San Benito County is facing an estimated $4.1 million shortfall
in next fiscal year’s budget, which could lead to severe service
cuts and possible layoffs.
San Benito County is facing an estimated $4.1 million shortfall in next fiscal year’s budget, which could lead to severe service cuts and possible layoffs.
The shortfall is largely caused by the state fiscal crisis and rising costs of employee benefits. County officials haven’t divulged specific programs that could take hits but said “discretionary services” – those that aren’t required by the state – are most endangered, according to County Administrative Officer Terrence May.
That includes programs involving the parks, the library, 4-H, veterans services and contributions to local nonprofit organizations, he said.
May delivered the dismal outlook to the 2004-05 budget at Tuesday’s Board of Supervisors’ meeting. His eight-page report detailed a breakdown of the likely shortage.
“I think my concern is not just this next year’s budget,” said Supervisor Reb Monaco, “but then the following year, too.”
Other ways the county could slash the budget include “reducing employee costs;” cutting department’s budgets across the board; delaying purchases of equipment; increasing taxes; or raising fees, according to May’s report.
The earlier-than-usual analysis comes months before the July 1 fiscal year begins, allowing supervisors several meetings to hammer out a plan to potentially reduce services.
The report, based on this year’s annual requests from department heads, projects the county will spend $30.8 million out of its General Fund. Revenues, however, are only expected to come in at $22.7 million. That’s an $8 million deficit on the surface, but one that will be halved by leftover funds from previous years’ underspending.
“For the most part, our departments have submitted budgets that pretty much hold the line,” May told the Board.
Still, that projected deficit, May said, could escalate between now and July if state lawmakers follow a recent pattern of taking money from local government to pay for state budget woes.
The state’s fiscal year also starts July 1, and budget planning is under way.
“I think everybody’s waiting to see what the governor’s May revise is going to (look like),” said Sheriff Curtis Hill, whose department suffered from two deputy positions being “unfunded” for the current fiscal year.
The state has already audited the county’s property tax base, resulting in an annual $1 million loss. Moreover, the governor has proposed shifting $832,000 from the county into a state education fund, and another $500,000 previously allocated to rural counties’ law enforcement services is likely getting the ax, according to the report.
Supervisor Ruth Kesler at Tuesday’s meeting asked the CAO whether even more county funding may be shifted to the state.
“I think anything is possible,” May responded. “And that’s an eventuality we need to position ourselves for.”
But it’s not just California government giving the Board headaches. Employees’ salaries and benefits, which make up nearly 90 percent of county spending, are skyrocketing.
The county’s share paid to the Public Employees’ Retirement System (PERS) will jump from 4 percent to 9 percent of total wages – an additional cost next year estimated at $700,000. May said that boost is because investments made by PERS have sunk along with the stock market’s downward spiral.
Furthermore, increased costs of workers’ compensation premiums, health plans and salary raises will cost the county another $600,000 next year, according to the report.
Facing such a significant shortfall, officials say the county is fortunate the Board has spent conservatively in recent years.
San Benito County maintains a “very healthy” General Fund reserve of $7.8 million, May said, a rainy day account that accumulated through the years.
May commended the current Board and previous supervisors for accruing such savings.
“The Board, through very aggressive cost containment measures, and department heads, through frugal spending, were able to amass a surplus of revenues over expenditures,” May said in an interview.
“It’s bad,” Hill said, “but we’re going to be in a little bit better position than neighboring counties.”
But, as the city of Hollister is learning, hefty reserves can dwindle if spending gets out of control. Hollister maintained a $15 million reserve in 1999 that has since diminished to about $6 million, money which could dissipate by 2007, according to city officials.
And the county has had its share in recent years of “cost overruns” over everyday operations, May acknowledged.
He mentioned pay-outs to longtime employees who have retired and private legal costs as examples of services supplemented recently by the General Fund. San Benito County has spent more than $2.5 million for private lawyers’ services over the past four years.
The county was also short this year more than $400,000 in an account intended to pay for fire services contracted with the California Department of Forestry and Fire.
That problem would be nonexistent if the Board had activated a tax district that was established in 1987 specifically to fund fire services. For unknown reasons, supervisors never gave it final authorization, and may have lost millions in potential revenues.
In the coming weeks, the Board’s budget subcommittee – supervisors Pat Loe and Richard Scagliotti – will examine possible cost-cutting measures. They will report back to other supervisors for discussions between now and July.
This year’s worst-case scenario, May said, is unclear at this point.
“I really can’t say,” he said, “because so much of it will be beyond our control, depending on Sacramento.”
Kollin Kosmicki can be reached at 637-5566, ext. 331 or at
kk*******@fr***********.com
.
