When the County of San Diego developed its 2008-09 budget, county staff anticipated a decline in state funding and in property tax and sales tax revenue and prepared a conservative budget with contingency plans and strategies. Economic conditions have declined beyond even the county’s scenario, and on Nov. 18 a presentation to the Board of Supervisors noted that cuts in the near future are likely.
“We here in county government must be prepared,” said county Chief Administrative Officer Walt Ekard. “We have fiscal concerns the likes of which we have not seen in many years.”
The presentation was given by Ekard, Chief Financial Officer Don Steuer, and Health and Human Services Agency Director Nick Macchione.
“We are asking for no decisions today,” said Ekard. “This is simply setting the stage for what is to come.”
An economic downturn creates several pressures on a budget.
Funding from state and federal sources may be reduced, local revenues from property and sales taxes and user fees are declining and more citizens need social services, the supervisors heard.
“We’ll be required to make tough choices and prioritize all of our programs and services,” Macchione said.
The growth in assessed values from which property taxes are derived is projected to be 2.0 percent for 2009-10, down from a growth of 4.4 percent for 2008-09. and an increase of 9.9 percent for 2007-08. Although 2008-09 property tax payments are not due until Dec. 10, 2008, and April 10, 2009, assessments have already been issued.
Assessed values rose by 11.0 percent for 2004-05, 13.8 percent for 2005-06 and 12.0 percent for 2006-07.
The UCLA Anderson Forecast projects a statewide sales decrease of 3.8 percent for 2008, which would drop total revenues in 2000 dollars to the lowest amount since 2003.
The decrease in sales tax revenue also means a decrease in Proposition 172 funding for public safety. The county’s Proposition 172 revenues are $22 million below budget. The county expects state realignment revenue to be $31 million to $40 million below budget, and general purpose revenue is anticipated to be $25 million below budget. The county expects a $30 million shortfall in Proposition 172 revenue for next year.
“As information becomes available, we will continue to examine the impacts on our programs,” Steuer said.
Steuer also noted that the recent stock market declines have caused $1.1 billion in losses to the county’s retirement fund.
“Services that are discretionary will have to be discontinued or scaled back,” Macchione said.
That will result in a reduction of assistance advice and clinic hours, and vacant positions likely will not be filled.
“Residents needing our services will experience longer wait times,” Macchione said.
The county’s $5.15 billion 2008-09 budget included a $404.2 million capital budget along with $816 million in reserves and $128.3 million in debt repayment. The 2008-09 budget amount was an 8.8 percent increase over the $4.73 billion 2007-08 budget.
A county government and its associated staff serve two functions. The first is as an agent of the state for incorporated cities and unincorporated communities. Notable roles in this capacity include the Registrar of Voters, the court and correctional systems, the tax collector, the county recorder, public health, environmental health, and the Department of Agriculture, Weights and Measures, which includes agriculture in cities as well as unincorporated areas and also assures the accuracy of scales and gas pumps throughout the county.
The county’s other function is as the substitute for a city council and city staff for unincorporated communities. This includes planning and land use, roads, flood control, parks, libraries, and law enforcement.
The county also operates eight airports, two of which are in incorporated cities. Several cities contract with the county for library or law enforcement services.
The county’s role as agent of the state makes some of its funding subject to state mandates. Additional revenues are dedicated for purposes for which they are collected, and much of the county’s discretionary funding is spent on public safety.
“The next few months and years are probably going to be very challenging,” said Board of Supervisors chair Greg Cox. “We are going to have to reduce services.”
Cox noted that reserves will allow budgeted programs to continue and that the reductions would likely be made during the 2009-10 budget process.
“I don’t think you’re going to see any dramatic curtailment of programs this fiscal year,” he said. “We will be glide-stepping these programs down.”
Cox also believes that existing appropriations for capital improvements are not in jeopardy.
“If you have money available, you’re probably going to get better construction contracts,” he said.
Supervisor Bill Horn doubts that funding will be available for growth in county programs.
“We’re going to be lucky if we can maintain what we have,” he said. “We’re in for some challenges that are going to last for a few years.”
Ekard and the supervisors have faced previous budget challenges. Ekard has served as the CAO since 1999. Supervisors Dianne Jacob and Pam Slater-Price were first elected in November 1992, Horn and Ron Roberts in November 1994, and Cox was appointed to replace Brian Bilbray when Bilbray was elected to Congress in November 1994.
“This is not really a new cycle. It’s an old one,” Horn said. “This time we’ve made preparation. But this is an outside influence on us.”
“It’s trickled down to local government where it’s come to roost,” Jacob said.
Jacob believes that preparation will be the best course.
“It’s going to be painful,” she said. “We are fortunately a fiscally strong and a fiscally sound county. That does not mean we have outside sources of money.”
Jacob noted that past board actions have cut costs, but such options may not be available now.
“I don’t know if there’s any more outsourcing or any more managed competition to be done,” she said.
Jacob hopes that citizens and labor unions will work together with the county.
“It’s time for people to weigh in on what they feel are most important for us to maintain at the county level,” she said.
Slater-Price noted that the requirement to fund mandated programs will result in cuts to the discretionary programs.
“We have to cut the programs that are more forward-looking, more progressive, and more likely to work,” she said.
Cuts will be likely in the Critical Hours teen program and other intervention programs as well as to community centers, libraries, and park and recreation services.
“As well prepared as we are, we’re going to see some painful decisions,” Slater-Price said. “We’ve weathered this before and we’ll weather it again, but it will be difficult and it won’t be things we’d choose to do.”