By Zach Friend, County Supervisor 2nd District
The Board of Supervisors recently received a mid-year budget overview and I wanted to share with you what we learned and give you a general overview of the County budget.
Over the last few years, the Board of Supervisors has made investments in public safety, parks, roads and health and human services to restore some of the significant cuts during the Great Recession. However, the Board has also made a significant commitment to improving our reserves to address predictable future economic downturns. In the last few years the Board has improved the County’s bond rating by placing more in reserves (overall now at about 10 percent).
Budget Improvements
Locally, sales tax, property tax and transient occupancy taxes (TOT- hotel or other vacation rental taxes) are up. Overall, these improved taxes have added about $7 million in additional revenue to the County so far this year. Much of that was committed to reserves and addressing our longer term structural deficit.
Additionally, taxes associated with cannabis dispensaries, cultivation and manufacturing are expected to increase. However, it is very difficult to predict what the actual amount will be (currently estimated at approximately $5 million next year) and there are costs regarding enforcement, auditing and more that offset some of the revenue.
New housing and businesses coming on line at the Aptos Village, improvements and Rancho Del Mar and improvements slated for other locations in the county are also expected to be beneficial for the budget moving forward.
Potential Budget Challenges
While the County has made some strides in the budget there are some potential serious challenges in the coming years — many from external forces. PERS retirement rate changes from the state could significantly impact local cost-shares within the next few years. Modifications to how the state deals with in-home supportive services (IHSS), an essential service for some of the most vulnerable in our community, cost-shifts back to the County potentially $3-plus million/year in the coming years.
Additionally, the loss of significant grant funding (as the grants come to a close) in the Probation Department and Sheriff’s Office could mean the end of important programs or the need to absorb these costs in the budget. In our local health care world, changes to federal funding for the Affordable Care Act and the federal sunset of some funding for community health centers could mean a loss of approximately $1.7 million alone for community health centers, which provide an essential safety net for our community.
Loss of access to medical care and, with the uncertainty of changes to the Affordable Care Act potentially even more costs shouldered at the local level, could have real budget impacts moving forward. Additionally, recent federal tax changes may have negative impacts locally on property rates (turnover) and more — it is currently too soon to know what impacts the changes will have.
Where exactly do our revenues come from that make up the budget?
About of all county revenues come from the state and federal government; a much different funding structure than cities. These funds are generally pass-through funds to provide state and federally mandated services such as health care programs. This highlights the importance of stable state and federal funding.
Approximately 26 percent of the county revenue comes from local taxes including property taxes, sales taxes and TOT. Very little of your property tax dollar goes to the County. Based on a Prop. 13 formula, for every one dollar the county collects in property taxes, our County is only allowed to keep approximately 13 cents.
So where does the rest of your property tax go to? The largest share goes to schools while the rest goes to local special districts, cities and the libraries.
How are our taxes spent?
The largest portion of the county’s discretionary spending (net County cost) is for public protection (Sheriff’s Dept., Probation, County Fire), over half of the total. Approximately 20 percent was spent on health and human services. Additional funds go toward parks, land use and other governmental functions. The County also maintains a reserve, which is nearly 10 percent.
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The County budget can often be complex and I hope this provides you with a helpful overview. However, if you have any questions, I’d love hear from you. Please feel free to call at 454-2200.