The purpose of this report is to receive direction on a 2013-14 budget scenario that resolves the current budget gap between department requested budgets and available funds in preparation for the June budget hearings.
In February, departments were provided initial budget targets based on their proportional share of local funds consistent with our projected general purpose revenue for 2013-14. Each department submitted a requested budget and in some cases the submitted budgeted expenditures exceeded available funds. The exceptions to this were the Ag, UC Cooperative Extension, Library, Probation, Planning and Public Works, Employment and Social Services, and Alcohol, Drug and Mental Health Departments who all submitted balanced budgets.
The department requested budget expenditures exceeded available revenues by $7,976,526 (Attachment A). Staff have met with departments regarding their requested budgets and identified a number of measures which could resolve this gap.
Budget Strategies. In addition to reducing discretionary expenditures, there are two primary strategies available to close the budget gap. For those departments whose budget gap resulted from funding new or vacant positions, those positions should be reduced. As discussed with the Board previously, new positions will only be funded if they advance the tactical plan. Before we return to the status quo of filling vacant positions, it is important that departments review their business processes in an attempt to ensure that a) staffing is the most appropriate solution and b) the classification requested will meet the needs of the program. Consistent with the tactical plan, the county has issued a request for qualifications for firms to assist with these reviews so that departments can complete business process reviews prior to filling positions.
The second strategy available is to update the revenue projections developed in February. In some instances where additional data has been received since initial projections (i.e. sales tax reports), minimally increased revenue projections will close the remaining gap.
Attachment A highlights the specific recommendations for implementing these strategies.
In addition, the budget scenario relies upon the following key assumptions:
Maintain the current General Fund reserve levels. It is recommended that the General Fund reserve continue to be maintained at its current level and increased in accordance with the policy on Fund Balances and Reserves as part of the Adopted Budget in September.
Create an adequate contingency. The 2013-14 fiscal year includes many known budget risks. The State Budget, known and unknown impacts of Affordable Care Act implementation, an evolving indigent health care program and Federal budget sequestration represent some of the key concerns as staff constructs the 2013-14 budget.
To prepare for any unexpected fiscal actions, the preliminary estimate includes a $2.0 million General Fund contingency and a $600,000 indigent health contingency. Budgeted contingency is available for Board appropriation throughout the 2013-14 year should any unexpected needs arise. Any unused contingency may also provide additional funding flexibility in crafting the 2014-15 budget.
Creating a solid base for long term financial sustainability. California’s recovery continues to be slow with governmental revenue recovery and in particular Yolo County revenue recovery lagging behind the remainder of the economy. By maintaining the existing General Fund reserve, seeking to increase the General Fund contingency at Adopted Budget hearings, and including a balanced array of cost reductions comprised of program restructuring, and elimination of vacant positions, the proposed budget scenario supports long term financial sustainaibility.
Significant budget scenario impacts
Affordable Care Act (ACA) Implementation
While there are many known aspects of ACA implementation, there remain unresolved issues regarding the impact of health care reform. The ACA expands Medi-Cal and the State has yet to determine how it will fund this expansion; initial indications are that County health realignment revenues will be reduced. It is not yet known if that will impact the 13-14 fiscal year or will be delayed to the 14-15 fiscal year. Offsetting this potential reduction is the transfer from a county funding obligation to Med-Cal funding for the vast majority of our indigent care covered population. These issues create a difficult budgeting scenario and staff have conservatively budgeted for the potential impact. Based upon data known at this time, a reduction in the county cost for 2013-14 from the 2012-13 budget is recommended.
Labor Agreement
One of the assumptions used to create the requested budgets included an assumption that labor negotiations with the General Unit represented by Stationery Engineers, Local 39 would reach a conclusion by June 30. Should that assumption be incorrect, there will be a potential shortfall of approximately $83,000 per pay period for the period of time between July 1 and implementation of the agreement.
AB109 Impacts and Funding Allocation
The balanced budget scenario also includes some assumptions about the use of increased AB109 funds. For initial planning purposes, staff has assumed that programs funded last year will remain funded. If the Community Corrections Partnership modifies these funding allocations, adjustments can be made as part of Adopted Budget hearings.
State Budget
At this time, the state budget appears to be positioned to be balanced for the 2013-14 fiscal year. Should this trend continue, we do not anticipate reductions to the county budget other than those discussed above for implementation of the ACA.
Federal Budget
The President's Fiscal Year 2014 budget includes a number of adjustments with the potential to impact the county budget. While there are increases included for several grants we currently receive (i.e. Community Oriented Policing, Byrne Grant, Substance Abuse and Mental Health Services) there are a number of proposed reductions (Homeland Security, Community Service Block Grant, Mentally Ill Offender Treatment and Crime Reduction Act). Staff will continue to watch the budget discussions and report back as funding issues are resolved.
Solar Implementation
The energy savings as a result of the installation of the solar complex at the Health and Human Services property as well as at Grasslands is expected to be significant this fiscal year. The budget strategy reallocates these savings within the General Services budget to maintain our existing maintenance service levels.
Outstanding Funding Requirements
The proposed balanced budget scenario does not include the funding of several key budgetary components. As required by the county's reserve policy, additional contingency funds and the contribution to the general reserve will not be included. Similar to previous years, staff recommends that these items be considered and addressed as part of the Adopted Budget hearings when final carryforward fund balance information will be known. |