The purpose of this report is to provide the Board of Supervisors an update on the 2019-20 budget development process, and receive Board feedback and direction on proposed budget balancing strategies prior to finalizing the 2019-20 Recommended Budget.
On February 19, the Board of Supervisors held a budget workshop that included presentations from each department highlighting key 2018-19 accomplishments, long-range goals, goals and objectives for 2019-20 and emerging issues. The purpose of the workshop was to provide the Board an opportunity to hear from each department at the outset of the budget process, and to surface interests that would guide development of the 2019-20 Recommended Budget.
To further guide budget planning and development, on February 26 the Board approved the 2019-20 Budget Principles, which highlight key best practices and set forth guiding principles for the upcoming year. Notable provisions include taking advantage of funding opportunities in the 2019-2020 State budget, continuing to strengthen financial sustainability by funding liabilities and building reserves, and identifying alternate strategies to fund position growth in lieu of the general fund.
Budget Overview
For 2019-20, the budget development process has shifted to a base budget model, whereby department requests are separated into two components: 1) the base budget, or the amounts needed to maintain status quo operations, and 2) budget augmentations, or new funding requests such as new positions, programs or services. One of the reasons for shifting to a base budget model is to ensure that the costs of maintaining operations are fully and accurately recognized, and to more easily determine when available revenue is insufficient to meet these baseline needs.
As reflected in the table below, department base budget requests currently exceed projected general fund resources by approximately $7.2 million. When budget augmentation requests are considered, the gap grows to nearly $16.5 million.
2019-20 General Fund Budget Gap
| General Purpose Revenue Projections |
$79,942,385 |
| Base Budget General Fund Requests |
$87,158,874 |
| Base Budget Gap |
($7,216,489) |
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| General Fund Augmentation Requests |
$9,276,549 |
| Total Budget Gap |
($16,493,038) |
As noted above, a base budget is defined as the revenues and expenditures that are needed to maintain status quo operations given existing programs, services and staffing levels. As such, department base budgets reflect known or anticipated changes in underlying costs, such as negotiated cost of living adjustments, pension and OPEB rate increases, inflationary adjustments and internal charges such as IT, Fleet and rents and leases.
For 2019-20, increases in PERS rates have had a significant impact on base budget expenditures. Required employer contributions have increased by 3.2% of payroll for Miscellaneous employees and 4.2% for Safety employees. In addition, the supplemental pension charge for the Pension Trust, as approved in the Pension Funding Policy in May 2018, has increased from 1% to 1.25% of payroll. The table below provides a summary of the pension-related charges for 2019-20.
2019-20 Pension Charges
| Pension Charge |
2018-19 |
2019-20 |
Change |
| PERS Rate - Misc. |
25.20% |
28.40% |
3.20% |
| PERS Rate - Safety |
36.00% |
40.20% |
4.20% |
| Supplemental |
1.00% |
1.25% |
0.25% |
In total, these increases in pension charges have increased base budget expenditures by approximately $4.6 million. In addition, OPEB charges have increased from 8% to 8.5% of payroll. While this increase will achieve full payment of the Actuarial Determined Contribution necessary to prefund the OPEB liability, it increases base budget expenditures by approximately $0.6 million.
Beyond the base budget, department augmentation requests include a net increase of 52 new positions, of which 24 are general fund position requests. Notably, the Sheriff’s Office is requesting 20 new general fund positions, including 12 positions (10 Correctional Officers and 2 Detention Cooks) to staff the first phase of the Monroe Jail expansion.
Budget Solutions
The County Administrator’s Office is currently in the process of holding budget meetings with each department to review budget requests and discuss potential options for cost savings. Some of the budget balancing options currently being considered include the following:
- Deferring most budget augmentation requests to the Adopted Budget. Given the fiscal situation, it is unlikely that any new general fund position requests will be able to be funded in the Recommended Budget. Staff is still working to determine the timing of when the new staffing for the Jail expansion will be needed.
- Holding positions vacant or unfunding vacant positions. The 2018-19 Adopted Budget included a net reduction of one general fund position, and this trend is likely to continue. In addition, many departments are running a high vacancy rate, which should translate into savings throughout the year.
- Reducing services and supplies. Staff is reviewing base budget requests carefully to ensure that what is being requested truly reflects what is needed to maintain core operations. This includes matching one-time costs with estimated available fund balances. There may be opportunities to fund certain one-time costs, such as contracts, grant matches and contributions to reserves and contingencies, with one-time fund balances.
- Review major revenue projections, including property tax and Proposition 172 sales tax. By design, revenue projections are conservative at the outset of the budget process, as data such as assessed value growth is preliminary. However, due to the size of the budget gap, projections should be reviewed to ensure they are in line with expected trends. It should be noted that the solutions highlighted above are not necessarily all-inclusive; additional solutions may be identified or considered as staff continue to review department budget requests.
Next Steps
Department budget meetings with the County Administrator’s Office are scheduled to continue through May 3. Following the conclusion of the budget meetings, staff will develop and review budget balancing scenarios with the Chair and Vice Chair. Once a balanced budget is achieved, staff will begin preparing the budget document, which is scheduled for release on May 31. The 2019-20 Recommended Budget will be presented to the full Board on June 11.
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