The Covid-19 pandemic has put an unprecedented burden on most local governments’ financial resources as revenues have dried up due to lack of economic activity in many industries and expenditures are increasing dramatically due to pandemic response costs.
Most jurisdictions are facing challenges in balancing their budgets without the painful decisions of affecting their labor force through furloughs and layoffs. Yolo has been well prepared to weather through these unforeseen times and took a proactive approach during the Recommended Budget in asking departments to reduce budgets while many peers waited until later in the year to enact budget reductions. This approach is paying off in the Adopted Budget as the County was able to avoid asking departments for further reductions even though certain revenue streams are experiencing deeper than previously projected revenue loss. This fiscal improvement is also significantly due to the availability of State/Federal funding for partial realignment revenue backfill and assistance related to disaster response costs.
As part of the fiscal year end closing process, Department of Financial Services (DFS) calculated preliminary available General Fund Balance for the fiscal year ending on June 30, 2020. According to the preliminary analysis, the available unassigned General Fund Balance at the end of Fiscal Year 19-20 is approximately $9.7 million. It is important to note that during the Recommended Budget for 20-21, $6.2 million of the fund balance has already been appropriated, which leaves about $3.5 million available for the Adopted Budget 20-21.
At the July 22, 2020 Board meeting, DFS presented revised revenue projections based on more recent economic indicators, state budget initiatives, and actual receipts. These revised projections concluded that further revenue reductions in the budget were needed due to the pandemic. Major reductions were projected in General Fund and Public Safety Proposition 172 sales tax revenues adding up to $1.5 million.
Some of the operational costs were increased in the Adopted Budget such as Worker’s Compensation and General Liability insurance premiums and debt service related to the Energy Savings facility project. In addition, the County has formally created a Covid Response Operations Center (CROC) to effectively manage the pandemic response funded by CARES Act dollars. The departments that volunteered their employees to staff the CROC are getting credit in payroll costs due to absorption of the costs temporarily by this disaster funding source. The estimated net impact of increased operating costs and credit from CROC has net reduction in General Fund expenditures by approximately $189,000.
After absorbing the revenue and expenditures into the available Fund Balance of $3.5 million, a remaining balance of $2.2 million is available to fund additional contingencies, reserves, and department augmentation requests in the Fiscal Year 20-21 Adopted Budget. As a result, there are still some challenging decisions to be made in order to find a balance between investing in department critical needs and ensuring an adequate safety net through reserves and contingencies.
| |
Million |
| Available Fund Balance |
$3.5 |
| Revenue Loss |
($1.4) |
| Net of Budget Adjustments |
$0.2 |
| Available for Appropriation |
$2.2 |
Total augmentations requested by the departments for the Adopted Budget are $12.4 million, significantly exceeding available resources. Staff is analyzing the augmentation requests thoroughly and the funding priority will be given to the augmentations in the following order:
- Required to maintain the County’s disaster response
- Support having adequate budgetary safety net (such as contingencies) recognizing the continued fiscal uncertainty
- Essential to providing core County services, align with strategic plan, and no or minimal ongoing cost
Final recommendations for the Adopted Budget from the staff will be shared with the Board Budget Ad Hoc Sub-Committee on September 14 th.
Even though the County’s General fund supported areas do not require further reductions, there are still some funding streams that have emerging fiscal issues. DFS is working with the County departments on resolving those specific issues through a targeted approach. Some of the areas under review are funded by the Realignment dollars and some programs which didn’t initially participate in reductions during the recommended budget due to not being reliant on the general fund.
Staff plans on bringing a balanced Fiscal Year 20-21 Adopted Budget to the September 29 th Board Budget hearing. While much of this staff report presents an improved picture from Recommended budget, staff continue to diligently monitor revenue performance and will plan to revisit revenue assumptions should there be any significant further deterioration.
The July 21, 2020 Board meeting included a staff report on Major Fund Balances Analysis which could not be discussed properly during the meeting due to the time limitations. That staff report and the table listing the historic fund balances are included as Attachment A and Attachment B to this report to provide an additional review opportunity for the Board and to ask any pertinent questions of staff regarding fund balances. |