Estimated deficit for fiscal year 2007, which begins in July,
swells to $120.6 million
Santa Clara County Executive Pete Kutras this week advised the
Board of Supervisors that the County’s deficit projection for the
coming year is slightly higher than originally anticipated.
Estimated deficit for fiscal year 2007, which begins in July, swells to $120.6 million
Santa Clara County Executive Pete Kutras this week advised the Board of Supervisors that the County’s deficit projection for the coming year is slightly higher than originally anticipated.
The estimated deficit for fiscal year 2007, which will start on July 1, now stands at $120.6 million compared to an earlier estimate of $111.4 million. Kutras indicated to the Board that the deficit number would fluctuate as the fiscal year approaches.
“We continue to experience the impact of the longest sustained recession in our county’s history,” Kutras said. “Despite substantial reductions in spending, we’re facing deficits in the coming year and for the foreseeable future.”
During the past three years, the County has cut spending and sought new revenue sources totaling $640 million, including eliminating vacant positions, freezing hiring, offering early retirement to eligible employees and reducing services.
“While these actions were substantial, they are not enough to correct the ongoing structural imbalance in the county’s budget,” Kutras said.
A structural budget deficit means that the current methods used to finance county government are inadequate to cover the cost to maintain the current level of services.
The major portion of this deficit – $116 million – refers to the likely deficit amount attributable to local impacts. There are a number of uncertainties at the state and federal levels that could aggravate the county’s deficit even further. At present, it is not possible to estimate their full impact, officials said.
Some examples are:
– Federal funding to 22 California public hospitals of the MediCal Waiver ($166 million due to Santa Clara Valley Medical Center for inpatient MediCal services and some uninsured patient services);
– State determination on whether it will require that the mandatory fee for child support services as required by the federal government remain at the local government or revert to the state;
– Changes at the federal that would reduce California Title IV-D Child Support Program (approximately $4.5 million for Santa Clara County in fiscal year 2008);
– A federal shift of Medicaid expenditures to the state (impact on the county is unknown); and
– Efforts underway in Sacramento to eliminate the booking fees charged by counties to cities to recoup half of the administrative costs associated with booking and processing arrestees (potential impact $3.4 million).
The factors at the local level that impact this year’s deficit are:
– In Home Supportive Services costs have risen at a higher rate than the reimbursement available from the State and Federal government, increasing the net county cost of the program.
– Lower than projected overhead reimbursements, which reflect a federal requirement that overhead charges paid to local governments be based on actual costs, thereby resulting in a two-year delay between budgeted reimbursements and collections. The major budget reductions made by the county over the past few years, now mean less revenue from reimbursement of overhead costs.
– Many programs provided by the Social Services Agency are not being funded for cost increases by the State. The County is absorbing the increasing cost of salaries, benefits and administrative costs as program revenues have been frozen at fiscal year 2001 or 2002 levels.
During the meeting, $4.6 million was added to the projected deficit when the majority of the Board voted to support a request from four Tax Equity Allocation (TEA) cities – Los Altos Hills, Cupertino, Saratoga and Monte Sereno to increase their allocations of TEA funding from 55 percent to 100 percent.
This past November, a deficit solution proposal was approved by the Board of Supervisors to guide county departments and agencies in preparing their fiscal year 2007 budget requests, including one-time solutions totaling $67 million and ongoing solutions totaling $44 million. Kutras indicated that he would not yet change reduction targets. County agencies are going forward with plans to balance the $111 million budget deficit.
