Contingency 3,699,563 3.1% All Other 298,608 0.2% Total $ 120,996,953 100.0% 

Public Assistance

Public Ways / Facilities

General Government

Health / Sanitation

Debt ServiceEducation

Recreation / Cultural SrvcsReserves

Public Protection

2008-09 Net County Cost

County Obligations

State Mandates– The property tax system– Health and welfare programs– Criminal justice including

prosecution and defense– Detention– Agricultural inspection and weights

and measures

Unincorporated Area Services

Police protection Parks Land use planning Animal control 911 Library services Redevelopment

% of Population Living in Unincorporated Area

Santa Clara County: 6% Monterey County: 25% California 20% Santa Cruz County: 51%

Special Challenges

The majority of the County’s population lives in the unincorporated area

State mandates have first call on the General Fund Dollar

Property Tax Apportionment

Amount of Property Tax Dollars going to County General Funds varies greatly.

Rates established in Proposition 13 and Assembly Bill 8

State average of counties similar to Santa Cruz is 20%.

Santa Cruz receives 13%.

Property Tax Apportionment

County

Percent ofAssess Value in Unincorporated

Areas

Percent of Property Tax to

County General Fund

Humboldt 60% 20%

Monterey 48% 16%

Napa 47% 20%

Santa Cruz 58% 13%

Property Tax Apportionment

If the Santa Cruz County General Fund were to receive 20% of all property taxes, which is the average of similar Counties, the County’s current secured property tax revenues for FY 2007-08 would have been $66.6 million, instead of the $43.4 million actually received, a difference of $23.2 million. These funds are instead apportioned to our local special districts, the redevelopment agency and the schools, which lessens the State’s burden to support our schools.

Property Tax Apportionment

Deficit Reduction

A multi year plan: 2-4 years or longer 2009-10 is the first step CalPERS losses: 5% rate increases

projected for 2011-12. Cost: $9 million

Deficit Reduction Options

Revenues– County wide voter approved measures

General taxes: majority vote, Special purpose taxes: 2/3 vote

– Departmental revenues– Fees and charges

Deficit Reduction Options

Expenditures– Increasing fund balances by reducing current

costs– Elimination of staffing and services– Furloughs… closing county offices– Combinations

Current Year Savings

Hiring controls Defer general fund road expenditures Curtail travel Curtail overtime Union concessions

President Barack Obama

It is … “the selflessness of workers who

would rather cut their hours than see a friend lose their job which sees us through our darkest hours. ”

More Options

Meet with the Unions to discuss:– Expanding the use of voluntary time off– Freezing step increases– Deferring cost of living adjustments– Reducing county contributions for health care– Temporary layoffs

More Options

Reducing costs by closing the Aptos Permit Center

Evaluating departmental restructuring options for consideration

Expanding economic development Expanding the Use of Redevelopment

Projected Impacts

Major program reductions in all areas Estimated loss of 400 jobs Potential closures and furloughs in services

Potential Furlough Savings

2008-09

-- Temporary Layoff of 40 hours for all units $2,400,000  

2009-10 

-- Temporary Layoff of 160 hours for all units 9,600,000-- Freeze Step Increases for all units 900,000 -- Defer COLA and Health Plan increases for all units 3,600,000

 Total Net County Cost Savings $16,500,000

Concluding Observations

It can get worse The State budget problems are NOT yet

known The recession will be with us for some time We must and we will balance the budget The county staff is the best there is and they

will creatively and effectively address these enormous challenges

Recommended Actions

Continue hiring controls Defer the General Fund contribution to the

Road Fund in the amount of $1,400,000 Curtail all but essential travel Eliminate all but essential overtime

expenditures

Recommended Actions

Meet with affected bargaining units regarding a modification to the existing AVTO program to provide for additional voluntary reductions in the current fiscal year

Recommended Actions

Meet with affected bargaining units to discuss – freezing step increases– deferring cost of living adjustments and health

plan improvements – implementing temporary layoffs through the use

of unpaid time off during the 2008-09 fiscal year and beyond

Recommended Actions

Provide a 180 day notice to end the lease for the Aptos Permit Center

Monitor events in Sacramento and report back with recommendations when the State has acted

Recommended Actions

Work with County Departments on the cash flow problems associated with the State’s deferral of County reimbursements

Recommended Actions

Work with County Departments on their 2009-10 budget and the reductions in programs and services required to balance the expenditures and available financing in the 2009-10 General Fund Budget. 

Report on the 2009-10 County Budget

January 27, 2009