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 including a preliminary budget forecast for Fiscal Years 2019-21.
Annually, as part of the budget development cycle, the County Administrative Office (CAO) prepares preliminary estimates for the current fiscal year and provides a preliminary forecast for the upcoming budget year.
Using a Two-Year Budget Process
The Board is moving the County to a two-year budget process – mainly so that more time can be focused on programmatic review as opposed to budget preparation. Specifically, do the programs that we fund work for their intended purpose? If not, how can we modify programs to ensure they are providing the outcomes that our community expects?
As part of this process the budget will align better with the County’s new Strategic Plan and focus on a longer-term approach that ensures sustainability. The new two-year budget will also revise the previous accomplishments and goals section with a snapshot of objectives and key steps on how we will meet those objectives with this funding. This provides greater clarity to the community about what the goals are and how those goals will be met with the funding that we are allocating.
After the first year of the two-year budget, departments will do a review and update assumptions and outcomes as needed with explanations that allow the Board and community to understand how we did addressing these goals. The Board will consider changes to the original projections in a revised proposed budget for year two and approve changes during budget hearings.
2018-19 General Fund Budget: Savings Anticipated
County departments have begun to submit their estimates for FY 2018-19 revenues and expenditures based on actual expenditures to date and estimates for the remainder of the year. The FY 2018-19 General Fund Budget is financed largely by funds from the state and federal government for mandated programs. In addition, the County receives tax revenue from property tax, sales tax, transient occupancy tax (hotels and vacation rentals) and cannabis business tax. General Purpose Revenue growth is expected to increase by $1.9 million primarily from anticipated receipts from Measure G, which becomes operative on April 1, 2019.
Preliminary estimates indicate that General Fund expenditures will decrease by 0.4 percent, allowing $3.6 million to carry forward to finance the budget for FY 2019-20.
Looking Forward: Revenue Growth Funds Most Rising Costs
At this time, preliminary estimates indicate County General Purpose Revenues are projected to increase approximately 7 percent next year, primarily from continued property tax growth, hotel tax growth and the addition of a full year of revenue from the voter-approved Measure G.
County General Fund net expenditures are expected to increase by $7 million, primarily from increases for critical unmet needs funded by Measure G and the rising cost of salaries and benefits. Beyond next year, it’s believed that revenues will grow more slowly as property tax growth slows and hotel/vacation rental taxes slow a bit. The County is estimating that revenues will grow overall by about 4 percent by 2020/2021.
These estimates assume that state and federal funds continue to be allocated to the County for mandated programs and services at least at our current levels, that some of the lagging revenues from the Cannabis Business Tax for Cultivators and Manufacturers (due to licensing) will come online, and that no new major initiatives will be undertaken that increase General Fund costs.
While the economy is currently strong many forecasts do call for a possible recession in the next few years. Looking ahead it’s important the County continue to build and maintain our reserves for a potential downturn and prepare for slowing revenue growth. The size of a decline would have an impact of services – assuming a limited decline, the County’s new revenue measure and reserves will help mitigate any impacts. If we experience something similar to the 2009/2010 declines then the recent efforts will definitely help provide a cushion but impacts will still be felt.
Overall, the current County budget position is strong but we always have work to do to ensure it stays strong. We’ve been working to improve (through the Strategic Plan and two-year budget) transparency and accountability for how your funds are being spent and ensuring those funds match your priorities.
As always, if you have any questions or feedback feel free to call me at 454-2200.