Millions in RivCo Budget Shortfalls Discussed During Budget Workshop

PAUL J. YOUNG, City News Service:

Riverside County supervisors signed off Tuesday on a budget report that spotlights growing public safety costs and the need for ongoing fiscal discipline, prompting a debate about the advantages of bolstering the county’s reserve pool.

“You need to have a range,” board Chairman Marion Ashley said of the county’s rainy day fund. “There should be a floor and a ceiling. Our discretionary revenue will go up over time. We can’t just sit here and accept that $200 million will be OK.”

The topic arose as the county’s chief financial officer, Paul McDonnell, summarized how the county’s finances shaped up at the close of the first- quarter of the 2015-16 fiscal year.

McDonnell highlighted the appreciation of the county’s reserve pool, pointing out that there was $38 million in contingency funding, available to meet any unforeseen expense, and $201 million in designated reserves, theoretically set aside for specific uses.

The total $239 million exceeds the board-preferred 15 percent reserve of total discretionary revenue that should be on hand. McDonnell said discretionary income was close to $800 million.

Before the Great Recession of 2008-09, the board’s reserves soared to nearly $400 million.

“There’s been some discussion about changing the current formula and basing reserves on the overall general fund budget, instead of discretionary revenue,” McDonnell said.

The former county treasurer noted that a heftier rainy day fund would assure higher credit ratings -- and thus increased borrowing authority at more advantaged rates -- for the county.

“As the reserve number inches higher, the sacrifices of general fund agencies become greater,” Supervisor Kevin Jeffries cautioned. “We have to make sure that the number is what it should be -- and not some pie-in-the-sky amount.”

McDonnell, along with county CEO Jay Orr, recommended holding off on tweaking board policy until the midyear budget report in February. The Executive Office team said the financial road ahead would be clearer after several audits conclude at the outset of 2016.

The audits are examining operations within county public safety agencies to identify cost-cutting opportunities and greater operational efficiencies.

The first-quarter budget report showed that while most county agencies are spending in line with revenue, the Riverside County Sheriff’s and Fire departments, the District Attorneys’ Office and the Office of the Public Defender are struggling with the cyclical funding shortfalls identified during the board’s June budget hearings.

According to Executive Office staff, Sheriff Stan Sniff is facing a $32- $42 million hole by the end of the current fiscal year, due mainly to salary and benefits increases guaranteed under a collective bargaining agreement.

Overtime expenses were underscored as an ongoing challenge in the sheriff’s quest to cap spending. According to the Executive Office, in fiscal year 2014-15, roughly $38 million was spent on OT.

Officials noted that expanded medical and behavioral health obligations for inmates will impose additional financial burdens.

Last month, the county reached a legal settlement with two law firms that filed a class-action suit on behalf of inmates based on alleged civil rights violations connected with substandard disability and mental health care in local detention facilities. County officials estimated those additional healthcare costs could top $20 million between now and June 30.

McDonnell told the board Tuesday that annual expenses could be as high as $40 million, an ongoing financial toll that he found worrisome.

The fire department has an estimated $1.3 million in red ink on its books, according to the budget report. The shortfall also stems from higher labor expenses, though Executive Office staff appeared confident Fire Chief John Hawkins and his team would be able to find “cost-saving measures” to narrow the gap.

District Attorney Mike Hestrin told county accountants that nearly $3 million of his projected shortfall in the current fiscal year had been whittled away -- but the agency remained about $9 million over budget.

Negotiated personnel expenses fit into the cost equation, but the D.A. told the board earlier this year that changes in state law, including voter- approved Proposition 47, were taxing his resources and, therefore, putting a squeeze on funds.

“The district attorney will continue to work with his staff to preserve public safety ... and to reduce recidivism by encouraging those who have served their time to become more involved in their families and communities,” according to the report.

Public Defender Steve Harmon projected a $1.7 million year-end shortfall, another product of “unfunded salary and benefit increases,” the Executive Office said. Retirement payouts and a continuing loss of allocations from Indian gaming mitigation grants were also weighing on the agency’s ledger, officials said.

The board allocated funds to partially cover public safety agencies’ shortfalls in June, and McDonnell suggested that additional aid would be required, but that would only be possible farther into the fiscal year, after budget analysts “nail down” what the agencies’ “true needs are.”

Thanks to unanticipated carry-over funds from the previous fiscal year, the report showed the county ending the current one with an additional $2.2 million in discretionary revenue.

According to the report, county sales tax revenue was up from a year ago, while documentary transfer taxes and building permit applications were also higher. However, officials admitted that activity appeared to be flattening.

Property tax revenue was expected to grow along with higher overall assessed valuations on the tax roll, but at a growth rate about 1.4 percentage points below last year’s.

(Image via Shutterstock)